Recent Decisions Regarding Implied Certification Theory

A recent Supreme Court decision in United Health Care Services v. Escobar is having a big impact on the application of implied certification theory to these cases. Prior to this decision, there was a split in the courts regarding implied certification. That is, while some circuits of the United States upheld the idea of implied certification as a theory of liability under the False Claims Act, others did not.

However, in its recent decision, the Supreme Court mandated that all circuits apply implied certification to cases under the False Claims Act. In the same decision, the Supreme Court also emphasized the importance of materiality as an aspect of a false claims case. Because of this, United Health Care Services v. Escobar was decided on relatively narrow grounds.

Reaching a Decision

In this case, the Supreme Court made a decision based upon the grounds of what constitutes a false claim with respect to the healthcare billing structure. Healthcare bills are comprised of codes that represent specific goods and services, so when an individual or entity knowingly misrepresents the goods and services provided by using the incorrect codes, he, she, or it makes a false claim.

Because this case involved codes directly associated with all charges involved in the underlying facts, the codes used by the defendants implied regulations that applied to their conduct. As a result, the Supreme Court was able to find implied certification. However, the Supreme Court in my view did not make a decision regarding the presence or absence of implied certification in bills and invoices in other areas of government.

Thus, while the Supreme Court has provided some clarity on this issue, much confusion remains. It will be interesting to see how cases are treated in other industries, which may or may not have such a defined coding structure as is found in the healthcare industry, and whether the implied certification theory will be expanded under those cases. Additionally, it will be interesting to see whether other government contracting billers devise coding systems, because if they do, such systems would fit neatly into the Supreme Court’s recent decision regarding the healthcare coding system. That would make it easier to apply implied certification theory under the same reasoning.

Are there any specific industries that you believe are likely to develop such coding systems?

It is unlikely that any such changes will happen quickly. However, I do think there is a wide opportunity here.

Most government agencies have forms that reference regulations, such as the Defense Federal Acquisition Regulations. So, while I do not expect anything to change overnight, I do think people like me will increase their scrutiny of invoices in order to determine exactly what claims are contained in those invoices regarding implied adherence to either a contract or a regulatory structure, as such claims may give rise to a case based on an implied or even an express certification. Still, many government bills and invoices already include express certifications, which will not be impacted by the recent Supreme Court decision.

Now, there are lawyers who are trying to read this decision as heightening the materiality requirement under the False Claims Act. I do not really read this decision in that manner. I think materiality has always been an issue and is something that has always needed to be considered in cases involving false claims.

Still, after this decision, several of my colleagues were hit with motions to reconsider false claims cases, which are motions to have the judge reexamine the case. Moreover, Defense Bar practitioners have been claiming that this decision heightened the materiality requirement under the False Claims Act. While the general outcome of such motions is currently uncertain, I do not think that they will be entirely successful.

Long-Term Effects

Specifically in healthcare, I think this case opens up more kinds of cases to potential False Claims Act litigation. Implied certification now can be extended to include so-called “conditions of participation,” which in many courts were not considered actionable under this theory. We’ll see if that happens in the long run.

I think, in the long term, there will be a greater understanding of what constitutes a case under the False Claims Act. That is, there will be increased recognition of the materiality necessary to bring a false claims case, and more widespread agreement regarding the function of implied certification theory under the False Claims Act. I hope the Supreme Court decision will make individuals and entities realize that, when they bill the government, they are making certain implications regarding the legality and truthfulness of their claims.

I’m grateful to the Relators Carmen Correa and Julio Escobar who have been fighting this case for a long time and their counsel of Thomas Greene and David C. Fredrick. I think ultimately this expands rather than limits the scope of the False Claims Act.