What could happen when a medical provider knowingly submits claims to the government for reimbursement that are not correct? For example, a compounding pharmacy compounds drug that does not meet USP, is manufactured under insanitary conditions, or for 503B under manufacturing conditions that do not meet cGMPs?
An interesting read is Justice Thomas’ majority opinion in Universal Health Service, Inc Vs United States and Massachusetts ET AL. EX REL. ESCOBAR ET AL. 579 U.S. 15-7 2016.
In this case a mental health provider submitted claims for reimbursement for child counselling and prescribing medication. A key point of the opinion concerns submitting claims for payment using payment codes that imply specific services i.e., and corresponding qualifications. Is it too far to apply the same rules to potency, or manufacturing conditions? An excerpt of what I consider the key passage from the opinion is provided below:
So too here, by submitting claims for payment using payment codes that corresponded to specific counseling services, Universal Health represented that it had provided individual therapy, family therapy, preventive medication counseling, and other types of treatment. Moreover, Arbour staff members allegedly made further representations in submitting Medicaid reimbursement claims by using National Provider Identification numbers corresponding to specific job titles. And these representations were clearly misleading in context. Anyone informed that a social worker at a Massachusetts mental health clinic provided a teenage patient with individual counseling services would probably—but wrongly—conclude that the clinic had complied with core Massachusetts Medicaid requirements (1) that a counselor “treating children [is] required to have specialized training and experience in children’s services,” 130 Code Mass. Regs. §429.422, and also (2) that, at a minimum, the social worker possesses the prescribed qualifications for the job, §429.424(C). By using payment and other codes that conveyed this information without disclosing Arbour’s many violations of basic staff and licensing requirements for mental health facilities, Universal Health’s claims constituted misrepresentations.
Accordingly, we hold that the implied certification theory can be a basis for liability, at least where two conditions are satisfied: first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.4 (p.10-11)
My lay opinion as I am not a lawyer, is that it would seem logical if a company submitted requests for payments for a product that failed to meet specifications and used the CMS codes, that condition 1 is met. One would expect the drugs would meet USP, be compounded under sanitary conditions, and when compounded by a 503B registered facility in compliance with cGMPs, if not it would seem logical that condition 2 is met. This is a relatively new opinion released June 2016, so it will be interesting to see how this is applied to other health care industries.