The Study of Deception in Knowledge Claims
The U.S. Supreme Court is set to consider a significant case that could shape the interpretation of the False Claims Act (FCA). At the centre of the case, known as Universal Health Services v. United States ex rel. Escobar, is the question of whether the 'implied certification' theory of legal falsity under the FCA is viable.
The case originated from care rendered to a relator's daughter at Arbour Counseling Services, a mental health centre in Massachusetts. The relators alleged that their daughter's treatment by unqualified and unsupervised staff violated various state regulations, which were conditions of payment by the Massachusetts Medicaid program.
Justice Kennedy, during the oral arguments, referenced Restatement (Second) of Torts § 529, which states a statement is fraudulent if the maker knows or believes it's misleading because of his failure to add an additional statement to make it true. He applied this concept to a hypothetical scenario, suggesting that knowingly seeking payment without satisfying a material precondition of payment, or disclosing such fact, can create the conditions for treating a claim as 'false' or 'fraudulent' under the FCA.
Justice Breyer, on the other hand, questioned whether an implicit statement in a contract, such as the services being provided by a doctor, could be considered breached, material, and false if the services were not provided by a doctor. He proposed a hypothetical scenario where a contract for doctor's care was breached, and the breach was not disclosed, suggesting that it could be construed as fraud under common law.
The Deputy Solicitor General argued that a person who submits a claim is representing that they have a legal entitlement to be paid, and if they know that they have no such legal entitlement, the claim is false. Counsel for Universal Health Services, however, resisted this assertion, arguing that 'implied certification' was not part of FCA jurisprudence earlier than 1994.
The First Circuit Court of Appeals reversed the District Court's decision, stating that the issue was whether Universal Health Services knowingly misrepresented compliance with a material precondition of payment. The High Court may not require an explicit statement for a regulation to be a precondition of payment in order to support an FCA claim, as long as a claimant can be shown to have knowingly failed to disclose its non-satisfaction of a material precondition of payment in seeking compensation from the government.
Justice Sotomayor questioned the distinction between fraud and dishonesty under the False Claims Act versus a simple violation of laws or contracts. The judge who questioned the attorney from Universal Health Services during the United States Supreme Court oral arguments was Justice Sotomayor.
The outcome of this case could have far-reaching implications for healthcare providers and the government, potentially setting a precedent for how violations of regulations and contracts are handled under the False Claims Act. The U.S. Supreme Court's decision is expected in the coming months.
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