Healthcare Provider Liability for False Claims After the Escobar Decision

Use these links to jump to different sections:

• FCA Liability After the Supreme Court’s Decision
• What Constitutes a Violation?
• Looking Back for Regulatory Violations and the FCA Materiality Requirement
• Find an Experienced Healthcare Lawyer

Ever since the U.S. Supreme Court’s unanimous ruling in the 2016 case Universal Health Services, Inc. v. United States ex rel. Escobar, there has been a thorn in health providers’ sides. On its face, the decision closes a statutory gap to prevent fraud within the industry, but it has had other legal implications—namely, increased risks in reporting and billing.

“We had a matter a couple of years ago that we looked at, and it was really out of whack. When we ran the numbers, my calculator didn’t go that high,” says Bruce F. Howell, a health law attorney who has helped healthcare organizations for more than 30 years. “There was another case a couple of years ago for a hospital in South Carolina, I believe, and the fine was more than its gross revenue for the year.”

FCA Liability After the Supreme Court’s Decision

When healthcare providers now submit claims for government program reimbursement (like Medicare or Medicaid), they face liability under the False Claims Act (FCA).

As 31 U.S.C. § 3729 says, the FCA comes into play when “any person… knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.”

Each violation is subject to “loads of stuff,” as Howell puts it, including the hefty fines previously alluded to. “First of all, you take each bill—say it’s $100—and you triple it, so, $300,” he explains. “Then, if the government is really mad, they can slap on a penalty of anywhere from approximately $11,000 to $21,000 per bill.”

What Constitutes a Violation?

This is where things get a bit murky. “Let me give you an example,” Howell says:

“Doctors and the government love ambulatory surgery centers. They are very efficient—much faster than hospitals—and the government allows physicians to invest in them. But [one of the requirements is that a] physician has to do one-third of their surgeries every year at the ambulatory surgery center. The government considers this an extension of the doctor’s office. That’s all well and good. But if you’ve got a center where a doctor hasn’t done that, that’s a violation—so the arrangement is not compliant. Therefore, the bills that are sent to the government could be deemed to be false claims.”

Looking Back for Regulatory Violations and the FCA Materiality Requirement

The government can look back six years in an investigation, Howell adds, and call into question every bill during that period.

“Let’s say an operating room has a light that isn’t compliant. Is that material to the bill? Probably not. But other things can be material. There are a lot of [FCA cases] going on about [the materiality standard], and we’re using it as an opportunity to warn our clients: ‘Let’s make sure everything is compliant and under control.’”

Worrying about a light fixture is a bit extreme, but one thing that isn’t is the relationship between acting physicians and the facilities. “Typically, what you look at is the relationship between the doctors and where they refer to because you can’t get paid for referrals,” Howell says. “Health law has been a huge area of growth and fraud for years because there’s so much money in it.” Regulations like these are meant to address it, but they can also lead to new problems and questions.

Find an Experienced Healthcare Lawyer

Referrals and relationships are a major red flag that the government is looking for, and Howell advises his clients to ensure clarity and compliance on this and several other points in response to the Escobar decision. Any healthcare provider would do well to seek counsel from a reputable attorney within the industry since the last thing anyone wants is a reason for the government to suspect a violation, misrepresentation, or noncompliance. 

For more information on this area of law, see our overview of health care law.