U.S. Supreme Court to Tackle “Implied Certification” Theory of False Claims Act Liability

By | Published On: January 6, 2016

On December 4, 2015, the Supreme Court granted certiorari in Universal Health Services, Inc. v. United States ex rel. Escobar, No. 15-7, to address the viability and reach of the “implied certification” theory of False Claims Act (FCA) liability. The Court’s Opinion could impact health care providers across the nation that bill federal health care programs, as the Court is likely to clarify the types of billing errors and practices that could give rise to FCA liability.

The FCA makes it unlawful to “knowingly present[], or cause[] to be presented, a false or fraudulent claim” for government reimbursement. 31 U.S.C. § 3729(a)(1)(A).

Whether a claim for government reimbursement is “false” under the FCA can be a complex question. Consider a physician who entered a contract with a government payor in which he or she agreed to comply with all applicable laws and contractual requirements, including a requirement that the physician would only seek reimbursement for services that are medically necessary. If the physician provides a service that is later determined not to be medically necessary, and claims reimbursement for the service without making any express certification as to medical necessity, could the physician face FCA liability under a theory that he or she “impliedly certified” the medical necessity of the service through the claim for reimbursement?  The Court’s Escobar Opinion will likely address this question.

The Escobar case began in 2009, when the parents of a patient who had died following treatment at a mental health clinic owned and operated by the subsidiary of defendant, brought a lawsuit against defendant in the U.S. District Court for the District of Massachusetts on the theory that the mental health clinic failed to comply with various supervision and licensure requirements, rendering the entity’s claims for government reimbursement false under the FCA. Although the District Court dismissed the claims, the U.S. Court of Appeals for the First Circuit reversed, holding that the regulations at issue were conditions of payment by MassHealth, Massachusetts’ Medicaid program, and that the provider’s noncompliance with those conditions constituted falsity under the FCA.  Universal Health Services, Inc. v. United States ex rel. Escobar, 780 F.3d 504 (1st Cir. 2015).

The Supreme Court granted certiorari and is set to address two questions.  First, the Court will address whether the “implied certification” theory is a viable means of establishing legal falsity under the FCA. Resolving this question entails grappling with a circuit split. While the First Circuit could be said to have adopted the “implied certification” approach in Escobar, the Seventh Circuit has taken a different approach, rejecting use of the theory in United States v. Sanford-Brown, Ltd., 788 F.3d 696 (7th Cir. 2015), petition for cert. filed, No. 15-729 (U.S. Dec. 2, 2015). Second, assuming that the “implied certification” theory is a valid grounds for FCA liability, the Court will consider whether a claim for reimbursement can be considered legally “false” if the law or contractual provision the party is alleged to have violated does not expressly state that it is a condition of payment. Resolving this question also requires resolution of a circuit split—this time as between, on the one hand, the Second and Sixth Circuits, which require that the obligation be designated a condition of payment, and on the other, the First, Fourth, and D.C. Circuits, which do not require such a label as a predicate to establishing legal falsity.

FTLF will monitor the case as it proceeds before the Court and provide updates as the case unfolds.   However, if you have questions about this case, please contact our Health Care group at Feldesman Tucker Leifer Fidell LLP, www.ftlf.com or 202-466-8960.

Learn more about the FTLF Team