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Friday, December 11, 2015

Cert Granted in Universal Health Services v. United States ex rel. Escobar regarding the Meaning of Fraud in the FCA

On December 4, the Supreme Court granted cert in a False Claims Act case, Universal Health Services v. United States ex rel. Escobar, that may help clarify confusion as to when knowing failure to comply with the law constitutes fraud against the government. The DOJ recovered $1.9 billion in healthcare fraud in FY2015, but the complex regulations surrounding healthcare make it difficult for courts to determine when a known regulatory violation legally constitutes fraud.

This case began in tragedy. In 2009, Julio Escobar and Carmen Correa lost their daughter, Yarushka Rivera, to a drug-related seizure while she was under the psychiatric care of Universal Health Services, Inc. They were outraged to discover that the staff prescribing medication to Yarushka were not licensed, certified, or even eligible for certification. Escobar and Correa filed a whistleblower complaint under the False Claims Act, alleging that Universal Health had defrauded the federal government, which had paid for Yarushka’s medical care through the MassHealth system. While all parties agree that the treating staff should have been licensed and certified, federal courts have been unsure whether Universal Health’s behavior legally constitutes fraud under the False Claims Act. The circuits are split as to whether fraud first requires Universal Health to explicitly certify continued compliance with “thousands of pages of federal statutes and regulations,” or whether Universal Health might have impliedly certified under certain conditions. Some circuits have held that knowingly specifying the wrong physician could constitute fraud, but knowingly identifying the wrong supervising physician would not constitute fraud. The resulting circuit decisions have created confusion and uncertainty as to the circumstances for which fraud liability attaches. This case should help clarify these issues.

David Kwok at the University of Houston has a different take on the analysis: he proposes using fair competition as the basis for determining fraud liability. If a competitor could comply with the regulatory scheme, then a company’s knowing failure to comply with the regulation should constitute fraud under the False Claims Act. This proposal makes it easier for companies to predict potential liability and for whistleblowers to understand which cases to bring forward. Given the Supreme Court's interest in these issues, Professor Kwok's work is extraordinarily timely and important. You can read his Article, A Fair Competition Theory of the Civil False Claims Act, which was recently published in the Nebraska Law Review, here.

Posted by Jessica Berch on December 11, 2015 at 02:49 PM | Permalink

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