False Claims Act
In 1863, President Abraham Lincoln pushed the first federal whistleblower statute through Congress. The False Claims Act (“FCA”), otherwise known as “Lincoln’s Law,’’ contained whistleblower, a.k.a. “qui tam” provisions that authorized private citizens to sue (on behalf of the government) companies and individuals that were defrauding the government. The Latin phrase, “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” means “he who brings an action for the king as well as for himself.” The FCA imposes liability on any person who submits a claim to the federal government that he or she knows (or should know) is false. Total False Claims Act recoveries since the 1986 amendments now total over $17 billion, with nearly $1 billion recovered in the first quarter of FY 2006 alone.
In the case of Universal Health Services v. United States ex rel. Escobar, the United States Supreme Court held: (1) The implied false certification theory can be a basis for liability under the False Claims Act when a defendant submitting a claim makes specific representations about the goods or services provided, but fails to disclose non-compliance with material statutory, regulatory, or contractual requirements that make those representations misleading with respect to those goods or services; and (2) liability under the FCA for failing to disclose violations of legal requirements does not turn upon whether those requirements were expressly designated as conditions of payment.
The underlying facts of the case involved Yarushka Rivera, a 17-year old female and beneficiary of Massachusetts’ Medicaid program, who for several years before her death, received care from an affiliate of Universal Health, a Massachusetts mental health facility. In 2009, Yarushka had an adverse reaction to a medication that was purportedly prescribed by a physician to treat bipolar disorder. She suffered multiple seizures requiring hospitalization before her death. After her death, an employee of the health care facility advised Yarushka’s mother and step-father that few health care employees were actually licensed to provide mental health care and that supervision of them was minimal. It was determined that only one (1) of the five (5) employees that provided mental health services to Yarushka were properly licensed, including the individual who diagnosed Yarushka as suffering from bipolar disorder. Moreover, it was determined that the professional who prescribed the medication was a nurse, who lacked authority to prescribe medication without proper supervision. The health care facility’s improper practices were systemic such that 23 employees were found to be providing health care services absent the proper license and/or supervision. Many staff members misrepresented their qualifications and licensing status to the Federal Government to obtain individual National Provider Identification numbers, which are submitted in connection with Medicaid reimbursement claims and correspond to specific job titles.
Subsequently, Yarushka’s parents filed the instant qui tam suit, alleging that Universal Health violated the False Claim Act under an implied false certification theory of liability. More specifically, it was alleged that Universal Health submitted reimbursement claims that made representations about the specific services provided by specific types of professionals, but that failed to disclose serious violations of regulations pertaining to staff qualifications and licensing requirements for these services. Unaware of these deficiencies, the Massachusetts Medicaid program paid the claims. The Federal District Court dismissed the case because none of the regulations violated was a condition of payment. The US Court of Appeals for the First Circuit reversed in part holding that each time Universal Health submits a claim, it implicitly communicates that it conformed to the relevant program requirements. The appellate court determined that Universal Health submitted false claims because it knowingly misrepresented compliance with a material precondition of payment. Because of differing views regarding the validity and scope of the implied false certification theory of liability amongst several US appellate courts, the Supreme Court accepted review.
The Supreme Court found that Universal Health failed to disclose its noncompliance with federal regulations, and misled the federal government when submitting claims for payment by using payment and other codes that corresponded to specific counseling services as well as National Provider Identification numbers corresponding to specific job titles. Thus, the Supreme Court held that a condition of payment need not be expressly stated as such in the statute, regulation, or contract, and that the implied certification theory can be a basis for FCA liability where the claim submitted for payment “does not merely request payment but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” The Court declined to decide whether all claims for payment implicitly represent that the billing party is legally entitled to payment when no representations in the submission for payment are made. Finally, the Supreme Court emphasized that not every requirement of the regulations and contractual requirements that companies and individuals are often required to follow will be material giving rise to a valid claim under the FCA.
