Universal Health Services, Inc. v. United States ex rel. Escobar
136 S. Ct. 1989
| SCOTUS | 2016

Background

  • Yarushka Rivera, a Massachusetts Medicaid beneficiary, received counseling at Arbour, a clinic owned by a Universal Health subsidiary; she later suffered adverse medical events and died after treatment by allegedly unlicensed or unsupervised staff.
  • Arbour submitted Medicaid reimbursement claims using service codes and provider NPI numbers representing specific services and provider types.
  • State investigation found numerous violations of Massachusetts Medicaid regulations governing staff qualifications and supervision; Massachusetts imposed remedial measures.
  • Plaintiffs (Yarushka’s parents) filed a qui tam suit under the False Claims Act (FCA), alleging an implied false certification theory: claims represented compliance with material regulatory requirements while concealing noncompliance.
  • The District Court dismissed, holding the violated regulations were not conditions of payment; the First Circuit reversed, treating all claims as implicit certifications and the regulations as dispositively material.
  • The Supreme Court granted certiorari, vacated the First Circuit, and clarified when implied false certification can support FCA liability.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether implied false certification can ground FCA liability Submitting reimbursement claims that represent specific services implicitly certifies compliance with material statutes/regulations; omission of violations makes claims false Submitting a claim is not a representation; omissions are not actionable absent a duty to disclose or only where an express condition of payment is violated Yes — but only when (1) the claim makes specific representations about goods/services and (2) omission of noncompliance renders those representations misleading (a "half-truth")
Whether FCA liability requires the violated rule to be expressly designated a condition of payment The Government/relators: any undisclosed violation of a material legal requirement can make a claim false even if not labeled a payment condition Universal Health: liability should be limited to violations of expressly designated conditions to give fair notice and limit exposure No strict express-condition rule; express designation is relevant but not dispositive — materiality and scienter control liability
Standard for materiality under the FCA Relators/Gov: a requirement is material if defendant knew Government could lawfully refuse payment for noncompliance Universal Health: materiality needs a demanding, concrete showing; not every regulatory breach is material Materiality is demanding: misrepresentation must have natural tendency to influence payment; minor or routinely tolerated violations are not material; Government’s payment with knowledge is strong evidence of non-materiality
Pleading and proof thresholds on remand Plaintiffs: allegations that violations were central to payment decision suffice at pleading stage Defendant: dismissal appropriate where no plausible showing of materiality or required elements Vacated and remanded — plaintiffs may have pleaded a viable claim but courts below must apply the clarified standards (materiality, particularity, scienter) on remand

Key Cases Cited

  • United States v. Bornstein, 423 U.S. 303 (historical context for FCA enforcement)
  • United States v. McNinch, 356 U.S. 595 (historical background on pre-FCA abuses)
  • Neder v. United States, 527 U.S. 1 (common-law fraud elements and materiality guidance)
  • Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (statutory interpretation of FCA language)
  • Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (materiality principles in fraud contexts)
  • Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (FCA penalty characterization)
  • United States ex rel. Marcus v. Hess, 317 U.S. 537 (materiality example where government would not have paid)
  • United States v. Science Applications Int’l Corp., 626 F.3d 1257 (CAFC decision discussing implied certification and materiality)
  • United States ex rel. Hutcheson v. Blackstone Medical, Inc., 647 F.3d 377 (1st Cir. precedent addressing implied certification)
  • Mikes v. Straus, 274 F.3d 687 (2d Cir. limiting implied certification to express conditions of payment)
  • Sanford-Brown, Ltd. v. United States, 788 F.3d 696 (7th Cir. rejecting implied certification theory)
  • Junius Construction Co. v. Cohen, 257 N.Y. 393 (illustrative common-law example of actionable half-truth)
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