TREBLE DAMAGES PLUS A PENALTY of as much as $11,000 per claim; that is the exposure a physician, hospital or other healthcare provider may face for violating the federal False Claims Act ("FCA"). One of the issues that is important in any allegation that the statute has been violated is determining that a claimant knowingly submitted "false" or "fraudulent" information. Every claim and cost report (as well as many other forms) that is submitted to the Medicare or Medicaid program includes a statement wherein the submitter attests to the truth of the information contained thereon.
In many instances falsity is fairly easy to determine; for example, whether services were performed as billed. However, in some instances it is not so clear; for example, when a service is rendered and accurately billed, but provided by someone who is not appropriately licensed. While the information on the claim is accurate, under the circumstances is this a false statement? The government and many Whistleblowers have argued that the FCA encompasses this second type of billing under the theory of "implied false certification"; that is, in signing the attestation a claimant is certifying that not only is the information on the claim (or cost report) accurate, but all of the underlying legal/regulatory conditions necessary to provide those services and submit that claim have been satisfied.
Until recently, the ability of the government or a Whistleblower to successfully argue the implied certification theory depended on where the case was being brought – some federal District Courts and Courts of Appeals rejected this theory, while others adopted it. On June 16, 2016 the uncertainty was resolved when Justice Thomas, writing for a unanimous Supreme Court wrote:
We first hold that, at least in certain circumstances, the implied false certification theory can be a basis for liability [under the FCA]. Specifically, liability can attach when the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant's noncompliance with a statutory, regulatory or contractual requirement.
Universal Health Services, Inc. v. United States ex rel. Escobar (slip opinion at 1-2).
In this case the parents of a teenager, a Massachusetts Medicaid recipient who was diagnosed with bipolar disease, sued Universal Health Services when they learned that the defendant had retained unlicensed professionals who treated and prescribed medications to which the patient had an adverse reaction and subsequently died of seizures. The Court found that Universal Health had submitted claims to the Medicaid program "using payment codes that corresponded to specific counseling services, … represented that it had provided individual therapy … and other types of treatment. [In addition the defendant] made further representations using National Provider Identification numbers corresponding to specific job titles" that required licensed healthcare professionals. Slip op. at 9-10.
Left unqualified, Escobar would create an almost indeterminable degree of potential liability for healthcare providers and vendors that deal with the Federal health care programs. With the large number of sometimes conflicting statutes, regulations and administrative instructions they are expected to satisfy, it seems likely that at least one of them would not be met - thereby creating potential FCA liability. (For example, what is the FCA exposure created by a HIPAA violation?) However, the Court was clear to limit the use of the fraudulent certification theory to instances in which "the defendant's failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths." Id. at 10 (emphasis added).
In the future, the government and Whistleblowers will have the comfort of knowing that they can make their case using the implied certification theory and the flexibility it provides in proving a defendant knowingly submitted claims that were false or fraudulent. However, it will be incumbent on these plaintiffs to also demonstrate that whatever information caused the claims to contain "misleading half-truths" was material to determining whether or not it should be paid. The likely result is that the time and cost of litigating FCA claims, for both the plaintiffs and the defendant, and the stakes of a successful outcome for either side will continue to increase.