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A case before the U.S. Supreme Court could expand physicians’ liability under the False Claims Act (FCA).
The case of Escobar v. Universal Health Services centers on the theory of implied certification and how that legal test should be used to determine whether a claim for payment is fraudulent.
The case “is an opportunity for the Supreme Court to figure out how far the False Claims Act is going to stretch,” said Lawrence M. Kraus, a Boston health law attorney who attended the April 19 oral arguments. “On the practical level, it may have an impact as to whether [such] cases get dismissed at an early stage or whether they go into the discovery phase, which can be quite long, unpleasant, and expensive.”
The Escobar case arises from the death of a patient who was treated at a Lawrence, Mass., mental health clinic operated by Universal Health Services. The patient died from an alleged adverse reaction to medication prescribed for her by clinic staff, according to allegations by her family. The patient’s father, Julio Escobar, later learned counselors and psychologists involved in his daughter’s treatment were not licensed, were not properly supervised by a physician, and had lied about their medical credentials, according to court documents.
The Massachusetts Department of Public Health found the clinic had violated 14 distinct regulations, including those relating to staff licensure and supervision. As a result of the investigation, the clinic entered into a correction plan with the agency and paid a civil fine.
Mr. Escobar and his wife then filed suit under the FCA and the Massachusetts False Claims Act, claiming that Universal had presented false claims to Medicaid by seeking payments for services provided by unlicensed, unsupervised health care providers. Although the reimbursement claims submitted to the government accurately described the services provided and cited the correct charges, the plaintiffs alleged that because the clinic’s operations violated state requirements to participate in Medicaid, Universal had also violated the FCA. The federal government intervened in the case on behalf of the Escobars.
Universal countered that the FCA suit was invalid because a reimbursement claim cannot be false unless its details are untrue or inaccurate.
The plaintiffs, however, contend that a claim does not have to include explicit false statements to be fraudulent. Rather, their complaint relies on “implied certification,” a theory holding that any submission for government payment includes an implicit certification that the health provider has complied with all applicable contract requirements, laws, and regulations that could be a condition of payment. Universal falsely claimed entitlement when it submitted reimbursement requests that did not conform to applicable laws, the plaintiffs argued.
The 1st U.S. Circuit Court of Appeals ruled in favor of Escobar, and Universal appealed to the Supreme Court.
Circuit courts across the country have split on the issue, Mr. Kraus noted.
“There have been a number of different approaches from appeals courts in the country,” he said. “This is not a new issue, but one that the Supreme Court found important enough to decide.”
Why should doctors care about this case?
A ruling for the plaintiff could increase the chances that physicians are accused of an FCA violation after submitting a claim for payment, said William W. Horton, a Birmingham, Ala., health law attorney and chair of the American Bar Association Health Law Section.
“The problem that this raises for health care providers is: There is an enormous web of laws and regulations out there, many of which don’t have anything to do with whether a particular service was rendered or not,” Mr. Horton said in an interview “If you adopt the implied certification theory and take a broad view, than you significantly enhance the scope of claims that could be pursued under the False Claims Act.”
Mr. Horton provides this example: Take a physician group that has an in-office lab, and assume that for some technical reason, the group doesn’t satisfy the Stark Law exception for in-office ancillary services. If a physician in the group refers a Medicare patient to the lab and the group bills Medicare, that’s a Stark Law violation because the group didn’t meet the Stark exception, even if there’s no dispute over whether the patient needed the test or whether the test was done correctly, or whether the Medicare claim accurately reflected the charges, he said. By broadly applying the implied certification theory to this scenario, a case could be made that the practice violated the FCA in submitting the claim because the group was implicitly certifying that the claim did not result from a referral that violated the Stark Law.
“The group could be found liable for the enormous penalties available under the False Claims Act even though the services rendered were medically necessary and appropriate, and even though the group did not expressly certify, in so many words, that the claim did not result from a referral that violated the Stark Law,” Mr. Horton said.
Medical associations, including the American Medical Association and American Hospital Association have weighed in on the case in favor of Universal Health Services. In its brief, the AMA said there is a “sharp distinction” between statutory, regulatory, or contractual violations and false or fraudulent claims.
“Implied certification claims find no support in the statute and do not resemble claims Congress had in mind when enacting or amending the FCA,” according to the brief. “They deprive contractors of their constitutional rights to have notice that they are engaging in conduct subject to heightened sanctions.”
How might the Supreme Court rule?
During oral arguments on April 19, some justices appeared to indicate which way they are leaning, Mr. Kraus said.
Chief Justice John Roberts seemed concerned about the reach of the FCA under the implied certification theory. He raised questions about how people conducting business with the government would know about each and every regulation that could apply as a condition of payment.
Associate Justice Sonia Sotomayer and Associate Justice Elena Kagan appeared in favor of implied certification, while Associate Justice Samuel Alito Jr., Associate Justice Clarence Thomas, and Associate Justice Ruth Bader-Ginsberg did not display a strong opinion either way, Mr. Kraus said. Associate Justice Stephen Breyer appeared to be conflicted, asking for guidance from Roy T. Englert, an attorney for Universal Health Services.
“I’m asking for advice from you, from your point of view,” Justice Breyer said to Mr. Englert. “What the sentence in the opinion should say that describes the circumstances under which the person who submits a form saying, ‘I want a thousand dollars. I just supplied the guns or the medical care.’ ... When has that person committed fraud? – Or that’s what I want. What is the sentence you want me to write?”
Justices could rule a number of ways. They could uphold the appeals court decision, which would affirm a broad interpretation of implied certification theory. They could rule that the implied certification theory is valid, but it cannot be stretched as far as the appeals court expanded it. Justices could choose to reject the implied certification theory altogether and decide that the government must expressly identify every condition of payment in which a health provider is certifying compliance when they submit a claim, either on the claim form or by regulation. The high court could also split on the issue four to four, leaving intact the range of circuit court interpretations on implied certification across the country.
“There’s a very real question as to whether they’re going to be able to get a majority on any of those decisions because this is not an easy question,” Mr. Horton said. “The court has a pretty wide range of potential rulings available to it, but I don’t know what they’re going to be able to majority around, if they’re going to be able get a majority around any result at all.”
A decision in the case is expected by June.
On Twitter @legal_med
A case before the U.S. Supreme Court could expand physicians’ liability under the False Claims Act (FCA).
The case of Escobar v. Universal Health Services centers on the theory of implied certification and how that legal test should be used to determine whether a claim for payment is fraudulent.
The case “is an opportunity for the Supreme Court to figure out how far the False Claims Act is going to stretch,” said Lawrence M. Kraus, a Boston health law attorney who attended the April 19 oral arguments. “On the practical level, it may have an impact as to whether [such] cases get dismissed at an early stage or whether they go into the discovery phase, which can be quite long, unpleasant, and expensive.”
The Escobar case arises from the death of a patient who was treated at a Lawrence, Mass., mental health clinic operated by Universal Health Services. The patient died from an alleged adverse reaction to medication prescribed for her by clinic staff, according to allegations by her family. The patient’s father, Julio Escobar, later learned counselors and psychologists involved in his daughter’s treatment were not licensed, were not properly supervised by a physician, and had lied about their medical credentials, according to court documents.
The Massachusetts Department of Public Health found the clinic had violated 14 distinct regulations, including those relating to staff licensure and supervision. As a result of the investigation, the clinic entered into a correction plan with the agency and paid a civil fine.
Mr. Escobar and his wife then filed suit under the FCA and the Massachusetts False Claims Act, claiming that Universal had presented false claims to Medicaid by seeking payments for services provided by unlicensed, unsupervised health care providers. Although the reimbursement claims submitted to the government accurately described the services provided and cited the correct charges, the plaintiffs alleged that because the clinic’s operations violated state requirements to participate in Medicaid, Universal had also violated the FCA. The federal government intervened in the case on behalf of the Escobars.
Universal countered that the FCA suit was invalid because a reimbursement claim cannot be false unless its details are untrue or inaccurate.
The plaintiffs, however, contend that a claim does not have to include explicit false statements to be fraudulent. Rather, their complaint relies on “implied certification,” a theory holding that any submission for government payment includes an implicit certification that the health provider has complied with all applicable contract requirements, laws, and regulations that could be a condition of payment. Universal falsely claimed entitlement when it submitted reimbursement requests that did not conform to applicable laws, the plaintiffs argued.
The 1st U.S. Circuit Court of Appeals ruled in favor of Escobar, and Universal appealed to the Supreme Court.
Circuit courts across the country have split on the issue, Mr. Kraus noted.
“There have been a number of different approaches from appeals courts in the country,” he said. “This is not a new issue, but one that the Supreme Court found important enough to decide.”
Why should doctors care about this case?
A ruling for the plaintiff could increase the chances that physicians are accused of an FCA violation after submitting a claim for payment, said William W. Horton, a Birmingham, Ala., health law attorney and chair of the American Bar Association Health Law Section.
“The problem that this raises for health care providers is: There is an enormous web of laws and regulations out there, many of which don’t have anything to do with whether a particular service was rendered or not,” Mr. Horton said in an interview “If you adopt the implied certification theory and take a broad view, than you significantly enhance the scope of claims that could be pursued under the False Claims Act.”
Mr. Horton provides this example: Take a physician group that has an in-office lab, and assume that for some technical reason, the group doesn’t satisfy the Stark Law exception for in-office ancillary services. If a physician in the group refers a Medicare patient to the lab and the group bills Medicare, that’s a Stark Law violation because the group didn’t meet the Stark exception, even if there’s no dispute over whether the patient needed the test or whether the test was done correctly, or whether the Medicare claim accurately reflected the charges, he said. By broadly applying the implied certification theory to this scenario, a case could be made that the practice violated the FCA in submitting the claim because the group was implicitly certifying that the claim did not result from a referral that violated the Stark Law.
“The group could be found liable for the enormous penalties available under the False Claims Act even though the services rendered were medically necessary and appropriate, and even though the group did not expressly certify, in so many words, that the claim did not result from a referral that violated the Stark Law,” Mr. Horton said.
Medical associations, including the American Medical Association and American Hospital Association have weighed in on the case in favor of Universal Health Services. In its brief, the AMA said there is a “sharp distinction” between statutory, regulatory, or contractual violations and false or fraudulent claims.
“Implied certification claims find no support in the statute and do not resemble claims Congress had in mind when enacting or amending the FCA,” according to the brief. “They deprive contractors of their constitutional rights to have notice that they are engaging in conduct subject to heightened sanctions.”
How might the Supreme Court rule?
During oral arguments on April 19, some justices appeared to indicate which way they are leaning, Mr. Kraus said.
Chief Justice John Roberts seemed concerned about the reach of the FCA under the implied certification theory. He raised questions about how people conducting business with the government would know about each and every regulation that could apply as a condition of payment.
Associate Justice Sonia Sotomayer and Associate Justice Elena Kagan appeared in favor of implied certification, while Associate Justice Samuel Alito Jr., Associate Justice Clarence Thomas, and Associate Justice Ruth Bader-Ginsberg did not display a strong opinion either way, Mr. Kraus said. Associate Justice Stephen Breyer appeared to be conflicted, asking for guidance from Roy T. Englert, an attorney for Universal Health Services.
“I’m asking for advice from you, from your point of view,” Justice Breyer said to Mr. Englert. “What the sentence in the opinion should say that describes the circumstances under which the person who submits a form saying, ‘I want a thousand dollars. I just supplied the guns or the medical care.’ ... When has that person committed fraud? – Or that’s what I want. What is the sentence you want me to write?”
Justices could rule a number of ways. They could uphold the appeals court decision, which would affirm a broad interpretation of implied certification theory. They could rule that the implied certification theory is valid, but it cannot be stretched as far as the appeals court expanded it. Justices could choose to reject the implied certification theory altogether and decide that the government must expressly identify every condition of payment in which a health provider is certifying compliance when they submit a claim, either on the claim form or by regulation. The high court could also split on the issue four to four, leaving intact the range of circuit court interpretations on implied certification across the country.
“There’s a very real question as to whether they’re going to be able to get a majority on any of those decisions because this is not an easy question,” Mr. Horton said. “The court has a pretty wide range of potential rulings available to it, but I don’t know what they’re going to be able to majority around, if they’re going to be able get a majority around any result at all.”
A decision in the case is expected by June.
On Twitter @legal_med
A case before the U.S. Supreme Court could expand physicians’ liability under the False Claims Act (FCA).
The case of Escobar v. Universal Health Services centers on the theory of implied certification and how that legal test should be used to determine whether a claim for payment is fraudulent.
The case “is an opportunity for the Supreme Court to figure out how far the False Claims Act is going to stretch,” said Lawrence M. Kraus, a Boston health law attorney who attended the April 19 oral arguments. “On the practical level, it may have an impact as to whether [such] cases get dismissed at an early stage or whether they go into the discovery phase, which can be quite long, unpleasant, and expensive.”
The Escobar case arises from the death of a patient who was treated at a Lawrence, Mass., mental health clinic operated by Universal Health Services. The patient died from an alleged adverse reaction to medication prescribed for her by clinic staff, according to allegations by her family. The patient’s father, Julio Escobar, later learned counselors and psychologists involved in his daughter’s treatment were not licensed, were not properly supervised by a physician, and had lied about their medical credentials, according to court documents.
The Massachusetts Department of Public Health found the clinic had violated 14 distinct regulations, including those relating to staff licensure and supervision. As a result of the investigation, the clinic entered into a correction plan with the agency and paid a civil fine.
Mr. Escobar and his wife then filed suit under the FCA and the Massachusetts False Claims Act, claiming that Universal had presented false claims to Medicaid by seeking payments for services provided by unlicensed, unsupervised health care providers. Although the reimbursement claims submitted to the government accurately described the services provided and cited the correct charges, the plaintiffs alleged that because the clinic’s operations violated state requirements to participate in Medicaid, Universal had also violated the FCA. The federal government intervened in the case on behalf of the Escobars.
Universal countered that the FCA suit was invalid because a reimbursement claim cannot be false unless its details are untrue or inaccurate.
The plaintiffs, however, contend that a claim does not have to include explicit false statements to be fraudulent. Rather, their complaint relies on “implied certification,” a theory holding that any submission for government payment includes an implicit certification that the health provider has complied with all applicable contract requirements, laws, and regulations that could be a condition of payment. Universal falsely claimed entitlement when it submitted reimbursement requests that did not conform to applicable laws, the plaintiffs argued.
The 1st U.S. Circuit Court of Appeals ruled in favor of Escobar, and Universal appealed to the Supreme Court.
Circuit courts across the country have split on the issue, Mr. Kraus noted.
“There have been a number of different approaches from appeals courts in the country,” he said. “This is not a new issue, but one that the Supreme Court found important enough to decide.”
Why should doctors care about this case?
A ruling for the plaintiff could increase the chances that physicians are accused of an FCA violation after submitting a claim for payment, said William W. Horton, a Birmingham, Ala., health law attorney and chair of the American Bar Association Health Law Section.
“The problem that this raises for health care providers is: There is an enormous web of laws and regulations out there, many of which don’t have anything to do with whether a particular service was rendered or not,” Mr. Horton said in an interview “If you adopt the implied certification theory and take a broad view, than you significantly enhance the scope of claims that could be pursued under the False Claims Act.”
Mr. Horton provides this example: Take a physician group that has an in-office lab, and assume that for some technical reason, the group doesn’t satisfy the Stark Law exception for in-office ancillary services. If a physician in the group refers a Medicare patient to the lab and the group bills Medicare, that’s a Stark Law violation because the group didn’t meet the Stark exception, even if there’s no dispute over whether the patient needed the test or whether the test was done correctly, or whether the Medicare claim accurately reflected the charges, he said. By broadly applying the implied certification theory to this scenario, a case could be made that the practice violated the FCA in submitting the claim because the group was implicitly certifying that the claim did not result from a referral that violated the Stark Law.
“The group could be found liable for the enormous penalties available under the False Claims Act even though the services rendered were medically necessary and appropriate, and even though the group did not expressly certify, in so many words, that the claim did not result from a referral that violated the Stark Law,” Mr. Horton said.
Medical associations, including the American Medical Association and American Hospital Association have weighed in on the case in favor of Universal Health Services. In its brief, the AMA said there is a “sharp distinction” between statutory, regulatory, or contractual violations and false or fraudulent claims.
“Implied certification claims find no support in the statute and do not resemble claims Congress had in mind when enacting or amending the FCA,” according to the brief. “They deprive contractors of their constitutional rights to have notice that they are engaging in conduct subject to heightened sanctions.”
How might the Supreme Court rule?
During oral arguments on April 19, some justices appeared to indicate which way they are leaning, Mr. Kraus said.
Chief Justice John Roberts seemed concerned about the reach of the FCA under the implied certification theory. He raised questions about how people conducting business with the government would know about each and every regulation that could apply as a condition of payment.
Associate Justice Sonia Sotomayer and Associate Justice Elena Kagan appeared in favor of implied certification, while Associate Justice Samuel Alito Jr., Associate Justice Clarence Thomas, and Associate Justice Ruth Bader-Ginsberg did not display a strong opinion either way, Mr. Kraus said. Associate Justice Stephen Breyer appeared to be conflicted, asking for guidance from Roy T. Englert, an attorney for Universal Health Services.
“I’m asking for advice from you, from your point of view,” Justice Breyer said to Mr. Englert. “What the sentence in the opinion should say that describes the circumstances under which the person who submits a form saying, ‘I want a thousand dollars. I just supplied the guns or the medical care.’ ... When has that person committed fraud? – Or that’s what I want. What is the sentence you want me to write?”
Justices could rule a number of ways. They could uphold the appeals court decision, which would affirm a broad interpretation of implied certification theory. They could rule that the implied certification theory is valid, but it cannot be stretched as far as the appeals court expanded it. Justices could choose to reject the implied certification theory altogether and decide that the government must expressly identify every condition of payment in which a health provider is certifying compliance when they submit a claim, either on the claim form or by regulation. The high court could also split on the issue four to four, leaving intact the range of circuit court interpretations on implied certification across the country.
“There’s a very real question as to whether they’re going to be able to get a majority on any of those decisions because this is not an easy question,” Mr. Horton said. “The court has a pretty wide range of potential rulings available to it, but I don’t know what they’re going to be able to majority around, if they’re going to be able get a majority around any result at all.”
A decision in the case is expected by June.
On Twitter @legal_med
