On June 16, 2016, the United States Supreme Court issued its opinion in *Universal Health Services v. U.S. ex rel Escobar*, 597 U.S. ____ (2016). The case centers on whether a legal theory known as “implied certification” may be used to bring False Claims Act cases against medical providers. Under the theory, providers can be held liable for submitting false claims to government programs for failing to follow certain regulations even if the government never explicitly stated that following the regulations was a condition of payment and even if the provider never explicitly vouched that it had complied with the regulations.
In *Universal Health Services Co.* a young woman in Massachusetts was referred to a clinic for mental health treatment. The young woman’s family had health insurance through a Medicaid plan. After receiving counseling, the young woman was diagnosed with bipolar disorder and prescribed medication. She eventually suffered a seizure from the medication and died. The young woman’s parents later learn that the individuals involved in her care were both unqualified and unsupervised.
The parents file a lawsuit against the owner of the clinic that treated their daughter. However, instead of filing a medical malpractice lawsuit, the parent’s file what is known as a False Claims Act, which is also known as Qui Tam lawsuit. The case presents an unusual legal theory for redressing physical harm to patients caused by medical malpractice.
Qui Tam lawsuits arise from a Civil War procurement statute — the False Claims Act — that has been significantly altered and strengthened since the 1980s to police both defense contracting and federal health programs. The False Claims Act empowers private “relators” with knowledge of misconduct to bring suit on behalf of the government and rewards them with a share of any judgment or settlement.
In *Universal Health Services Co.* the young woman’s parents filed their Qui Tam suit against the corporate owner of the facility that treated their daughter and sent Medicaid the bill. Writing for the unanimous Court, Justice Thomas provided a seemingly straightforward answer to a fairly technical question: whether “implied false certification” of compliance with governmental requirements can constitute a violation of the False Claims Act, which attaches sizeable penalties to “false or fraudulent claims” but does not define those terms.
In the opinion, Justice Thomas emphasized that “fraud” has a well-developed meaning under the common law—which requires awareness on the part of the fraudster and loss of value to the person defrauded—even if it is undefined in the False Claims Act. The plain language of the False Claims Act supports the Court’s holding.
The False Claims Act imposes liability on anyone who “(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; [or] (B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” It defines “material” as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” And it defines “knowingly” as “actual knowledge; … deliberate ignorance; … or reckless disregard of the truth or falsity of the information; and … no proof of specific intent to defraud [is required].”
Since the defendant, Universal Health Service, had submitted claims to Medicaid using specific billing codes that misrepresented the qualifications of their workforce, and because the underlying regulatory violations were substantial, the Court suggested that the Escobar family had met its legal burden. Thus, the Federal District Court incorrectly dismissed their lawsuit.
The holding in *Universal Health Service* means that in certain cases of medical malpractice, plaintiffs may also be able to assert Qui Tam claims. Since considerable monetary penalties are available to plaintiffs in Qui Tam cases, in the right case this is a legal theory worth exploring.
