Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. ___ [2016 WL 3317565] (June 16, 2016).
Yarushka Rivera, a minor, received mental health treatments subsidized by Medicaid at the Arbour clinic, a subsidiary of Universal Health Services. Rivers was diagnosed with bipolar disorder and prescribed a medicine that ultimately caused her death. After discovering that few of Arbour’s employees were properly supervised or licensed, Rivera’s parents filed a qui tam suit alleging that Universal Health violated the False Claims Act, 31 U.S.C. § 3729(a)(1)(A), which imposes penalties on those who “knowingly present” a “false or fraudulent claim for payment” to the federal government. The parents relied on the “implied certification” theory—under which a defendant implicitly certifies compliance with all regulations and other conditions of payment when it submits a claim—in alleging that Universal Health defrauded Medicaid by seeking reimbursement for its services despite violating licensing regulations. The district court dismissed the complaint because none of the regulations Arbour allegedly violated were conditions of payment. The First Circuit disagreed and reversed.
The Supreme Court granted certiorari to resolve a split in the circuit courts as to the availability and elements of the implied certification theory. The Court refused to adopt a bright-line rule. The Court unanimously held that providers can be liable under an implied certification theory if, in the course of requesting payments, they enter codes or make other specific representations about their goods or services that are deceptive in context (i.e., “misleading half-truths”). Drawing upon the common law of fraud, the Court explained that, when a claimant submits claim information and “omits its violations of statutory, regulatory, or contractual requirements, those omissions can be a basis for liability if they render the defendant’s representations misleading.” Although the Court endorsed the implied certification theory, its opinion clarifies that the theory will not apply in every instance when a provider has violated regulations—indeed, even the violation of an express condition of payment does not automatically trigger liability. The Court emphasized that “a misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government’s payment decision in order to be actionable under the False Claims Act.” (Emphasis added.) Thus, the doctrine of materiality limits the scope of liability under the implied certification theory, and the Court’s opinion reiterates that the “materiality standard is demanding.” Proof of materiality might include, for example, evidence that a provider knows the government refuses to pay claims when particular rules or regulations have not been followed. The Court remanded to allow the lower courts to reassess the parents’ allegations under the new standard. Courts will now start building a body of case law regarding the circumstances that do (and do not) support implied certification liability.
