Amicus Briefs Ask Supreme Court to Rein In The Implied Certification Theory (Part One)

As we have previously reported, the Supreme Court will decide a case this term that will address the viability and scope of the implied certification theory.  Earlier this week, numerous stakeholders filed amicus briefs supporting the petitioner, illuminating the practical consequences of the vast scope of potential liability under the implied certification theory.

The hallmark of the implied certification theory is the notion that virtually any regulatory obligation can be invoked as being “material” to the government’s payment decision.  Courts thus must ex post define a claim as “false or fraudulent” by hazarding a guess as to whether the government would have declined to pay had it known of the regulatory violation.  The morass of regulations governing numerous industries, but particularly the healthcare industry, leaves participants uniquely vulnerable to potential treble damages and public opprobrium under this theory of FCA liability.  The amici advanced numerous statutory and public policy reasons for eliminating the implied certification theory.

A group of six healthcare providers and trade associations of healthcare providers (“Providers’ Coalition”) represented by Sidley Austin filed a brief raising the troubling constitutional implications created by the implied certification theory’s lack of notice.  As the Supreme Court has explained, “regulated parties should know what is required of them so they may act accordingly.”  Yet the layers of regulations applicable to providers, and the often fact-intensive nature of determining whether a regulatory violation was “material” or a “condition of payment,” deprives providers of any clear guideposts.  The Providers’ Coalition urges the Court to interpret the FCA so as to avoid implicating these Due Process concerns.  In place of the implied certification theory, the Providers’ Coalition proposes that “false or fraudulent” claims be limited to circumstances where a claim: (1) “misrepresent[s] the goods or services provided,” (2) “contain[s] a false certification of compliance with a rule that is expressly, specifically, and unambiguously referenced on the claims form and which itself is unambiguous,” or (3) “the underlying services were performed in violation of a statute that Congress itself has expressly, specifically, and unambiguously declared renders claims for those services false within the meaning of the FCA.”  In particular, the Providers’ Coalition asks the Court to reject the proposition that blanket “compliance with all laws” language in CMS forms, such as the CMS Form 1500 and provider agreements, can serve as the basis for FCA liability.  While many courts have accepted “this sort of untethered application of the FCA,” the Providers’ Coalition argues that “any theory that holds healthcare providers liable for fraud based on forward-looking promises to comply with all applicable Medicare laws and regulations is not express, clear, and unambiguous, and thus ‘lacks a discerning limiting principle.’”

Another coalition of healthcare and non-healthcare trade associations focuses on how whistleblower abuse of the FCA, particularly through the sweeping theories of liability evoked under the implied certification theory, has unmoored the statute from congressional intent.  While Congress has amended the FCA to ensure it captures evolving trends in fraud, these amendments were not meant to spawn the “increased attempts to manipulate the FCA . . . to support improper qui tam lawsuits.”  These trade associations note that many of their members engage in “low-dollar, high-volume transactions,” making them particularly susceptible to outsized penalties calculated on a per-claim basis.

In their amicus brief, the American Health Care Association and the National Center for Assisted Living (“AHCA/NCAL”) criticize how circuit courts frequently invoke a 1986 Senate committee report for the proposition that Congress intended the words “false” and “fraudulent” to be construed broadly.  Whatever the sweeping interpretation advanced by the 1986 Congress, the brief argues, it was the 1863 Congress that passed the FCA.  AHCA/NCAL maintain that in Vermont Agency of Natural Resources v. United States ex rel. Stevens, the Supreme Court rejected as “erroneous” the 1986 Congress’ interpretation of the FCA.  As a result, AHCA/NCAL explain, this Senate report “provides no basis on which to answer the fundamental question whether the 1863 Congress intended that FCA liability would be created” through implied certification, nor is there evidence of such intent.  If the Court were to rule that the implied certification theory is viable, the AHCA/NCAL propose a three-part test for “imposing careful limits on the theory’s use”: “the requirement allegedly violated [must] be (1) a condition of federal payment (2) expressly identified as such and (3) contained in a statute, codified regulation, or contract.”

A fourth amicus brief filed by a trio of associations representing hospitals and medical schools (“Hospitals and Medical Schools”) argues that the expansive scope of potential liability under the implied certification theory disrupts carefully calibrated, pre-existing administrative means of resolving regulatory non-compliance.  As a result, qui tam plaintiffs can effectively “supersede the appropriate administrative mechanisms, second-guess the agency’s determination, rewrite the mechanisms for dealing with noncompliance, and override the discretion vested in executive agencies.”  The Hospitals and Medical Schools emphasize the daunting volume and complexity of regulations imposed on healthcare providers and encourage the Court not to allow the FCA to be used as a blunt tool for enforcing them.

The Providers’ Coalition’s brief can be found here; the Trade Associations’ brief here; the AHCA/NCAL’s brief here; and the Hospitals and Medical Schools’ brief here.