Healthcare Fraud Archives
Challenging the Government's 'Implied False Certification' Theory
Ronald W. Chapman II is a healthcare fraud defense attorney and President of CCG Healthcare. He spearheads the leading healthcare compliance and investigations firm renowned for securing acquittals in prominent cases like United States v. Bothra and United States v. Pompy, CCG delivers unrivaled expertise and an unwavering commitment to defending clients. Experience the pinnacle of professional defense in the battle against health care fraud with Ron and CCG Healthcare.
On May 11, 2023, Justice Thomas delivered the opinion in Ciminelli v. United States holding that the “right to control” theory of fraud is not a valid basis for liability under the wire fraud statute.
Ciminelli was prosecuted for depriving New York state of “valuable economic information” as a result of a bid rigging scheme. Health care fraud defense attorneys likely recognize that the Government’s theory in this “right to control” prosecution is much like its theory in health care fraud prosecutions wherein the Government often alleges that Medicare, Medicaid, PBMs and other insurers are deprived of their ability to control the delivery of healthcare through unpromulgated guidance documents, payment determinations, and policy statements.
Ciminelli’s core holding has broad application to this line of cases - health care policy is much like the bid requirements in Ciminelli and its only a matter of time before the Court begins to tailor health care fraud prosecutions.
Before engaging in this discussion, however, we must pay a visit to one of the most important FCA decisions in recent history Universal Health Services Inc. v. Escobar.
Background: Universal Health Services Inc. v. Escobar
In the case of Universal Health Services Inc. v. Escobar, the United States Supreme Court issued a ruling on June 16, 2016. The case dealt with the interpretation of the False Claims Act (FCA), a federal law that imposes liability on individuals and companies who defraud the government by submitting false claims for payment.
The central issue in the case was whether a defendant could be held liable under the FCA for submitting a claim for payment to the government when the claim includes false representations about compliance with certain statutory, regulatory, or contractual requirements. Specifically, the Court addressed whether the implied false certification theory could be a basis for liability under the FCA.
The implied false certification theory holds that when a party submits a claim for payment to the government, it implicitly certifies compliance with all relevant regulations, statutes, and contractual requirements. If the party fails to disclose violations of such requirements, the claim can be considered false and potentially subject to FCA liability.
The Supreme Court, in a unanimous decision, affirmed the viability of the implied false certification theory as a basis for liability under the FCA. However, the Court established certain requirements and limitations to prevent the theory from being overly broad and potentially exposing defendants to liability for minor or insignificant regulatory violations.
The Court held that to establish liability under the implied false certification theory, two conditions must be met: (1) the claim for payment must make 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.
Furthermore, the Court clarified that not all statutory, regulatory, or contractual violations automatically render a claim false under the FCA. The violations must be material, meaning they have to be significant enough to influence the government's decision to pay the claim. Minor or immaterial violations would not give rise to FCA liability.
Overall, the holding in Universal Health Services Inc. v. Escobar reaffirmed the implied false certification theory as a valid basis for liability under the False Claims Act, while also setting standards and limitations to ensure that liability is appropriately applied to cases involving material misrepresentations or omissions.
Implied False Certification as it Applies to Health Care Fraud
The Government is unlikely to admit it but it has been using the “implied false certification theory” in health care fraud cases in recent history. The argument goes something like this: Defendant signed an 855 promising that it would abide by Medicare rules and regulations related to (insert telemedicine, PBM requirements, injections etc). The Government then introduces the testimony of a representative from Medicare or a UPIC to state that it would not have paid the claim had it known that the services were not delivered in accordance with program integrity requirements. The government then asks the jury to determine that the failure to disclosed the difference between the services provided and the Medicare requirements for the service is fraudulent concealment of a material fact. Countless cases with this theory have been prosecuted across the United States. Telemedicine is one popular area in which we have seen this theory surface.
Ciminelli’s Narrowing of Federal Fraud Statutes
In Ciminelli the Supreme Court unequivocally held that the right to control theory cannot be squared with the test of federal fraud statutes which are “limited in scope to the protection of property rights”. In Ciminelli the right to control was the bidding process. In health care prosecutions the right to control is the Government’s control over delivery of payment for healthcare services and the manner in which they are delivered. This quote is particularly important:
“the right to make informed decisions about the disposition of one’s assets, without more, were treated as the sort of property giving rise to wire fraud, it would risk expanding federal fraud statutes beond property fraud as defined at common law and as Congress would have understood it”
The Court recognizes the exact problem we have seen in health care fraud prosecutions in recent history. Treating information as property makes a federal crime of an almost “limitless variety of deceptive actions traditionally left to the state contract and tort law” or in the case of health care fraud - False Claims Act litigation.
The Government’s Inevitable Response
When faced with a challenge based on Ciminelli we can almost hear the Government’s response echo through the courtroom. “The property at issue is not the ability to control the delivery of healthcare but the millions that Defendant X deprived the federal government through its scheme to defraud”. This is certainly a valid argument and one that likely will have some weight with the courts. However it falls flat when we are dealing with a “scheme” where the services were delivered but not in the way the Government expected or required.
Lets take a popular area of “fraud” - telemedicine. In a telemedicine scheme a physician will log in to their platform and review documentation and perhaps visit with a patient and then prescribe durable medical equipment or medication which is then filled by a linked pharmacy or DME company. In such a scheme, the visit occurred but not in the way Medicare would have liked. The patient pays for services but the service was somehow substandard because of the use of store and forward communications or some other issue.
Sure, the Government is deprived of property because it paid for the service. But its not the property that is the issue - its the fact that it paid for something other than what it bargained for. This is further complicated by the fact that the face of Medicare contracts don’t spell out how a service should be delivered - that is a moving target based on millions of pages of guidance documents, shifting regulations, and complex interpretations.
Further Development of the Holding in Ciminelli in the Health Care Fraud Space
Ciminelli v. United States marks a pivotal moment for health care fraud prosecutions, particularly regarding the government's reliance on the implied false certification theory. As legal challenges arise, courts will refine and clarify the application of Ciminelli's principles to ensure a fair assessment of liability in health care fraud cases. The evolving legal landscape will undoubtedly shape the future of health care fraud prosecutions.
Introducing CCG Healthcare: Unleashing Success in the Face of Healthcare Investigations!
When healthcare entities face federal investigations and prosecutions, they need a game-changer on their side. That's where CCG Healthcare comes in, led by the visionary Ronald W. Chapman II, renowned healthcare fraud defense attorney.
We are the masters of delivering results, turning the tables on even the most high-profile healthcare fraud prosecutions. Our recent successes include the $450 million Health Care Fraud acquittal in United States v. Bothra and the complete acquittal in United States v. Pompy .
At CCG Healthcare, we're not just consultants; we're architects of success. Collaborating with defense counsel, we craft an unbeatable defense strategy that leaves no room for doubt. From groundbreaking statistical analysis to compelling expert witness testimony, and meticulous healthcare audits, we arm healthcare fraud defendants with the unbeatable edge they need in FCA and Healthcare Fraud cases.
When the stakes are high, trust the team that knows how to win. CCG Healthcare: Igniting Triumph in the Fight for Justice!