Thought Leadership

Supreme Court Issues Long-Awaited Key Decision on False Claims Act

June 16, 2016 Advisory

The U.S. Supreme Court (SCOTUS) issued a decision today in a case that has important implications for healthcare providers and other organizations that bill the U.S. government for goods or services. (Universal Health Services, Inc. v. United States ex rel. Escobar). 

The case arose out of a situation in which a teenage girl, Yarushka Rivera, received services from a mental health facility that billed the Massachusetts Medicaid program for those services. She died of a seizure after suffering an adverse reaction to a medication prescribed by a purported physician at the facility. 

When Rivera's mother and stepfather discovered that few of the facility's employees were licensed to prescribe medication or to offer mental health counseling, they filed a qui tam, or "whistleblower" lawsuit against the facility’s owner and operator, Universal Health Services (Universal). The case was filed under the U.S. False Claims Act (FCA), on an "implied false certification theory" of liability, which treats submission of payment claims to the government as implied certification of compliance with statutory, regulatory or contract requirements that are material conditions of payment, and thus "false" or "fraudulent" if the provider of services was not in compliance with those requirements. 

Universal convinced the U.S. District Court of the District of Massachusetts to dismiss the action on the grounds that none of the regulations violated by Universal was a condition of payment. On appeal from that decision, the First Circuit Court of Appeals reversed the District Court, holding that the regulations expressly required compliance with the requirements Universal violated, and that compliance with the regulations was a material condition of payment. 

At first glance, the decision might appear to be good news for entities that bill the government, because SCOTUS rejected the Court of Appeals' decision. SCOTUS acknowledged that "billing parties are often subject to thousands of complex statutory and regulatory provisions," and facing FCA liability for violating any single such provision "would hardly help would-be defendants anticipate and prioritize compliance obligations." 

The SCOTUS decision held, however, the implied certification theory can be the basis for FCA liability if the defendant submitting a claim makes specific representations about the goods or services provided, but fails to disclose noncompliance with material statutory, regulatory, or contractual requirements that make the representations misleading. The example used was that of an applicant for a position whose resume lists prior jobs and then retirement, "but fails to disclose that his 'retirement' was a prison stint for perpetrating a $12 million bank fraud." Universal, according to the opinion, had submitted its claims under payment codes that corresponded to specific counseling services, and its staff members had used National Provider Identification numbers that corresponded with specific qualifications. 

SCOTUS noted that materiality "cannot be found where noncompliance is minor or insubstantial," and that whether the government identifies a provision as "material" isn't necessarily decisive. Even more helpful to contractors, the decision held "if the Government regularly pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material." 

Ultimately, the good news for entities providing goods and services to the government is that violation of a regulation or law doesn't necessarily give a whistleblower or the government grounds for a FCA claim. However, providers still must pay careful attention to whether the specific claim for payment might involve a material misrepresentation.

Contact Us
  • Worldwide
  • Boston, MA
  • Chicago, IL
  • Denver, CO
  • Dublin, Ireland
  • Edwardsville, IL
  • Jefferson City, MO
  • Kansas City, MO
  • Las Vegas, NV
  • London, England
  • Miami, FL
  • New York, NY
  • Orange County, CA
  • Philadelphia, PA
  • Princeton, NJ
  • Salt Lake City, UT
  • St. Louis, MO
  • Washington, D.C.
  • Wilmington, DE
Worldwide
abstract image of world map
Boston, MA
800 Boylston St.
30th Floor
Boston, MA 02199
Google Maps
Boston, Massachusetts
Chicago, IL
100 North Riverside Plaza
Suite 1500
Chicago, IL 60606-1520
Google Maps
Chicago, Illinois
Denver, CO
4643 S. Ulster St.
Suite 800
Denver, CO 80237
Google Maps
Denver, Colorado
Dublin, Ireland
Fitzwilliam Hall, Fitzwilliam Place
Dublin 2, Ireland
Google Maps
Edwardsville, IL
115 N. Second St.
Edwardsville, IL 62025
Google Maps
Edwardsville, Illinois
Jefferson City, MO
101 E. High St.
First Floor
Jefferson City, MO 65101
Google Maps
Jefferson City, Missouri
Kansas City, MO
2345 Grand Blvd.
Suite 1500
Kansas City, MO 64108
Google Maps
Kansas City, Missouri
Las Vegas, NV
7160 Rafael Rivera Way
Suite 320
Las Vegas, NV 89113
Google Maps
Las Vegas, Nevada
London, England
Royal College of Surgeons of England
38-43 Lincoln’s Inn Fields
London, WC2A 3PE
Google Maps
Miami, FL
355 Alhambra Circle
Suite 1200
Coral Gables, FL 33134
Google Maps
Photo of Miami, Florida
New York, NY
7 Times Square, 44th Floor
New York, NY 10036
Google Maps
New York City skyline
Orange County, CA
19800 MacArthur Boulevard
Suite 300
Irvine, CA 92612
Google Maps
Philadelphia, PA
2005 Market Street
29th Floor, One Commerce Square
Philadelphia, PA 19103
Google Maps
Philadelphia, Pennsylvania
Princeton, NJ
100 Overlook Center
Second Floor
Princeton, NJ 08540
Google Maps
Princeton, New Jersey
Salt Lake City, UT
222 South Main St.
Suite 1830
Salt Lake City, UT 84101
Google Maps
Salt Lake City, Utah
St. Louis, MO
7700 Forsyth Blvd.
Suite 1800
St. Louis, MO 63105
Google Maps
St. Louis, Missouri
Washington, D.C.
1717 Pennsylvania Avenue NW
Suite 400
Washington, DC 20006
Google Maps
Photo of Washington, D.C. with the Capitol in the foreground and Washington Monument in the background.
Wilmington, DE
1007 North Market Street
Wilmington, DE 19801
Google Maps
Wilmington, Delaware