Billing Government for Improperly Licensed Providers Leads to Liability Under False Claims Act

Increase in Federal Whistle-Blower Lawsuits Against Healthcare Providers Likely

In an important decision under the False Claims Act, on June 16, 2016, the Supreme Court of the United States issued a decision that will allow claims under a theory called "implied false certification." Under the theory, service providers can face enormous civil fines and penalties if they bill the government for services without complying with basic statutes and regulations like staff and licensing requirements. The decision creates new avenues for whistle-blowers to file claims when they have specific information about how the government is being defrauded.

If successful, a whistle-blower, a private person known as a "Relator" in court filings, can share a "bounty" of the recovery, often 15%-30% of the amount recovered, plus attorneys' fees. Whistle-blowers are often employees with inside information about a company's wrongdoing, and are entitled to protection against retaliation from their employers. However, whistle-blower protection laws are complicated and can be difficult to understand, so the assistance of a skilled and experienced whistle-blower protection attorney is critical to explain and protect your rights.

Mental Health Counseling Service Fraudulently Billed Medicaid

In United Health Services v. Escobar, 17 year old Yarushka Rivera died after suffering a seizure caused by a reaction to medication prescribed by a psychologist at Arbour Counseling Services. Arbour, which was operated by Universal Health Services, Inc., allowed people who were not properly licensed to provide counseling services without supervision and prescribe medications. Of the 5 professionals who treated Yarushka over a 5 year period, only 1 was properly licensed. Additionally, the person who diagnosed Yarushka with bipolar disorder claimed she was a PhD psychologist, although her degree came from an unaccredited online college and Massachusetts had rejected her license application. In all, 23 Arbour employees did not have licenses to provide mental health services but nonetheless counseled patients without supervision and prescribed drugs.

Despite failing to comply with basic regulations like employing properly licensed staff, Arbour billed Massachusetts Medicaid, a government agency. The bills used payment codes for specific services, and indicated that the services were provided by people with specific titles, like a Clinical Social Worker. However, the people providing services often were not properly licensed to provide mental health counseling services or prescribe medication.

Supreme Court Allows "Implied False Certification" Theory

After an Arbour counselor revealed to Carmen Correa and Julio Escobar, Yarushka's mother and stepfather, that many Arbour employees were not properly licensed and were minimally supervised, they sued Universal Health Services under the False Claims Act (FCA) for fraudulently billing the government. The case was initially dismissed, but Yarushka's parents successfully appealed the case to the Supreme Court of the United States.

The Supreme Court accepted their theory of "implied false certification" under the FCA. Deciding the case in Yarushka's favor, the Court found that Universal Health Services' bills were misleading because they made specific representations about services provided, while Universal failed to disclose that it had not complied with basic laws like staff and licensing requirements. By billing the government for services provided, Universal implicitly certified that it had complied with these basic statutory and regulatory requirements, when in fact it had not. Universal's failure to disclose its noncompliance subjected it to liability because the request for payment was a fraudulent misrepresentation to the government.

Thanks to the actions of the Arbour whistle-blower who told Yarushka's parents about Arbour's failure to comply with basic licensing requirements, they were able to seek justice for Yarushka and save taxpayers millions of dollars by exposing fraudulent billing practices.

Expanding Ways for Whistle-blowers to Expose Wrongdoers

The decision in Escobar expands the ways in which whistle-blowers can expose wrongdoers. Ordinary people who know about their employer's corrupt and fraudulent practices can save taxpayers millions of dollars by using the False Claims Act to expose bills for services that are improperly and sometimes unlawfully provided.

When it was originally enacted in 1863, the False Claims Act was aimed at stopping fraud perpetrated by contractors during the Civil War by imposing civil and criminal penalties upon those who presented false or fraudulent claims. Today, the FCA has expanded to include claims presented as direct requests to the government for payment, including requests for reimbursement made to recipients of federal funds under various benefits programs. The modern FCA includes civil penalties so severe that liability is punitive in nature, including triple damages plus civil penalties up to $10,000 per false claim.

Learn more about different types of whistle-blower lawsuits.