August 26, 2016 - Posts

Major Supreme Court Decision Bolsters Whistleblowers and Makes it Easier to Establish That a Government Agency Has Been Defrauded

For as long as there has been a False Claims Act, there have been disputes over what makes a particular claim “false” – or, more specifically, what types of false claims are legally enforceable under the statute.  In answering that question, some courts have drawn sharp distinctions between what they consider “conditions of payment” and “conditions of participation.”  For example, under this line of reasoning, a lab that bills Medicare for tests that it never performs is clearly submitting false claims, as Medicare only pays for actual performed tests.  However, under this same line of reasoning, a lab that bills for tests that were performed without required physician oversight is not submitting false claims, unless the government had expressly stated that physician oversight was a condition of payment for those tests.  See generally, e.g., U.S. ex rel. Hobbs v. MedQuest Assocs., Inc., 711 F.3d 707 (6th Cir. 2013).  Not surprisingly, this distinction has been tricky to apply and has lead to a great deal of confusion, particularly considering that not all courts have recognized this distinction or applied it the same way.

Thankfully, the Supreme Court’s recent decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) has provided some much-needed clarity.  In Escobar, a mental health facility was accused of billing Medicaid for counseling services that were being provided by self-described psychologists and psychiatrists who were not actually licensed in the state.  The facility argued that it had never submitted any legally false claims, as it had never affirmatively stated that these practitioners were properly licensed and that proper licensure was not an express condition of payment under state Medicaid laws. 

In rejecting this argument, the Supreme Court made clear that liability under the False Claims Act does not hinge on any technical distinction between “conditions of payment” and “conditions of participation.”  Instead, the critical question is whether the government would still have paid the claim if it had known about the false statement or omission.  This approach to analyzing false claims against the government makes sense, and the Supreme Court should be applauded for rejecting the clunky and overly-technical “participation” versus “payment” distinctions that have caused so much confusion in the past.

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