[Cross-posted from Hamilton and Griffin On Rights]
On June 17, the Supreme Court unanimously decided Universal Health Services v. United States ex rel. Escobar (UHS), holding that FCA cases may be predicated on “implied certifications” of compliance as long as the defendant knowingly violates a requirement it knows is material to the government’s payment determination. Because the First Circuit applied an incorrectly broad interpretation of materiality, however, the Justices nonetheless vacated the appellate judgment and remanded. While both parties quickly claimed victory, in reality the decision is likely to satisfy no one and to raise as many questions as it answers.
The case was filed by the parents of a young woman who died after receiving Medicaid-covered mental health treatment from a Massachusetts clinic that failed to satisfy state licensing and supervision regulations. Her parents alleged that the clinic’s MassHealth claims were fraudulent because, by filing for payment, the clinic had implicitly represented that it was in compliance with all relevant state requirements. A district court dismissed the suit but the First Circuit reversed, taking a very broad view of the scope of implied certification. On appeal, UHS asked the Court to reject the implied certification theory, arguing that a failure to disclose noncompliance should not be considered fraudulent in the absence of an affirmative duty to disclose. Respondents, supported by the United States as amicus curiae, countered that a defendant who knowingly bills the government for services without disclosing a failure to meet material conditions has submitted a false claim. While few observers expected the Court to entirely abolish implied certification, at oral argument the Justices appeared deeply divided as to the scope of the theory and the source of any limiting principle.