Universal Health Services, Inc. v. United States

Supreme Court of the United States · Contracts

ContractsFalse Claims ActImplied false certificationMaterialityFraud by omissionFalse Claims Act31 U.S.C. § 3729(a)(1)(A)implied false certification

Facts

Respondents alleged that a subsidiary of Universal Health operated a Massachusetts mental health clinic that used unlicensed, unqualified, and unsupervised staff to provide services reimbursed by Medicaid. In submitting reimbursement claims, the clinic used billing codes for specific counseling services and National Provider Identification numbers corresponding to specific professional titles, while allegedly failing to disclose violations of Massachusetts Medicaid regulations governing staff qualifications, licensing, and supervision. Massachusetts later investigated and reported numerous regulatory violations. Respondents alleged Medicaid would not have paid the claims had it known the services were performed by unlicensed and unsupervised personnel.

Issue

Whether the implied false certification theory can provide a basis for liability under the False Claims Act, and if so, whether liability depends on the violated statutory, regulatory, or contractual requirement being expressly designated a condition of payment. The Court also addressed how the Act's materiality requirement applies to such claims.

Rule

Under the False Claims Act, implied false certification can be a basis for liability at least where two conditions are met: (1) the claim does more than merely request payment and makes specific representations about the goods or services provided, and (2) the defendant's failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths. Liability does not turn on whether the violated requirement was expressly labeled a condition of payment; instead, the defendant must knowingly violate a requirement that is material to the Government's payment decision. Materiality is demanding: it cannot rest solely on the Government's option to refuse payment or on a condition-of-payment label, and evidence that the Government pays despite actual knowledge of violations is strong evidence immateriality.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A maintenance contractor in Phoenix submits monthly invoices to a federally funded housing authority seeking reimbursement for "lead-remediation inspection" services and lists technician classification codes for each unit inspected. In fact, the inspections were performed by workers who lacked the certifications required by the governing contract, and the invoices did not disclose that noncompliance.

Which is the strongest argument that the contractor has plausibly submitted a false or fraudulent claim under the implied false certification theory?

Explanation. The majority held that implied false certification can support liability at least where a claim makes specific representations about the goods or services provided and the omission of noncompliance makes those representations misleading. Here, the invoice uses service descriptions and technician classification codes, so it is not merely a demand for payment. The omission of required certifications could render those representations misleading. The Court declined to hold that every claim automatically implies compliance with all legal requirements, rejected any rule making express condition-of-payment language dispositive, and made clear that express false words are unnecessary if the claim is a misleading half-truth. (Derived from Universal Health Services, Inc. v. United States (n.d.).)