Opinion ID: 31536
Heading Depth: 2
Heading Rank: 4

Heading: Implied Certification Theory of Liability

Text: 21 In order to receive payment, Humana submits enrollment lists to HCFA identifying the persons enrolled in its HMO program for any given month. Willard does not allege that those enrollment lists were literally false, in that they requested payment for individuals not enrolled or not eligible for enrollment. Rather, Willard argues that by requesting payment, Humana has impliedly represented to the Government that it has complied with applicable statutes and regulations central to performance of Humana's contract with HCFA, as well as the terms of the contract. Willard further argues that by requesting payment, Humana impliedly represented that the Government received everything it had contracted and bargained for. As there was no express certification of compliance, Willard contends that Humana made an implied certification of compliance which the Government relied upon. 22 This court has recognized that services rendered in violation of a statute do not necessarily constitute false or fraudulent claims under the FCA. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir.1997). This court, however, has also recognized that the FCA interdicts material misrepresentations made to qualify for government privileges or services. Id. (quoting United States ex rel. Weinberger v. Equifax, Inc., 557 F.2d 456, 461 (5th Cir.1977)). While this Circuit has decided cases dealing with FCA liability based on express certifications of compliance with various statutes and regulations, we have not specifically addressed whether FCA liability can be based on an implied certification theory. 23 Willard relies on the Tenth Circuit's decision in Shaw v. AAA Engineering & Drafting, Inc., 213 F.3d 519 (10th Cir. 2000), to support recognition of FCA liability based on an implied certification theory. The defendant in Shaw had contracted to perform photography services for the Government. Id. at 523. Under the contract, the defendant was required to dispose of certain chemicals used in the contracted for film processing in accordance with environmental guidelines and standards. Id. at 527. The United States, appearing as amicus curiae, argued that by submitting monthly invoices for the photography services, the defendant: 24 impliedly certified that it had complied with the silver recovery [environmental compliance] provisions in the contract; because [the defendant] was being paid not only for photography services but also for environmental compliance, its false implied certification of compliance with the contract's silver recovery requirement gives rise to liability under the FCA. Id. at 531. 25 The Tenth Circuit embraced the implied certification theory of FCA liability, noting that it is consistent with the legislative history of the 1986 amendments to the FCA and supported by the language and structure of the FCA itself. Id. at 530. The district court found Shaw unpersuasive, stating that: 26 Although the court used the phrase `implied certification,' the court did not create or recognize a new or expanded cause of action under the False Claims Act. `Implied certification' amounts to nothing more than an alternative expression of the well-accepted idea that billing the government for something not delivered may constitute a false claim. If the government defines its bargain in a manner that requires adherence to a statute or regulation, compliance with that statute or regulation is implied by virtue of a request for payment. As with a claim brought under the theory of express certification, there can be no liability based upon an implied certification unless compliance is a condition for payment. (citations omitted). 27 As the district court explained, [t]he Tenth Circuit held that submission of the invoices constituted a false claim because the payment requested was for both photography services and for silver recovery activities, but the silver recovery had not been performed. Thus, the critical point is that an action on which payment was conditioned had not been performed. Other circuits that have recognized the implied certification theory have also set forth this requirement. See United States ex rel. Augustine v. Century Health Svs., Inc., 289 F.3d 409, 415 (6th Cir.2002) (adopting the implied certification theory, explaining that FCA liability can attach if the claimant violates its continuing duty to comply with the regulations on which payment is conditioned); Mikes v. Straus, 274 F.3d 687, 700 (2d Cir.2001) (concluding that implied false certification is appropriately applied only when the underlying statute or regulation ... expressly states the provider must comply in order to be paid); United States ex rel. Siewick v. Jamieson Science & Eng'g, Inc., 214 F.3d 1372, 1376 (D.C.Cir.2000) (holding that courts will infer certification from silence, but only where certification was a prerequisite to the government action sought). 28 This court need not determine here whether it will recognize the implied certification theory, because even if assuming for the sake of argument we were to apply such a theory here, Willard would still lack a cognizable claim for two reasons. First, Willard has failed to allege facts that would show that HCFA conditioned its payment to Humana on any implied certification of compliance with the anti-discriminatory regulations. 29 It is clear that compliance with the regulations Willard alleges Humana violated was not a condition of payment under the contract. If Humana engaged in any practice that would reasonably be expected to have the effect of denying or discouraging enrollment based on health status, the Government is merely authorized to suspend future enrollment, suspend future payments, or impose monetary penalties, rather than withhold payment for those already enrolled. See 42 U.S.C. § 1395mm(i)(6). See also United States v. Southland Management Corp., 326 F.3d 669, 676 (5th Cir.2003). Moreover, Willard does not allege that the regulations concerning discrimination based on health status and income were referenced in the contract. A review of the standard contract with Medicare HMO providers submitted by Willard indicates that neither 42 U.S.C. § 1395mm(i)(6) or 42 C.F.R. § 417.428(b)(1) were mentioned in the contract, let alone their compliance certified as a condition for payment, despite the fact that compliance with numerous other regulations, some of which are specific to health care providers and others of which relate to labor more generally, was incorporated either within the contract itself or in its appendix. 30 Second, Willard has not alleged facts sufficient to reflect that there was any regulatory violation. Willard does not allege that Humana turned away less healthy people or discouraged less healthy Medicare eligible people per se from participating in the program. Under 42 U.S.C. § 1395mm(i)(1), civil penalties may be imposed if a Medicare contracting HMO engages in any practice that would reasonably be expected to have the effect of denying or discouraging enrollment by eligible individuals whose medical condition or history indicates a need for substantial future medical service. However, while Willard alleges that Humana supervisors stated, as a matter of fact, that the company does not profit by insuring the sick, Willard does not allege that Humana in fact implemented a policy or practice of actually discouraging less healthy individuals from enrolling or actually turning them away. The complaint never alleges that either Willard or any of his coworkers at the behest of Humana either actually turned away any less healthy eligible individuals or actually discouraged any from enrolling. Indeed, the complaint does not even allege that Willard and other agents responsible for enrolling prospective beneficiaries examined their medical histories or conducted an evaluation of their future need for medical services. 31 Willard merely claims Humana accomplished a similar ultimate result de facto by less aggressively marketing its plan in the rural counties as compared with Harris County. However, Willard does not allege that the Medicare eligible population in the rural counties is less healthy on average than that in Harris County. Even if this is assumed, the undisputed fact that reimbursement rates are calibrated separately for each county means that such a practice would not unduly benefit Humana or harm the Government. 32 Willard comes closer to alleging a regulatory violation under 42 C.F.R. § 417.428(b)(1), which prohibits, [p]ractices that are discriminatory. For example, the HMO or CMP may not engage in any activity intended to recruit Medicare beneficiaries from higher income areas (usually an indicator of better health) without making a comparable effort to enroll Medicare beneficiaries from lower income areas. However, Willard never alleges that the rural counties are lower income areas than Harris County. Although an argument could perhaps be made that the general provision of 42 C.F.R. § 417.428(b)(1) might be construed to include discrimination between urban and rural areas in the aggressiveness of marketing efforts, Willard does not make this allegation, let alone cite any authority or precedent supporting such a construction. Furthermore, in light of the parenthetical reference to residents of higher income areas generally having better health and the overarching concern of discrimination between healthy and sick patients that could undermine the capitation rate scheme, the lack of any obvious and general correlation between urban and rural status and health would suggest that this classification would not be a regulatorily recognized proxy for health. Even to the extent urban and rural differences affect health, so long as any marketing differences occur on a county-by-county basis as opposed to distinguishing between urban and rural areas that might lie within one county, the latter of which is not alleged, the fact that capitation rates are set county-by-county means ipso facto the government cannot be shortchanged. 33 Finally, even if we were to find that Humana was under a contractual or regulatory obligation to enroll beneficiaries on a proportionate basis in every county, Willard's complaint fails because it does not allege Humana enrolled a lower percentage of Medicare eligible beneficiaries in the rural counties as compared with Harris County. 1 34