As federal district courts and courts of appeals attempt to apply the Supreme Court’s dictates in Universal Health Services, Inc. v. U.S. ex rel. Escobar, it is necessary to ask whether the Court succeeded in easing the complexity of this aspect of the Federal Claims Act (FCA). Have lower courts been able to consistently apply the new standards to assess materiality? Or, has the opinion, which arguably both broadened and narrowed application of the implied false certificate theory and when liability might attach, further muddied the waters for courts and parties attempting to determine whether behavior is of the sort that qualifies as “fraud”? Most importantly, what impact has the Escobar opinion had on providers and other government contractors for purposes of trying to determine whether noncompliance with a regulation of any sort constitutes fraud for purposes of the FCA? In reviewing lower court opinions analyzing FCA claims in accordance with the dictates of Escobar, this article argues that while Escobar does seem to be motivating lower courts to apply a rigorous and demanding materiality standard, the Court’s “back-to-basics” approach in determining materiality seems to be providing little consistency regarding what type of evidence would need to be proffered to satisfy the new materiality standard. To the extent such lack of consistency endures, providers, suppliers, manufacturers, and other parties potentially subject to application of the FCA in the health care setting will continue to struggle to determine how to consider Escobar for purposes of assessing and prioritizing compliance risk. Part I of this article briefly examines the history of the FCA and explores how the FCA has evolved as the primary enforcement tool for health care fraud and abuse. This Part further examines the origins of the implied false certification theory and the various splits and issues among the circuit courts that prompted the Supreme Court to review this issue in Escobar. In Part II, this article examines the details of the Escobar case and outlines the specific findings of the Supreme Court as well as how the DOJ, federal district courts, and federal courts of appeals have interpreted the Escobar opinion. Then, Part II analyzes the approaches of various courts in applying the new materiality standard to examine the impact the standard will have on future FCA cases relying on the implied false certification theory. It further highlights consistent themes, open questions, or distinctions that have emerged since the issuance of the Escobar opinion. Part III argues that while Escobar may succeed in ensuring a more exacting and demanding standard for claims relying on an implied false certification theory, and thus a broader number of defenses available to defendants involved in FCA cases, the lack of consistency for specific types of proof that constitute materiality will have a detrimental effect on ongoing compliance efforts by those entities subject to the FCA. These challenges will be particularly acute for health care entities, including providers and suppliers, in trying to prioritize and assess risk and in operation of effective compliance programs under the countless regulations to which such entities are subject. Finally, this article concludes by offering some suggestions for potentially mitigating or lessening some of the confusion that might arise through the Centers for Medicare and Medicaid Services and other state regulatory agencies by issuing clear and precise communication about what types of fraud those agencies believe should be actionable under the FCA.
83 Brook. L. Rev. 1227 (2018)