U.S. Supreme Court Issues Key Decision on False Claims

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U.S. Supreme Court Issues Key Decision on False Claims

On June 16, 2016, the U.S. Supreme Court issued a decision of importance to
all healthcare providers, Universal Health Services, Inc. v. United States
et al ex rel. Escobar et al. The issue in this case was whether providers
are liable for submission of false claims when all relevant statutory,
regulatory or contractual requirements have not been met. This issue is
often referred to as the "implied false certification theory of liability."

The Court considered two key questions in its decision:

- whether the implied certification theory of legal falsity is viable
under the False Claims Act

- whether claims can be "false claims," if the statute, regulation or
contractual requirement that was not met states that it is a condition of

THE GOOD NEWS! The Court said that liability under the False Claims Act
cannot be decided on the basis of whether a requirement is designated by the
government as a condition of payment because not every violation of
designated conditions of payment can be the basis for liability. Likewise,
requirements that are clearly designated as conditions of payment may not
result in liability.

THE NOT-SO-GOOD NEWS! The Court concluded that the implied certification
theory is a basis for liability under the False Claims Act if two
requirements are met:

- Claims submitted make specific representations about the goods or
services provided and are not just requests for payment

- Providers' failure to disclose noncompliance with material
statutory, regulatory or contractual requirements makes the claims for
payments misleading with regard to their truthfulness

According to the Court, the emphasis regarding liability under the False
Claims Act is clearly on whether the non-compliance was "material" or not.

The Court went on to say that providers can determine whether non-compliance
with regard to the submission of claims is material based on:

- Whether the government identified the requirement as a condition of

- Whether the defendant knows that the government consistently
refuses to pay claims based on noncompliance with a particular statutory,
regulatory or contractual requirement

- Whether the government usually pays particular types of claims
despite actual knowledge on the part of the government that certain
requirements were not met

The facts in the case considered by the U.S. Supreme Court were that a
Medicaid recipient received counseling services for several years at a
counseling center. The recipient had an adverse reaction to a medication
that a purported doctor at the center prescribed after diagnosing her with
bipolar disorder. The recipient's condition worsened and she eventually
died of a seizure. The recipient's parents later learned that few employees
at the center were actually licensed to provide mental health counseling,
authorized to prescribe medications and/or to offer counseling services
without supervision. The recipient's parents initiated the lawsuit that
resulted in the above decision.

Applying the Court's decision to this case, most providers would likely
conclude that the claims for the services described above were false because
the practitioners who rendered them were not appropriately licensed under
state laws. In other words, non-licensure is a "material" violation.

But there are many other instances of non-compliance that providers may not
view as "material." Non-compliance with some Conditions of Participation
(CoPs) of the Medicare Program, for example, is not necessarily "material"
and may not serve as the basis for submission of false claims under the
False Claims Act. Practically speaking, liability for non-compliance with
applicable criteria is likely to boil down to:

- Whether providers had knowledge of the materiality of applicable
statutory, regulatory and contractual requirements

- Whether the government regularly pays claims even through it knew
that certain requirements were not met

In other words, providers are not out of the woods yet! In any event
providers must be prepared to address the two issues above, if government
representatives come calling.

C2016 Elizabeth E. Hogue, Esq. All rights reserved.

No portion of this material may be reproduced in any form without the
advance written permission of the author.
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