This week, the U.S. Supreme Court heard oral arguments in the Universal Health Services whistleblower case, which has generated a fair amount of media attention. The implications of Universal Health Services vs. U.S. ex rel. Escobar cannot be understated, as the outcome could limit the number of cases that can be filed under the False Claims Act.
Background on Universal Health Services vs. U.S. ex rel. Escobar
The Escobar family filed suit against United Health Services after their daughter had a seizure and died while in a counseling center owned by UHS. The teenage girl, a recipient of Massachusetts state medical benefits, was treated by mental health counselors who were not licensed in the state to provide mental health therapy, according to the United Health Services whistleblower lawsuit.
The complaint states that the UHS-owned counseling center submitted invoices for Medicaid reimbursement based on claims that the mental health councilors who were providing services were licensed to do so when, according to the lawsuit, they were not. The Universal Health Services whistleblower lawsuit further claims that the counseling center made similar fraudulent misrepresentations regarding other clinical staff members and nurse practitioners, and that the facility invoiced Medicaid for reimbursement despite its noncompliance with state staffing and supervision requirements.
The complaint was initially dismissed in district court, which found that the state regulations at issue imposed only “conditions of participation,” not “preconditions to payment” sufficient to give rise to False Claims Act liability.
The U.S. Court of Appeals for the First Circuit ended up reversing the district court decision and remanded the United Health Services whistleblower case for further proceedings. On June 30th of last year, UHS filed a petition for certiorari with the Supreme Court.
SCOTUS Hears Arguments in Universal Health Services Whistleblower Lawsuit
In arguments heard earlier this week, attorneys for UHS asked the Supreme Court to consider that it isn’t fraud when a hospital bills Medicaid or other government health care agencies for doctor services when it knows that doctors didn’t perform the services; and that hospitals operating as government contractors should be permitted “to pick and choose which regulations they comply with.”
The UHS legal team further contended that while the company may have breached the terms of the government contract, it isn’t serious enough to be considered fraud. This question of what should be considered fraud is at the heart of this case.
After hearing their argument, Justice Sonya Sotomayor began to question UHS on why the company’s actions shouldn’t be considered fraud.
Justice Sotomayor asked if it would be a breach of contract to provide the Army with a gun that doesn’t shoot. A UHS attorney answered by saying it would depend on the facts of the case.
“What – what more facts do you need?” said Justice Sotomayor. “Government contracted for guns. All of sudden you deliver guns that don’t shoot. That – those are the facts that led to this Act.”
At another point in the transcript, Justice Sotomayor asked Mr. Englert if anybody, except himself, would ever think that it wasn’t fraud to provide guns that didn’t shoot, if that’s what the government contracted to purchase.
Justice Elena Kagan was also incredulous of UHS’s argument. When asked if UHS had satisfied the terms of their government contract, a UHS attorney said “not every jot and tittle.” Justice Kagan continued that she wasn’t concerned with every jot and tittle, only the material portions of the contract. “That – you know, that the guns shoot, that the boots can be worn, that the food can be eaten – … and a doctor’s care is a doctor’s care,” she said.
It seems clear that if a health care provider submits a claim for reimbursement to Medicare or Medicaid implying that it was in compliance with regulations and all material terms of a contract, when it knows that it wasn’t, that is fraud. As for UHS’s other argument – that government contractors should be allowed to “pick and choose which regulations they comply with” because “there’s so many and confusing” regulations to contend with – that is quite simply absurd. What would be the point of having any regulations at all if contractors could decide for themselves which they can ignore?
What Happens Next?
Based on the transcripts from the oral argument, it seems unlikely that the Justices will strike down the FCA’s implied certification theory of legal falsity. Nonetheless, the Justices appear to be looking for a rule that would define when an implied certification claim of legal falsity can be made. What this rule would look like, or even whether a majority can reach an agreement on the rule, remains to be seen.
At any rate, the outcome of the Universal Health Services whistleblower case may very well decide how specific government contracts need to be in order to hold fraudsters accountable. It could even define what is considered a false or fraudulent claim under the False Claims Act. This case is definitely one to watch.