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More than a dozen major healthcare organizations and associations have jumped into a Supreme Court case over the validity of a legal theory now used to bring many fraud lawsuits against them. The case has the potential to reduce – or increase – the number of False Claims Act suits brought against healthcare providers and other companies, depending on which way the high court rules.

The US Supreme Court has agreed to hear Universal Health Services v. United States ex rel Escobar. The case focuses on situations in which whistle-blowers allege providers have submitted false claims to government programs by failing to follow certain regulations. That legal theory is known as “implied certification” and has been accepted by some federal appeals courts and rejected by others.

Organizations found liable under the False Claims Act, also called Qui Tam litigation, face penalties and triple damages. In 2015, two-thirds of federal whistle-blower lawsuits targeted healthcare entities. That’s prompted a number of healthcare organizations to file briefs siding with the Universal Health Services, which argues against the theory. Organizations that have filed briefs include the Pharmaceutical Research and Manufacturers of America, the Generic Pharmaceutical Association, the American Hospital Association and the Chamber of Commerce of the United States.

The American Medical Association argues in its brief that imperfect compliance is not the same as fraud. “The healthcare regulatory environment is especially complex, making it particularly inappropriate to use the hammer of (False Claims Act) liability to punish noncompliance,” according to the brief.

In their brief, the American Hospital Association, Federation of American Hospitals and Association of American Medical Colleges say the healthcare field is already targeted by whistle-blowers seeking massive payouts. In False Claims Act cases, whistle-blowers are entitled to a percentage of whatever money the government recovers. They argue in the brief that the implied-certification theory has exacerbated the filing of meritless suits against healthcare organizations. The suits “try to tap into the extreme complexity of Medicare and Medicaid and use that as a basis for asserting all sorts of hospitals, healthcare providers and others – have committed fraud for what might be fairly minor regulatory missteps,” said Jessica Ellsworth, a partner at Hogan Lovells who filed the brief on behalf of the hospital associations and medical college association.

The United States Chamber of Commerce claims that the theory “profoundly increases risk and uncertainty for government contractors, grantees, and program participants” and should be rejected.

But Patrick Burns, co-executive director of the Taxpayers Against Fraud Education Fund, a not-for-profit group that supports whistle-blower incentive programs, said implied certification is important for holding healthcare and other organizations accountable for doing the right thing – even if that right thing isn’t explicitly stated in a contract with the government.

He said the facts of this case before the Supreme Court are a prime illustration. The Universal Health Services case was brought by the parents of a patient who died at a Massachusetts mental health clinic. Her parents alleged that the clinic’s caregivers were not properly supervised and that the clinic did not employ a board-certified or board-eligible psychiatrist and a licensed psychologist, in violation of state Medicaid program regulations. The 1st U.S. Circuit Court of Appeals sided with the plaintiffs in that case.

It is difficult to understand how the facts of this case can be construed to be about “fairly minor regulatory missteps.” The teen who died, Yarushka Rivera began seeing Universal Health Services counselor Maria Pereyra in 2007 after experiencing behavioral problems at school. Pereyra, though on staff at its Arbour satellite clinic, had no professional license to provide mental-health therapy. After hearing parent complaints about the quality of her care, Yarushka was transferred to another staff member, Diana Casado. Like Pereyra, Casado was unlicensed. In February 2009, Yarushka was once again assigned to a new therapist, Anna Fuchu. Fuchu held herself out as a psychologist with a Ph.D., though the parents later learned that she had trained at an unaccredited online school and that her application for a professional license had been rejected. Notwithstanding Fuchu’s lack of essential credentials, she treated Yarushka and eventually diagnosed her with bipolar disorder.

Several months later, when Yarushka’s behavioral problems had not abated, officials at her school informed the parents that she would be permitted to attend classes only if she saw a psychiatrist. When the parents told this to Fuchu, she referred Yarushka to Maribel Ortiz, another staff member at Arbour. Believing Ortiz to be a psychiatrist, the parents referred to her as “Dr. Ortiz.” They eventually discovered, however, that she was not a psychiatrist, but rather a nurse, and that she was not under the supervision of the one Arbour staff psychiatrist, Maria Gaticales – herself not board-certified, or eligible for board certification, as contemplated by the regulations. Yarushka died after having a second seizure while under this care.

There is an old saying in the practice of appellate law “bad facts make bad law.” Cases with bad facts should not be appealed. It is very difficult to see how the U.S. Supreme Court can construe what happened in this case to be nothing more than quibbling over vague and ambiguous regulations dealing with being properly trained, licensed and supervised to provide health care.