The False Claims Act, despite its name, does not define what it means for a claim to be “false” or “fraudulent.” This post examines the primary ways courts have interpreted the False Claims Act’s falsity element and discusses common issues that arise concerning falsity.
Liability Under the False Claims Act
Most False Claims Act cases involve allegations that the defendant knowingly presented or caused to be presented a “false” or “fraudulent” claim for payment, or made or caused to be made a “false” record or statement material to a false claim or to an obligation to pay money to the government. 31 U.S.C. § 3729(a)(1)(A)-(B), (G).
Thus, to establish liability under the False Claims Act, a plaintiff must prove, among other elements, the existence of a “false” or “fraudulent” claim or a “false” record or statement. But in contrast to other terms that are defined in the False Claims Act—like “knowingly” and “material”—the terms “false” and “fraudulent” lack statutory definitions. Therefore, these terms have been defined through judicial interpretation, resulting in several different theories of falsity and lines of argument for establishing falsity in False Claims Act cases.
In a False Claims Act case premised on factual falsity, the falsity involves a claim for payment that misrepresents the goods or services actually provided. For example, in False Claims Act cases against healthcare providers, common allegations of factual falsity include double-billing a federal healthcare program or inaccurately coding the level of service provided (upcoding) to receive higher reimbursement. In each of these examples, the services represented on the claim for payment are inconsistent with the services provided.
In contrast, False Claims Act cases premised on legal falsity involve the violation of material statutory, regulatory or contractual provisions. Courts have recognized two types of legal falsity: express false certification and implied false certification.
- Express False Certification. The express false certification theory applies when a defendant falsely certifies that it complied with a statute, regulation or other legal requirement, where compliance with that requirement is a prerequisite to payment.
- Implied False Certification. Even if a defendant does not expressly certify that it complied with a requirement that is considered a condition of payment, a defendant can still be liable under the implied certification theory. In the seminal decision Universal Health Services, Inc. v. U.S. ex rel. Escobar (2016), the Supreme Court confirmed the validity of the implied false certification theory when “at least two conditions are satisfied:”
- The defendant requests payment and “makes specific representations about the goods or services provided.”
- “The defendant’s failure to disclose noncompliance with material statutory, regulatory or contractual requirements makes those representations misleading half-truths.”
While these two conditions present one viable path to establishing an implied false certification claim, the Court did not exclude the possibility that an implied false certification claim could exist in other circumstances.
Other Notable Issues Regarding Falsity
In addition to factual and legal falsity, a few other falsity issues are worth highlighting.
- Objective Falsity in Medical Necessity Cases. In recent years, federal appellate courts have been split over whether the False Claims Act requires a false certification to be “objectively” false. This issue arises primarily in cases involving a physician’s determination or certification that services provided to a patient were medically necessary. The question is whether that certification of medical necessity can be deemed “false” based on subjective differences in medical opinion—for example, based on the opinion of the government’s or a relator’s expert that the services were not medically necessary. Some circuits have held that mere differences in clinical opinions are insufficient to render a physician’s judgment false, while others have found that unreasonable medical opinions or subjectively dishonest certifications can give rise to False Claims Act liability. So far, despite the growing divide among federal appellate courts, the Supreme Court has declined to weigh in on whether an objective falsity standard should apply in False Claims Act cases alleging that services furnished were medically unnecessary.
- Per se Falsity of Anti-Kickback Statute Violations. The Affordable Care Act added a provision to the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(g), mandating that a claim for items and services resulting from an Anti-Kickback Statute violation “constitutes a false or fraudulent claim” under the False Claims Act. Based on this provision, many courts have held that, even in the absence of an identifiable false certification, claims tainted by an Anti-Kickback Statute violation are automatically false for purposes of the False Claims Act.