In a unanimous decision, the Supreme Court ruled that the “implied certification” theory can be applied under the False Claims Act (FCA) in “certain circumstances,” offering slightly more restrictive grounds for liability under the law.
The decision, delivered by Justice Clarence Thomas, indicated that “at least in certain circumstances, the implied false certification theory can be a basis for liability.” The court further held that FCA liability is not based solely on expressly stated conditions of payment, but rather, whether the defendant knowingly violated a requirement that is “material” to the government’s payment decision.
As some predicted, the Court outlined some limitations, including two conditions for implied certification going forward: The claim makes specific representations about the goods and services provided, and the defendant failed to disclose noncompliance with “material” regulations--a condition the Court characterized as “half-truths.” The Justices offered a more restrictive definition of materiality as “capable of influencing the payment or receipt of money,” and noted that the FCA is not “a vehicle for punishing garden-variety breaches of contract or regulatory violations.”
The case in question, Universal Health Services, Inc. v. United States ex rel. Escobar, involved claims submitted by a mental health provider that provided patient care using unlicensed and unsupervised counselors. Although the Supreme Court vacated the rulings of two lower courts and sent the case back down to a First Circuit court, it did note that the allegations against United Health included representations that were “misleading in context.”
The decision is likely to come as a disappointment to provider organizations that argued that the implied certification theory “lowers the bar as to what constitutes ‘fraud.’” Leading up to opening arguments, 21 states and anti-fraud organizations urged the Court to uphold a more expansive definition of the theory.
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