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What is the difference between express and implied false certification?
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Understanding Express and Implied False Certification
False certification is a legal theory that can be used to establish liability under the False Claims Act (FCA). The FCA imposes liability on any person who knowingly submits a false or fraudulent claim for payment to the federal government. Under false certification theory, a claim can be considered false or fraudulent if the claimant falsely certifies compliance with statutory, regulatory, or contractual requirements, even if the claim is not factually false on its face.
There are two main types of false certification – express certification and implied certification. The key difference is whether the certification of compliance is explicitly stated or merely implied:
- Express false certification occurs when a claimant explicitly states that they are in compliance with applicable requirements when submitting a claim, but that express certification is false.
- Implied false certification occurs when a claimant submits a claim without explicitly certifying compliance, but compliance is impliedly a prerequisite to payment of the claim. The failure to disclose noncompliance makes the claim misleading.
Express False Certification
Express false certification was the original theory of false certification developed by courts. It applies when a claimant explicitly certifies compliance with applicable statutes, regulations, or contract provisions as part of the process for submitting a claim. Common examples include certification clauses on claim forms, enrollment forms, or payment requests. If that express certification is false, it can render the entire claim fraudulent.
For instance, Medicare claim forms require healthcare providers to certify that the services billed were medically necessary and were provided in compliance with applicable laws and regulations. If a provider falsely certifies compliance on the claim form despite knowing the services were not necessary or were provided in violation of Medicare rules, that express false certification could constitute a false claim under the FCA.[1]
The main elements of express false certification are:
- An explicit false statement or fraudulent certification of compliance with statutes, regulations, or contract provisions
- Made by the claimant in connection with a claim for payment from the government
- Knowledge by the claimant that the statement was false
- The false statement was material to the government’s decision to pay the claim
Over time, courts refined the express false certification theory by requiring that the certification go to a prerequisite of payment, rather than just any statutory or regulatory violation. This prevented turning the FCA into a general enforcement mechanism for any breach of contract or regulatory noncompliance. Under this framework, liability attaches only if compliance with the requirement in question is material to the government’s payment decision.[2]
Implied False Certification
Implied false certification emerged as courts recognized that explicitly certifying compliance is not always necessary for a claim to be considered false or fraudulent under the FCA. The implied certification theory holds that when a claimant submits a claim for payment, it impliedly certifies compliance with all relevant statutory, regulatory, and contractual requirements, even if not expressly stated.
The basic rationale is that by submitting a claim, the claimant is implicitly requesting payment pursuant to the government program requirements. Failure to disclose violations of material requirements makes the claim misleading half-truths.[3] For instance, a Medicare claim implicitly certifies that the provider complied with Medicare regulations, even if no express certification is made.
The elements of implied false certification are similar to express certification, but do not require an affirmatively false statement:
- The claim makes specific representations about the goods/services provided
- The claimant failed to disclose noncompliance with material statutory, regulatory, or contractual requirements
- That omission rendered the representations misleading
- The claimant knew about the noncompliance
In 2016, the Supreme Court endorsed the implied false certification theory in Universal Health Services, Inc. v. United States ex rel. Escobar. However, the Court cautioned that two conditions must be met – the claim must make specific representations about the goods/services provided, and the noncompliance must be material.[4] This helped limit implied certification from creating excessive liability.
Key Differences
While express and implied certification share the same basic premise, there are some notable differences:
- Explicit statement – Express certification requires an actual false statement, while implied certification infers representations from the act of submitting the claim itself.
- Breadth of requirements – Implied certification potentially encompasses a broader set of statutes, regulations, and contract provisions that are implicitly certified.
- Materiality – Implied certification requires materiality of the violation to limit overreach, whereas express certification focuses materiality analysis on the certification itself.
- Scienter – Express certification requires knowingly or recklessly making a false statement, while implied certification requires knowing about the underlying violation.
In practice, the two theories often overlap. A claim may involve both an express false certification of compliance as well as an implied false certification of compliance with additional requirements not expressly addressed. The fundamental inquiry is whether the claimant knowingly submitted false or fraudulent claims to the government that were material to the payment decision.
Practical Implications
The false certification theories have several important practical implications:
- They expand the scope of claims considered false or fraudulent under the FCA beyond just factually or facially false claims.
- But, they require materiality and knowledge to prevent limitless liability for any breach of contract or regulatory violation.
- They increase potential FCA liability for claims submitted under many government programs.
- Regulated entities must ensure they have compliance systems to identify any violations of material requirements.
- Mere regulatory violations do not necessarily create FCA liability – only failures to disclose violations material to the government’s payment decision.
In sum, the false certification theories target fraudulent claims submitted through misrepresentations or omissions. But proving falsity requires establishing materiality and scienter through rigorous evidence. It is not an automatic basis for liability any time statutory or regulatory requirements are violated. Understanding these nuances is crucial for government contractors and healthcare providers subject to complex regulatory schemes.
References
[1] OIG False Claims Act Guidance
[2] Implied Certification Theory in False Claims Act Cases