A case now before the U.S. Supreme Court could mean fewer fraud lawsuits filed against healthcare providers. Or it could at least give them more clarity about what constitutes a violation of the law, experts say.
The Supreme Court announced Friday it would hear Universal Health Services v. United States ex rel Escobar, a case that focuses on one theory whistle-blowers and the government use in bringing False Claims Act cases to court. The act makes it illegal to knowingly submit fraudulent bills to the government, such as for services not actually performed.
In a variation of fraud claims, some whistle-blowers allege that providers submitted false claims by failing to follow certain regulations. Providers sometimes are held liable for not following such regulations even if the government never explicitly stated that following a regulation was a condition of payment, and even if the provider never explicitly vouched that it had complied with the regulation.
The Supreme Court will consider whether whistle-blowers and the government should be allowed to bring FCA cases under this theory, known as implied certification.
“It's a huge deal for healthcare providers,” said Larry Freedman, an attorney with Mintz Levin who defends providers in FCA cases. Legal claims based on implied certification are now “the major driver” of healthcare whistle-blower suits, he added.
Lower courts have been divided on the issue, with some saying it's unreasonable to sue organizations under the act for compliance issues arising from the thousands of pages of state and federal rules. Federal and state agencies, not the courts, should deal with such violations, some courts have said.
Allowing an implied certification argument in situations where it hasn't been clearly expressed that a regulation is a condition for payment could turn the False Claims Act into “a punitive sanction for use against minor regulatory or contractual violations,” Universal Health argues in court papers.
Other courts, however, have allowed FCA cases to proceed under such circumstances.
“We understand that people make mistakes and we understand that not every violation of a rule rises to fraud,” said Patrick Burns, co-executive director of the Taxpayers Against Fraud Education Fund, a not-for-profit supporting whistle-blower incentive programs. But, he added, it's implied that when the government pays a contractor, the government is getting the work it paid for.
The Supreme Court could decide to invalidate implied certification as a basis for FCA cases, or it could limit its use to instances in which it's been explicitly stated that following a certain regulation is a condition of payment, among other possibilities, Freedman said. That could reduce the number of FCA cases filed in healthcare, or it could offer more clarity about when the act applies, Freedman said.
The CMS could respond to a Supreme Court decision by clarifying which regulations are conditions of payment, said Judy Waltz, a partner at law firm Foley & Lardner who usually represents providers. She said the idea of implied certification carries “huge risks” for the healthcare community.
David Chizewer, an attorney with Goldberg Kohn who represents whistle-blowers, predicts the high court will do away with implied certification. He thinks the justices will boil down the issues in FCA cases to whether providers who have submitted claims are actually entitled to payments, and whether they knew if they were not entitled to payments.
That could be bad news for providers, he said, because they will no longer be able to rely on “some of these more technical legal arguments that courts have been accepting. But it will be good news in that I think it will be easier to understand when you've violated the act and when you have not.”
The Universal case was brought by the parents of a patient who died at a Massachusetts mental health clinic. Her parents alleged that the clinic's caregivers were not properly supervised and that the clinic did not employ a board-certified or board-eligible psychiatrist and a licensed psychologist, in violation of state Medicaid program regulations. The 1st U.S. Circuit Court of Appeals sided with the plaintiffs in that case.
