Supreme Court to rule on theory underlying many healthcare fraud suits

"A case now before the U.S. Supreme Court could mean fewer fraud lawsuits filed against healthcare providers. Or it could at least give them more clarity about what constitutes a violation of the law, experts say.

The Supreme Court announced Friday it would hear Universal Health Services v. United States ex rel Escobar, a case that focuses on one theory whistle-blowers and the government use in bringing False Claims Act cases to court. The act makes it illegal to knowingly submit fraudulent bills to the government, such as for services not actually performed.

In a variation of fraud claims, some whistle-blowers allege that providers submitted false claims by failing to follow certain regulations. Providers sometimes are held liable for not following such regulations even if the government never explicitly stated that following a regulation was a condition of payment, and even if the provider never explicitly vouched that it had complied with the regulation.

The Supreme Court will consider whether whistle-blowers and the government should be allowed to bring FCA cases under this theory, known as implied certification.

“It's a huge deal for healthcare providers,” said Larry Freedman, an attorney with Mintz Levin who defends providers in FCA cases. Legal claims based on implied certification are now “the major driver” of healthcare whistle-blower suits, he added.

Lower courts have been divided on the issue, with some saying it's unreasonable to sue organizations under the act for compliance issues arising from the thousands of pages of state and federal rules. Federal and state agencies, not the courts, should deal with such violations, some courts have said.

Allowing an implied certification argument in situations where it hasn't been clearly expressed that a regulation is a condition for payment could turn the False Claims Act into “a punitive sanction for use against minor regulatory or contractual violations,” Universal Health argues in court papers."

Read more at Modern Healthcare