Millions at stake: Supreme Court considers what counts as health care fraud

American Hospital Association, other health care groups are backing UHS

The Supreme Court on Tuesday heard oral arguments in a case that could have a major effect on how frequently health care providers are charged with fraud under the False Claims Act (FCA).

At issue in the case, Universal Health Services v. United States ex rel Escobar, is what it means for a contractor—such as a health care provider—to "knowingly" file a claim that is "fraudulent" or "false," thereby violating the FCA, Ronald Mann writes for SCOTUSblog. The circuit courts have split on the question. There are "potentially hundreds of millions of dollars in FCA cases" at stake, Mann says.

In the case before the high court, the Escobars submitted a whistleblower suit under the FCA after their daughter reacted adversely to a medication and later died after receiving care at a Massachusetts mental health clinic.

The plaintiffs argue, under a theory known as "implied certification," that when a provider or other contractor submits a claim, it implies that the provider has complied with all applicable regulations, laws, and contract provisions. Therefore, they argue that providers commit fraud when they submit claims without following certain regulations, even if the government never explicitly stated that adhering to the regulations was a condition of payment and the provider did not explicitly claim to have met them.

Specifically, the Escobars allege that the clinic violated state regulations by not supervising unlicensed staff members who treated their daughter, and therefore violated the FCA when it submitted a claim to Medicaid.

Meanwhile, the petitioner, Universal Health Services (UHS), argues that there was nothing "false" or "fraudulent" about its Medicaid claim: It sought payment for services it delivered, and only for services it delivered. UHS argues that the Escobar's case is an issue of compliance, not of the FCA.

The American Hospital Association, the American Medical Association, and the Pharmaceutical Research and Manufacturers of America filed amicus briefs in support of UHS.

Details of oral arguments

Tuesday's oral arguments "shed little light" on how the Supreme Court would rule in the case, Lisa Schencker writes for Modern Healthcare. The high court is expected to release a decision by the end of June. 

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Justices Elena Kagan and Sonia Sotomayor appeared skeptical of the petitioner's argument, Schencker reports.

Kagan noted that the FCA was passed originally with the intent of cracking down on contractors who sold the government "rancid food" and "guns that don't shoot" during the Civil War. "I would think that this is the exact same—that the contract was for a doctor's medical care, and a doctor's medical care was not provided."

However, Roy Englert, arguing on behalf of UHS, argued that "not every jot and tittle" of a contract needs to be met in order to shield a provider from a FCA claim.

Chief Justice John Roberts "seemed sympathetic" to the idea the FCA would be an overly harsh way to punish a provider for not complying with particular regulations, Schencker reports. Roberts said that "when you have hundreds of thousands of pages of regulations," compliance can be difficult and complex.

Some justices also expressed concern that a ruling for the plaintiffs could increase the number of suits filed under the FCA, Danielle Blevins reports for Talk Media News (Schencker, Modern Healthcare, 4/19; Fisher, Forbes, 4/19; Blevins, Talk Media News, 4/19; Jones Sanborn, Healthcare Finance News, 4/18; Mann, SCOTUSblog, 4/12).

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