Supreme Court Evaluating Implied Certification in FCA Cases

Supreme Court Evaluating Implied Certification in FCA Cases


On December 4th, the Supreme Court announced it would hear arguments in Universal Health Services, Inc. v. United States ex rel. Escobar, No. 15-7 (U.S. Dec. 4, 2015).  In this somewhat unexpected, yet welcome, move, the Supreme Court announced its attention to address:

  1. The viability of the “implied certification” theory in False Claims Act cases. Implied certification generally means that a party had an ongoing obligation to comply with a law regardless of whether the party submitting the claim made a direct certification of compliance.
  2. And, if the “implied certification” theory is viable, whether a claim can be legally “false” under that theory only if the provider failed to comply with a statute, regulation, or contractual provision that expressly states that compliance with it is a “condition of payment.”  This is a significant step in addressing a split among the Circuits and could dramatically change the landscape of FCA cases. 

Under an implied certification theory, courts, including in the First Circuit, where Escobar originated, have found that a party submitting a claim to the United States -- whether it be a healthcare provider or government contractor -- can be liable for impliedly certifying compliance with billing regulations, contractual provisions and other requirements, “even though a certification of compliance is not required in the process of submitting the claim.” See Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010), cert. denied, 131 S.Ct. 801 (2010).  Some courts, including the Sixth Circuit, have limited this theory only to regulations that expressly condition payment on compliance. Others, such as the First and D.C. Circuits have a more expansive interpretation and allowed FCA liability to attach for non-compliance with regulations that don’t expressly condition payment on compliance.  In taking Escobar, the Supreme Court has indicated it will address both of these issues. 

Escobar’s facts are particularly disturbing, and involves the death of the relators’ teenage daughter after being treated at the defendants’ mental health facility.  The district court and the First Circuit both held that for an implied false certification theory to apply the regulation at issue must be a condition of payment for Medicaid reimbursement. Their analysis on what constituted a  “condition of payment” differed, however.  The district court dismissed the action, holding that the Medicaid regulations at issue were not conditions of payment, but rather mere “conditions of participation,” for which FCA liability cannot attach.  The First Circuit disagreed, holding that there was no need to distinguish between a condition of payment and a condition of participation under the FCA, and that the regulations was in fact a condition of payment

While it is impossible to predict how the Court will rule, its recent decision on FCA issues have suggested that it is wary of a unrestricted expansion of FCA liability.  In Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 672 (2008), the Court expressed significant concern over the FCA becoming an “all-purpose antifraud statute.”  More recently, this year, in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 135 S. Ct. 1970 (2015), the Court rejected an attempt by the Justice Department and relators to use the Wartimes Suspension of Limitations Act to extend the already generous statute of limitations in the FCA.  Both of these decisions suggest a Court that is wary of an unrestrained expansion of liability under the FCA.  This will be a case to watch as the upcoming term unfolds.  

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