## Facts

- Universal Health Services, Inc. (UHS) owned and operated Arbour Counseling Services, a Massachusetts mental health facility participating in the state Medicaid program (MassHealth).
- Yarushka Rivera, a MassHealth beneficiary, received counseling at Arbour and was prescribed medication by a purported doctor; she suffered an adverse reaction and later died from a seizure.
- Rivera’s parents learned that many Arbour employees allegedly lacked required licenses or authorization to provide counseling or prescribe medication without appropriate supervision.
- The relators alleged Arbour submitted Medicaid reimbursement claims that represented specific services were provided by specific types of qualified professionals, while omitting noncompliance with staff licensing and supervision requirements.
- The relators sued under the federal False Claims Act (FCA), alleging UHS knowingly presented false or fraudulent claims for payment.
- The district court dismissed, reasoning the alleged regulatory violations were not conditions of payment; the First Circuit reversed under an implied certification theory.
- The Supreme Court granted certiorari on the viability and scope of implied false certification and the role of “conditions of payment.”

## Issues

1. Whether the FCA permits liability under an implied false certification theory.
2. If so, whether liability is limited to violations of requirements expressly designated as conditions of payment.
3. What materiality standard governs whether undisclosed noncompliance makes a claim actionable under the FCA.

## Decision

- The Supreme Court unanimously held that implied false certification can be a basis for FCA liability in limited circumstances.
- The Court held liability may attach where a claim makes specific representations about goods or services and omits noncompliance with material statutory, regulatory, or contractual requirements, rendering the claim misleading.
- The Court rejected any rule making FCA liability depend on whether the violated requirement is expressly labeled a condition of payment.
- The Court emphasized that FCA materiality is “demanding” and vacated and remanded for application of the clarified materiality standard.

## Legal Principles

- Implied false certification is actionable when: (1) the claim includes specific representations about the goods or services provided, and (2) the failure to disclose noncompliance with material requirements makes those representations misleading half-truths.
- FCA liability for nondisclosure does not turn on whether a requirement is expressly designated a condition of payment; the label is relevant but not dispositive.
- Materiality under the FCA is rigorous and focuses on whether the misrepresentation would likely influence the government’s payment decision.
- Materiality is not established merely because the government could refuse payment or because compliance is labeled a condition of payment.
- Evidence bearing on materiality includes whether the government routinely refuses payment for similar noncompliance or, conversely, pays claims despite actual knowledge of the violations.

## Conclusion

The Court recognized a limited implied false certification theory under the FCA for claims that are misleading half-truths, but required a stringent, payment-focused materiality showing and rejected any formal condition-of-payment label as the controlling test.


Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016)