Courts confronting implied false certification claims under the False Claims Act have long applied the distinction between “conditions of payment,” which can support an FCA claim, and “conditions of participation,” which cannot. This distinction first arose in the healthcare field where Medicare/Medicaid regulations often distinguish strict prerequisites to payment from more general minimum health and safety standards. (This article contains a good discussion of the issue.) Outside of the healthcare context, however, some courts have rejected the distinction as “grammatical haggling [that] is unmoored in the law.” United States ex rel. Hendow v. University of Phoenix, 461 F. 3d 1166.
Recently, the Western District of Oklahoma denied summary judgment in United States ex rel. Fortenberry v. The Holloway Group, Inc., No. CV-11-247 (Sept. 2, 2014), a case involving allegedly false claims for Medicare/Medicaid payments in which the government did not intervene. The defendant admitted that it violated certain regulations relating to the delivery of mental health services, but contended that the regulations were merely conditions of participation, not conditions of payment. (The court determined that the defendant never expressly certified compliance with the applicable regulations and granted summary judgment on that issue.) The court determined that the regulations at issue were conditions of payment because they specified that failure to comply would result in “disallowance of services,” “indicat[ing] that the eligible provider’s ability to be reimbursed for specific services will be disallowed for a violation.” The court also found that the plaintiff had provided enough evidence of the defendants’ knowledge of the violation to survive summary judgment.
It appears this case is headed to trial if a settlement cannot be reached.