High Court Recognizes FCA Liability Based on Implied Certification

Last week in Universal Health Servs. v. U.S. ex rel. Escobar, the Supreme Court recognized the implied certification theory of FCA liability, subject to “rigorous” and “demanding” application of the scienter and materiality standards.  The Court unanimously held that a defendant may be liable under the FCA when, in connection with a claim for payment submitted to the government, the defendant “makes specific representations about the goods or services provided” and fails to disclose noncompliance with material statutory, regulatory, or contractual requirements that makes the representations “misleading half-truths.” Universal Health had argued that “liability should be limited to undisclosed viola­tions of expressly designated conditions of payment to provide defendants with fair notice and to cabin liability.” Responding to Universal Health’s argument, the Court wrote that concerns about fair notice and open-ended liability can be effectively addressed through strict en­forcement of the Act’s materiality and scienter require­ments.

The decision leaves considerable room for interpretation, and both the whistleblower and defense bars have hailed the decision as a win for their respective camps.  In a "Feature Comment" published in The Government Contractor, C&M attorneys analyze the Court’s opinion, the legal and factual context in which it arose, and its likely effect on Government contractors, health care providers and all institutions that accept federal dollars.