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Greene LLP Wins “Escobar” in First Circuit After Success in U.S. Supreme Court

Supreme-Court-PillarsGreene LLP secured another win for its clients in the U.S. Court of Appeals for the First Circuit in the firm’s seminal False Claims Act case, U.S. ex rel. Escobar v. Universal Health Services. The First Circuit’s decision will allow Greene LLP’s clients to continue pursuing fraud claims against the healthcare company, Universal Health Services Inc., the largest provider of mental health services to Medicaid programs across the country. Courts and lawyers across the country were tracking the First Circuit’s most recent Escobar ruling, as the decision could have made bringing False Claims Act cases considerably more onerous for whistleblowers from the outset.

In June, Greene LLP secured a favorable and unanimous decision for its clients in the U.S. Supreme Court. The Escobar decision represents the Supreme Court’s willingness to bolster the variety of viable theories of recovery under the statute. The June decision promises to have lasting consequences for a wide variety of whistleblower suits filed under the False Claims Act.

Greene LLP’s clients were prompted to file an FCA suit under Massachusetts’ qui tam provision by the death of their daughter, Yarushka Rivera, a Massachusetts teenager who died from an epileptic seizure after being treated at a mental health facility run by Universal Health Services (“UHS”). Under Massachusetts Medicaid (“MassHealth”) regulations, health care professionals must meet licensing and minimum qualification requirements to provide services reimbursed by the government.

After Yarushka’s death, Greene LLP’s clients made inquiries about the care she received at UHS’s facility. They found that a person held out as a licensed psychologist with a Ph.D. had gotten that degree from an unaccredited online college, and that the person’s application for a license in Massachusetts had been actually rejected. The person held out as a psychiatrist who prescribed an anti-seizure medication was a nurse, who did not have authority to write prescriptions absent proper supervision. Greene LLP’s clients determined that of the five UHS mental health care providers who treated Rivera, four were not licensed and were not supervised as required by MassHealth regulations.

Rivera’s case was originally filed in U.S. District Court in Boston, Massachusetts, where the trial court determined that billing MassHealth for services provided by unlicensed and unsupervised personnel could not support an FCA theory of liability. In 2015, the First Circuit reversed the District Court, and, in an uncommon decision, in 2016, the Supreme Court granted UHS’s petition for certiorari.

Writing for an undivided Supreme Court in an 8-0 decision, Justice Thomas was unpersuaded by UHS’s arguments. The Court ruled that by failing to inform the government that its clinic staff did not meet MassHealth’s licensing and minimum qualification requirements, UHS may have submitted “false” and “fraudulent” claims actionable under the FCA. The Supreme Court left that factual determination for a lower court, and remanded the case back to the U.S. Court of Appeals for the First Circuit in Boston, MA.

In the First Circuit’s latest ruling in Escobar, handed down on November 22, 2016, the Court focused on the centrality of UHS’s alleged regulatory failures to the company’s bargain with MassHealth for reimbursements for services provided. The First Circuit found that Greene LLP’s clients’ allegations could be material to the government’s decision to pay mental healthcare claims. As the First Circuit put it: “At the core of the MassHealth regulatory program in this area of medicine is the expectation that mental health services are to be performed by licensed professionals, not charlatans.”

The Court went on to compare the services provided by UHS to Civil War scandals, when dishonest Union Army contractors often provided defective military supplies to the government and caused Congress to enact the False Claims Act more than 150 years ago. The First Circuit wrote, “UHS’s violations in the instant case are as central to the bargain as the United States ordering and paying for a shipment of guns, only to later discover that the guns were incapable of firing.” The First Circuit’s decision will serve as guidance for other Federal Circuit Courts of Appeals and District Courts when evaluating claims by relators at the motion to dismiss phase.

Greene LLP partners Thomas M. Greene and Michael Tabb represented the relators in the First Circuit, and will continue to represent them in lower courts after this decision. Tabb’s oral argument to a three-judge panel of the First Circuit on October 25, 2016 proved successful. Specializing in False Claims Act litigation, Greene LLP’s partners each have over twenty years representing whistleblowers.

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