Did the Supreme Court open the Floodgates for FCA Whistleblower Claims

The U.S. Supreme Court may have opened the floodgates for whistleblower lawsuits based on its unanimous opinion in the whistleblower case of Universal Health Services. v. United States ex rel. Escobar, in which the Court found that the implied false certification theory can be a basis for liability under the False Claims Act (FCA).

 

The FCA, imposes very significant penalties on those who defraud the Government, including statutory fines for every invoice plus triple the amount of the paid amount.  I ask readers to think of the following article as it might apply to (for example) a long term pattern of upcoding(or other incorrect coding) which a whistleblower and then the government claim violates the FCA, even if the doctors were unaware that improper codes were used.

 

The case before the Court involved allegations against a mental health clinic in Massachusetts that submitted claims for payment for treatment of a teenage beneficiary of Massachusetts’ Medicaid program. The allegations were that the clinic used payment codes corresponding to different services and that staff members misrepresented their qualifications and licensing status to obtain NPI numbers which were submitted in connection with the claims. Massachusetts’ Medicaid program was unaware of the misrepresentation and paid the claims. The whistleblower plaintiffs’ complaint alleged that the clinic violated the FCA by submitting claims while failing to disclose serious violations of regulations pertaining to staff qualification and licensing requirements.  The plaintiffs did not allege that the health care clinic expressly certified compliance with the regulations; rather, the health care provider was alleged to have impliedly certified compliance when it submitted claims for payment.

 

The trial court dismissed the case, making a distinction between conditions of payment and conditions of participation, and held that only noncompliance with statutory or regulatory conditions of payment could render claims for payment actionable under the FCA.  The Court of Appeals for the First Circuitreversed the decision, and found that the Medicaid supervision and licensure requirements impose conditions of payment, and the health care clinic did, in fact, impliedly certify its compliance when it submitted its request for payment.

 

The Supreme Court did not address whether all claims for payment implicitly represent that the billing party is legally enti­tled to payment. Instead, the Court found that the claims in this case “fall squarely within the rule that half-truths—representations that state the truth only so far as it goes, while omitting critical qualifying information—can be actionable misrepresentations”. The Court found the clinic’s representations in submitting claims while omitting its violation of regulatory requirementswere clearly misleading. As such, the Court held that the implied certification theory can be a basis for liability “where two conditions are satisfied: first, the claim does not merely requestpayment, but also makes specific representations about the goods or services provided; and second, the defendant’sfailure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths”.

 

The Supreme Court also held that the FCA is not limited to violation of a contractual, statutory, or regulatory provision that is expressly designated as a condition of payment.  Instead, in order to be actionable under the FCA, a misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government’s decision to make payment and the Government’s decision to specifically identify a provision as a condition of payment is irrelevant.  As such a case-by-case analysis as to whether a statutory, regulatory, or contractual requirement is material to the decision to make payment is necessary.

 

In sum, a party may be liable for violations of FCA when it submits a claim making representations about services or goods provided, but fails to disclose noncompliance with statutory, regulatory, or contractual requirements that are material to the Government’s decision to pay the claim.

 

Today’s Supreme Court decision, which adopts implied false certification theory as a basis for liability under the FCA significantly broadens the reach of FCA, particularly, because it may encompass a violation of any statutory, regulatory, or contractual requirement that is deemed material to the Government’s decision to pay a claim.

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