The case arose in the aftermath of the death of a Medicaid beneficiary being treated by Arbour Counseling Services, a behavioral health center operated by Universal Health Services and in which many of the staff were lacking in proper certification and supervision (indeed, the treating psychologist who identified herself as having a PhD failed to disclose that it was received from an unaccredited Internet college at that the State of Massachusetts had denied her application to be licensed as a psychologist; further, the medication was prescribed by one who lacked the authority to do so absent supervision). The clinic misrepresented the staff credentials, submitted numerous claims for Medicaid treatment, and the Medicaid program promptly paid those claims to Arbour, which has been subject to a number of investigations pertaining to such issues as billing practices, poor care, and inadequate staffing: "At Arbour-HRI two years ago, public health officials found the hospital failed to provide active treatment to some patients, whose diagnoses included bipolar disorder and paranoid schizophrenia. Instead of attending group therapy, inspectors said, patients spent many hours sleeping or wandering the hallways — an allegation the company disputed."
The First Circuit Court of Appeals held that implied in claims submissions is compliance with conditions for payments. To determine whether a claim was indeed fraudulent, one must ascertain "whether the defendant, in submitting a claim for reimbursement, knowingly misrepresented compliance with a material precondition for payment" (780 F.3d 512 (2015)). The Court granted cert to resolve the lower courts' disputes as to the scope of implied false certification theory of liability.
The Supreme Court addressed the question of what precisely it means to submit false claims under the False Claims Act (FCA), given that the services in this case technically were provided (albeit from those without proper qualification or transparency). The Supreme Court held that the failure to reveal this information regarding treatment providers was actionable under the FCA. Prior to this ruling, while implied certification has been the subject of a number of suits brought against providers, the federal courts have been divided as to the proper resolution of the legal challenges. The recent Supreme Court decision has been seen as striking a balance between combating health care fraud claims and protecting against what some might construe as "frivolous lawsuits" over the FCA. Indeed, the Court clarifies that "the False Claims Act is not a means of imposing treble damages and other penalties for insignificant regulatory or contractual violations" and the Court did not address the issues of medical malpractice of which Arbour and other Universal Health Services-owned hospitals have been accused. While a number of health providers may newly be concerned regarding the potential FCA-related consequences of non-adherence to Medicare and Medicaid requirements, the Court's emphasis on significant legal and regulatory contractual obligations appears (perhaps consistent with its being unanimous in a time of marked polarization in both the legislative and judicial branches) a very reasonable approach to balancing ensuring effective enforcement while not leading to excessive litigation.