Congress recently proposed changes to the False Claims Act (“FCA”) that would make it easier for the government to prove certain noncompliance was “material” and therefore a violation of the FCA. These changes appear to be a response to the landmark Escobar decision regarding materiality under the FCA.
Originally introduced to address unscrupulous government contractors during the Civil War, the FCA has become a popular tool for prosecuting alleged healthcare fraud. In general, the FCA imposes civil liability for knowingly submitting false claims to the government. Importantly, the FCA carries severe consequences, including treble damages and a per-claim penalty that increases each year with inflation ($11,803 per claim for 2021). The FCA also allows individuals to initiate the prosecution under a qui tam action, in which the government may decide to intervene and wherein the individual is entitled to a share of the government’s recovery.
Under the “implied false certification” theory of FCA liability, liability attaches where a provider submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant’s noncompliance with a statutory, regulatory, or contractual requirement. In 2016, in the Escobar case, the United States Supreme Court held that any misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be “material” to the government’s decision to pay the claim in order to give rise to liability under the FCA. Materiality under Escobar is a demanding standard and cannot be met merely because the government has designated a requirement to be a condition of payment.