SCOTUS Hears Arguments on Implied Certification Theory

Last month, the United States Supreme Court took up the issue of whether False Claims Act (FCA) cases may be brought by whistleblowers and the government under the theory known as “implied certification.†And, if so, under what circumstances.

On April 19, the high court heard oral arguments in Universal Health Services v. United States ex rel. Escobar. The case was brought by the parents of a Massachusetts teen who died after receiving treatment at a facility owned by Universal Health Services.

The parents alleged that the girl, who was covered by Medicaid, was treated by unlicensed and unsupervised therapists who diagnosed her with bipolar disorder and prescribed an anti-seizure drug. After she stopped taking the drug, she developed a seizure disorder and died after suffering a seizure in 2009.

The parents filed suit in 2011, claiming that Universal violated the FCA, the Massachusetts False Claims Act, and other Massachusetts regulations, because they submitted bills for staff members who were not properly licensed and/or supervised, and that the treatment center did not have a fully-certified psychiatrist and a fully-certified psychologist on staff at the time.

The False Claims Act makes it unlawful to present a false or fraudulent claims for government reimbursement. A claim can be “factually false” because, for example, the contractor has not provided the products or services for which reimbursement is sought.

Under the theory of implied certification, when a provider submits a claim for government payment, it does so with the implication that it is being submitted in compliance with all statutes, regulations and contractual arrangements that govern the federal program being billed, (Medicare/Medicaid), even if that claimant has not expressly certified to compliance with these rules.

Universal Health Services argued that a claim cannot be fraudulent unless it states something that is untrue. If the claim seeks repayment for goods and services that the contractor provided, and does not describe or claim any aspect of the goods and services that the contractor failed to provide, then, the contractor contends, the claim cannot be actionable under the FCA.

There is a lot at stake in this case, so much so that a parade of others including the American Hospital Association, Chamber of Commerce of the United States, American Medical Association and the Pharmaceutical Research and Manufacturers Association of America, to name a few, filed amicus briefs.

Highlights from the high court’s oral arguments provide some insight into how the justices viewed the arguments.

Justice Stephen Breyer: That’s to me what’s at the heart of this. How do you distinguish those regulations, breach of which are fraudulent when you breach them, and implicit promise not to, from those that (are) not? There are millions of regulations. That’s what all the amici are worried about.

Chief Justice John Roberts: I suspect most cases are a little more complicated than that, and that’s where the difficulty comes in when you have hundreds, thousands of pages of regulations.

Justice Sonia Sotomayor: I have a very hard time accepting that if you provide –  if you claim money for a service that you don’t render, not a qualified individual, unsupervised by a qualified individual, which is a requirement specifically in the regulations, I’m having a hard time understanding how you have not committed a fraud.

Justice Elena Kagan: … the contract was for a doctor’s medical care, and a doctor’s medical care was no provided. A non-doctor’s care was provided.

Over the years, district courts have been divided on the issue. A ruling, which is expected sometime in June, could bring much needed uniformity to an area of law where the stakes are high. It will be interesting to see how, or if, the court will limit liability for implied certifications and what impact that could have on the healthcare industry.

The healthcare regulatory environment is extremely complex, often making it difficult for providers to safely navigate the waters. For the last 25 years, the Health Law Offices of Anthony C. Vitale has successfully assisted clients in traversing these complex matters and defending clients under investigation. Give us a call and let us know how we can help.