Implied False Certification Theory: Recognized basis for FCA liability

posted on:
November 22, 2016

Andrew Brashier

On June 16, the United States Supreme Court unanimously held that an implied false certification theory is a basis for liability under the False Claims Act (FCA).

In Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989 (2016) (Escobar), a teenager was prescribed medication for bipolar disorder and suffered an adverse reaction including seizures. After the reaction, the teenager’s parents learned few of the employees at the counseling center were actually licensed to provide mental health treatment and the center had minimal supervision of its counseling and mental health services. Additionally, the counseling services were misrepresenting staff qualifications and regulation compliance in order to obtain reimbursement from Medicaid.

The parents filed a qui tam suit in 2011 alleging Universal Health Services had violated the FCA under an implied false certification theory of liability. The court granted Universal Health Services’ motion to dismiss because none of the regulations violated were a condition of payment. However, the First Circuit reversed on the basis that each time a party submits a claim the party implies it conformed to the relevant program requirements entitling it to payment.

The Supreme Court affirmed, ruling the theory of implied false certification was valid to hold a provider liable under the FCA in certain circumstances when the misrepresentation of compliance would be material.

Though the FCA does not itself define false or fraudulent acts, the Supreme Court found Congress intended to use a common-law definition of fraud, which includes misrepresentations by omission as well as actively providing false information. Misleading claims or other half-truths are material and actionable under the FCA when they fail to include information related to compliance with regulations and the noncompliance is significant enough the government would likely have acted differently if the information was known.

To prove the misrepresentation was material under the FCA, it must be shown the government would likely have denied payment had they known of the noncompliance.

The Escobar decision clarifies that the implied false certification theory is acceptable to create liability under the FCA, opening up the potential for additional claims.

Are you aware of fraud being committed against the federal government, or a state government? If so, the FCA can protect and reward you for doing the right thing by reporting the fraud. If you have any questions about whether you qualify as a whistleblower, please contact an attorney at Beasley Allen for a free and confidential evaluation of your claim. There is a contact form on this website, or you may email one of the lawyers on our whistleblower litigation team: Archie Grubb, Larry Golston, Lance Gould or Andrew Brashier.

Source: Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989 (2016)

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