U.S. ex rel. Escobar v. Universal Health Servs., Inc. — Nov. 2016 (Summary)

FALSE CLAIMS ACT

U.S. ex rel. Escobar v. Universal Health Servs., Inc.
No. 14-1423 (1st Cir. Nov. 22, 2016)

The United States Circuit Court of Appeals for the First Circuit ruled, on remand from the United States Supreme Court, that relators in a False Claims Act (“FCA”) case against a mental health treatment facility had alleged sufficient facts to state a claim that the defendant had committed an FCA violation.

A young girl sought mental health treatment at the defendant’s facility in 2009.  She was prescribed medication that gave her seizures and eventually led to her death.  The defendant had, contrary to certifications of compliance with state and federal law, employed unlicensed and unsupervised personnel in the treatment of the decedent and others at the facility.  The unlicensed counselors had, in violation of Massachusetts’ Medicaid program, falsely represented their lack of appropriate credentials by using fraudulently-obtained National Practitioner Identification (“NPI”) numbers for use in submitting claims for reimbursement to the Massachusetts’ Medicaid program.

In prior proceedings, the Supreme Court had ruled that the implied false certification theory was a valid theory of liability under the FCA.  The Supreme Court had remanded the case to the Court of Appeals to determine whether the relators plead sufficient facts to meet the new materiality standard articulated by the Supreme Court.

The Court of Appeals ruled that the plaintiff had alleged sufficient facts to satisfy the materiality standard.  Responding to defendant’s argument that the state Medicaid agency paying the claims was aware of the allegations but paid the claims anyway, the court noted that there was no evidence in the plaintiff’s complaint to suggest that Medicaid agency had “actual knowledge” of the alleged violations.  The court reversed the district court’s grant of a motion to dismiss for the defendant and remanded the case for further proceedings.