Supreme Court Approves of “Implied False Certifications”

False Claims Act litigation: Implied False Certifications and Supreme Court

As we wrote back in April, the Supreme Court considered a case this term on a grey area in False Claims Act litigation – “implied certifications.” A typical false claim would be “factually false” – in other words, the fraudster submits a claim to the government that is actually false. For instance, if a government contractor submits an invoice to the government for 10 tons of potatoes but only supplies 5 tons, the invoice is “factually false.”

An “implied certification” involves a claim for payment where a defendant did not expressly certify a fact, but the act of submitting the claim “implies” that certain facts are true. For instance, submitting a claim for payment to Medicare has been deemed an implied certification of compliance with the Anti-Kickback Statute and the Stark Law. Thus, a claim that is submitted to Medicare for services that resulted from the payment of a kickback is “impliedly false.” Likewise, if a contractor fulfills a contract to provide guns to the military, but the guns do not shoot, that could be an “impliedly false” claim – the guns were in fact provided, but the contractor did not comply with the terms of the contract that require the guns to work.

Prior to yesterday’s decision in United Health Services, Inc. v. United States and Massachusetts ex rel. Julio Escobar and Carmen Correa, the courts of appeals had split on several questions, including (a) whether impliedly false claims were actionable, and (b) whether the fraudster must violate a specific “condition of payment” to render a claim impliedly false. In that case, a mental health facility was using unlicensed, unsupervised counselors to offer psychological counseling to patients. Moreover, many of the counselors lied about their credentials and licensure in order to get Medicaid provider numbers, in order to bill the federal government.

Writing for a unanimous Court, Justice Thomas brings some clarity. First, he concluded that a defendant may be liable for submitting an impliedly false claim, provided two conditions are met: “first, the claim does not merely request payment, but also makes specific representations about the goods or services provided.” Thus, submitting a bill by itself is not enough – the bill must outline that certain services were performed or goods were provided. Second, “the defendants’ failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” In the case, the providers’ material misrepresentations about their qualifications and licensure to get provider numbers, combined with their billing for counseling services, constituted misrepresentations. As Justice Thomas explained, “Anyone informed that a social worker at a Massachusetts mental health clinic provided a teenage patient with individual counseling services would probably – but wrongly – conclude that the clinic had complied with core Massachusetts Medicaid requirements,” such that the claims to Medicaid could be deemed “misrepresentations.”

Next, the Court rejected the view of a majority of circuit courts that an impliedly false claim only existed when the claim was submitted in knowing violation of an express condition of payment. For instance, the Medicare program has many rules, but a violation of a Medicare rule under this view did not necessarily make a claim false. The rule violated had to relate explicitly to payment, like the requirement that a service be medically necessary in order for the provider to be paid. The Court jettisoned this whole line of reasoning and instead concluded that the lynchpin of the “implied certification” analysis is the False Claims Act’s materiality requirement.

Justice Thomas noted that the “materiality standard is demanding,” and a misrepresentation or half-truth is not material just because it is labeled as a “condition of payment” or because the government could refuse payment. “[P]roof of materiality can include, but is not necessarily limited to, evidence that the defendant knows that the Government consistently refused to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement.” On the flip side, if the government consistently pays claims, notwithstanding its knowledge that a claimant is not complying with certain requirements, it is evidence that the term is not material.

We know this may sound a bit like gobbledygook, but the important point is this: violations of Medicare, Medicaid, and contracting rules may be actionable under the False Claims Act. Each case will depend on the specific violation. In certain instances, the government might continue to pay claims even though a contractor or Medicare provider is in breach of a rule, making the violation immaterial, and any claim based on it would not be “impliedly false.” By contrast, in Medicare cases, compliance with the Anti-Kickback Statute has been recognized as an essential requirement for payment. Any claims submitted to Medicare in violation of that statute would thus be “impliedly false.”

If you believe you might know of facts constituting an “impliedly false” claim, the best way to sort it out is to contact an attorney who handles False Claims Act cases. Call our office at 1-877-915-4040 for a free case evaluation.