{"id":4565,"date":"2016-06-16T01:22:00","date_gmt":"2016-06-16T01:22:00","guid":{"rendered":"https:\/\/www.healthlawpolicymatters.com\/?p=4565"},"modified":"2021-11-03T01:22:48","modified_gmt":"2021-11-03T01:22:48","slug":"the-supreme-court-adopts-broad-scope-of-false-claims-act-liability","status":"publish","type":"post","link":"https:\/\/www.healthlawpolicymatters.com\/2016\/06\/16\/the-supreme-court-adopts-broad-scope-of-false-claims-act-liability\/","title":{"rendered":"The Supreme Court Adopts Broad Scope of False Claims Act Liability"},"content":{"rendered":"\n

A unanimous Supreme Court issued its long-awaited and closely watched decision today on the scope of the False Claims Act (\u201cFCA\u201d), and the Court affirmed the FCA\u2019s long reach.\u00a0Universal Health Services, Inc. v. United States ex rel. Escobar et al.<\/em>, No 15-7.\u00a0\u00a0<\/a>The decision has momentous implications for health care providers and suppliers, and other entities, who seek or cause others to seek Medicare and Medicaid reimbursement.<\/p>\n\n\n\n

This post summarizes today\u2019s decision. Mintz Levin\u2019s\u00a0Health Care Enforcement Defense Group<\/a>\u00a0will be providing additional insight and commentary on the decision in the coming days.<\/p>\n\n\n\n

In the Escobar<\/em> case, Yarushka Rivera, a teenage beneficiary of Massachusetts\u2019 Medicaid program, received counseling services for several years at Arbour Counseling Services. She had an adverse reaction to medication prescribed to her at Arbour and later died. Her mother and stepfather discovered that some of the employees who provided counseling services and prescribed the medication to Ms. Rivera were not licensed to provide mental health counseling, or authorized to prescribe medications or offer counseling services without supervision. Massachusetts Medicaid imposes such licensing and authorization requirements.<\/p>\n\n\n\n

The plaintiffs brought an FCA case alleging that defendant submitted Medicaid reimbursement claims representing that mental health service were provided by licensed individuals but they were not, and that Massachusetts Medicaid was unaware of the deficiencies when it paid the claims. Thus the claims were false through a theory of \u201cimplied certification.\u201d<\/p>\n\n\n\n

What is implied certification, and why does the Court\u2019s decision matter?<\/strong><\/p>\n\n\n\n

As is well known, the FCA is a punitive statute that imposes treble damages as well as per-claim penalties. The statute is frequently used by the government and qui tam<\/em> relators to bring claims against entities in the health care industry, and FCA cases have resulted in enormous penalties.  The scope of what constitutes a \u201cfalse\u201d claim\u2014and thus the reach of the statute\u2014has been the subject of a long dispute and resulted in a split among the Circuit Courts of Appeal. Specifically, many FCA cases rely on \u201cimplied certification,\u201d a theory that the Supreme Court described as follows: \u201cwhen a defendant submits a claim, it impliedly certifies compliance with all condi\u00adtions of payment. But if that claim fails to disclose the defendant\u2019s violation of a material statutory, regulatory, or contractual requirement, so the theory goes, the de\u00adfendant has made a misrepresentation that renders the claim \u201cfalse or fraudulent\u201d under \u00a73729(a)(1)(A).\u201d<\/p>\n\n\n\n

Given the myriad statutes, regulations, sub-regulatory guidance, and contracts that govern the operations of entities in the health care industry, the failure to comply with any one of these provisions when providing any item or service payable by Medicare or Medicaid could make the claim for payment \u201cfalse,\u201d thus subject to enormous FCA penalties.<\/p>\n\n\n\n

What did the Court decide?<\/strong><\/p>\n\n\n\n

There are two parts to the Court\u2019s decision today. First, the Court accepted implied certification and decided that \u201cat least in certain circumstances,\u201d the implied false certification theory can be a basis for liabil\u00adity. The Court explained that \u201cliability can attach when the defendant submits a claim for payment that makes specific represen\u00adtations about the goods or services provided, but knowingly fails to disclose the defendant\u2019s noncompliance with a statutory, regulatory, or contractual requirement. In these circumstances, liability may attach if the omission renders those representations misleading.\u201d<\/p>\n\n\n\n

Second, the Court used the FCA\u2019s \u201cmateriality\u201d standard to impose some limitations on the FCA\u2019s scope. The Court explained that the \u201cmateriality standard is demanding,\u201d and it rejected the government\u2019s \u201cextraordinarily expansive view of [FCA] liability\u201d under which there could be FCA liability anytime the government was entitled to refuse payment.  The Court also rejected the bright-line rule that only an \u201cexpress condition of payment\u201d can provide the basis for liability, which providers and contractors argued was necessary to be certain that they have fair notice in advance of what is material.<\/p>\n\n\n\n

Instead, that Court decided that \u201cwhat matters is not the label the Government attaches to a requirement, but whether the defendant knowingly violated<\/strong> a requirement that the defendant knows is material to the Government\u2019s payment decision<\/strong>.\u201d  Thus a provider must \u201cknowingly\u201d violate a requirement and<\/em> \u201cknow\u201d it is material to the federal payment. The Court decided that it does not matter if the legal requirements are expressly designated as conditions of payment.<\/p>\n\n\n\n

Finally, the Supreme Court reiterated that the standard for materiality is rigorous and that plaintiffs must \u201calso plead their claims with plausibility and particular\u00adity under Federal Rules of Civil Procedure 8 and 9(b) by, for instance pleading facts to support allegations of materiality.\u201d<\/p>\n\n\n\n

Conclusion<\/strong><\/p>\n\n\n\n

The Supreme Court\u2019s decision has many aspects to digest. We will continue to provide more information about this important decision.<\/p>\n","protected":false},"excerpt":{"rendered":"

A unanimous Supreme Court issued its long-awaited and closely watched decision today on the scope of the False Claims Act (\u201cFCA\u201d), and the Court affirmed the FCA\u2019s long reach.\u00a0Universal Health Services, Inc. v. United States ex rel. Escobar et al., No 15-7.\u00a0\u00a0The decision has momentous implications for health care providers and suppliers, and other entities, … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_generate-full-width-content":"","footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/posts\/4565"}],"collection":[{"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/comments?post=4565"}],"version-history":[{"count":2,"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/posts\/4565\/revisions"}],"predecessor-version":[{"id":4567,"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/posts\/4565\/revisions\/4567"}],"wp:attachment":[{"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/media?parent=4565"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/categories?post=4565"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.healthlawpolicymatters.com\/wp-json\/wp\/v2\/tags?post=4565"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}