Victory for whistleblowers under the false claims act

In Universal Health Services, Inc. v. United States of America, et al. ex rel. Escobar, et al., a unanimous Supreme Court rendered a landmark decision for whistleblowers under the False Claims Act and for taxpayers in general. In that case, the Supreme Court ruled that health care organizations may be liable for billing the government concerning services that do not comply fully with regulations – even if those regulations are not explicit. In other words, the Supreme Court has endorsed an implied certification theory of liability so long as the misrepresentations are “material” to the government’s payments.

Universal, a Fortune 500 company, owns psychiatric a facility that allegedly permitted an unsupervised nurse practitioner to prescribe medication to 19-year-old patient despite State regulations requiring nurse practitioners to prescribe medication only under the supervision of a certified staff psychiatrist. Universal argued that its actions somehow did not constitute fraud because the State regulations did not explicitly condition government payments on the existence of proper supervision for prescribing medication.

In rejecting Universal’s creative argument, the Supreme Court expanded what fraud by omission means under the False Claims Act. This ruling will affect not only hospitals, nursing homes, and drug companies filing Medicaid or Medicare claims, but also numerous other for-profit companies and non-profit organizations.

In short, it will now be easier for whistleblowers to pursue qui tam cases under the False Claims Act and to do so successfully. The False Claims Act and State equivalents like the Minnesota False Claims Act enable whistleblowers to file qui tam lawsuits based on evidence that an employer or another for-profit company or non-profit organization has defrauded the government in some fashion. By encouraging whistleblowers to report fraud to the government, the False Claims Act regime serves as a consumer protection mechanism – especially in the medical field – as much as it provides another area of protection in the employment law arena. To that end, the Federal and Minnesota False Claims Acts provide for the recovery of triple damages concerning the amount of fraud committed – which can be millions of dollars – civil penalties that can be similarly enormous, compensatory damages for the relators to the extent they experience retaliation because of their whistleblowing activity, and attorney’s fees as well as litigation costs.