U.S. Supreme Court Declines to Review False Claims Act Materiality Standard

King & Spalding

On October 5, 2020, the U.S. Supreme Court declined to review a case questioning the materiality standard for Medicare fraud cases under the False Claims Act (FCA). The case involved allegations that Lawrence Memorial Hospital in Kansas falsified records of patient arrival times and employee training to inflate its Medicare reimbursements. The Tenth Circuit affirmed the district court’s opinion that the alleged false claims were not material to the government's decisions to pay the hospital.

Under the Supreme Court’s 2016 ruling in Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016), materiality for FCA purposes turns on whether the government would have withheld payment to a contractor had it known about alleged the noncompliance with Medicare requirements. The Tenth Circuit rejected the petitioner’s position that materiality should be based on whether a “reasonable person” would consider the alleged noncompliance material. Instead, the Tenth Circuit held the petitioner failed to show the hospital’s alleged inaccuracies in patient arrival time affected the “essence of the bargain” between the government and hospital. Further, the alleged failure to comply with FCA-related training requirements were “precisely the type of garden variety compliance issues that the demanding materiality standards of the FCA are meant to forestall.”

The case is United States ex rel. Janssen v. Lawrence Mem’l Hosp., U.S., No. 20-286 (petition denied Oct. 5, 2020). The Tenth Circuit’s opinion is available here. The Supreme Court’s list of cert denials from October 5, 2020 is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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