Supreme Court Evaluates Whether Implied or Express Certification of a Violation is Necessary for False Claims Case

One of the most important US Supreme Court decisions interpreting the Federal False Claim Act, 31 USC 3729, is currently under submission. (Universal Health Services, Inc., vs United States ex rel Escobar). In this case, the relator’s daughter was allegedly misdiagnosed and mistreated by a health care clinic that billed Medicare for the substandard treatment. Tragically, the 12 year old died following this debacle of treatment.

The suit is being brought under an “implied certification” theory of false claims liability. In short, the providers did not expressly state that all of its services were in compliance with state and federal laws requiring licenses and standards of care. In fact, these providers were apparently not licensed as doctors. The issue is whether, by submitting claims for reimbursement (and a high percentage of profit, we’re sure), was the clinic liable under the false claims act even though it never expressly provided that it had complied? The stakes are so high that 26 amicus (“friend of the court”) briefs have been submitted.

Under the federal false claims act, the Justices will decide whether the claim is either factually false or legally false. Legally false claims are either expressly certified or impliedly certified. If compliance with the law is the result, then that’s express and a false claim. (Eyelid ex rel US vs Lungwtiz, 616 F.3d 993 (9th Cir. 2010)). See following Medicare Fraud information related to CMS Form 1500 which calls for certification of compliance. Implied compliance is based on the premise that services billed-for comply with all rules. Numerous circuits (including California’s own, the 9th) have endorsed implied certification liability.  See these other False Claims Act blogs by our Los Angeles Qui Tam Attorneys.

In deciding this issue, the Supremes should be focused on the intent and knowledge of the wrong doers in determining liability. A false claim would seem to be appropriate to effectuate the purpose of the law. While penalties for false claims can be high, defendants should at least be thankful that most courts will not award additional punitive damages. Should a case for retaliation be brought under a comparable California statute such as Labor Code 1102.5 (coupled to a tort such as Termination in Violation of Public Policy), then erring defendants who put their profits above following the law will also face punitive damages.

Finally, it must be noted that the qui tam plaintiff (or relator) must prove that the defendant’s shortcomings was “material” and significant.  In this case, the parents who are suing on behalf of the deceased girl must allege the violations of substandard care were “so central” to the provision of care that the Medicaid program would not have paid the claims had it known about the violations.  The Supreme Court has sent the case back to the appeals court to resolve that issue.

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