The U.S. Supreme Court last week unanimously upheld a legal theory now used to bring many fraud cases against providers—but it also tried to outline the limits of that theory so it's not used to go after providers for minor violations.
In Universal Health Services v. U.S. ex rel Escobar, the justices decided unanimously that the theory, known as “implied certification,” may be used to bring False Claims Act cases against providers and others.
Under that theory, providers can be held liable for submitting false claims to government programs for failing to follow certain regulations even if the government never explicitly stated that following the regulations was a condition of payment and even if the provider never explicitly vouched that it had complied with the regulations. But the court also said that for implied certification to apply, an organization's failure to reveal it didn't comply with “material” requirements would have to render the organization's representations about its goods or services misleading.
Justice Clarence Thomas, who wrote the opinion, stated that there is a “rigorous” and “demanding” process for determining alleged misconduct. There is an element of common sense in these cases, but justices also made it clear the False Claims Act cannot be used as “a vehicle for punishing garden-variety breaches of contract or regulatory violations.”
“It is going to increase liability in FCA for healthcare providers,” said John Petrelli, a partner at BakerHostetler. “But it has increased scrutiny into some of those cases with the materiality standard.”
