UNITED STATES, ex rel. JULIO ESCOBAR; CARMEN CORREA, administratrix of the Estate of Yarushka Rivera, Plaintiffs, Appellants,
UNIVERSAL HEALTH SERVICES, INC., Defendant, Appellee. COMMONWEALTH OF MASSACHUSETTS, Plaintiff, Amicus Curiae,
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS [Hon. Douglas P. Woodlock, U.S. District Judge]
Michael Tabb, with whom Thomas M. Greene, Elizabeth Cho,
Greene LLP, were on brief for appellants.
T. Stancil, with whom Donald Burke, Robbins, Russell,
Englert, Orseck, Untereiner & Sauber LLP, and Mark W.
Pearlstein, Evan D. Panich, Laura McLane, McDermott Will
& Emery LLP, were on brief for appellee.
Healey, Attorney General of Massachusetts, with whom Robert
Patten and Jeffrey Walker, Assistant Attorneys General, were
on brief for amicus curiae Commonwealth of Massachusetts.
Charles S. Scarborough, Attorney, Appellate Staff, with whom
Benjamin C. Mizer, Principal Deputy Assistant Attorney
General, Carmen M. Ortiz, United States Attorney, and Michael
S. Raab, Attorney, Appellate Staff, were on brief for amicus
curiae United States of America.
Jennifer M. Verkamp, Morgan Verkamp LLC, and Jacklyn N.
DeMar, on brief for amicus curiae Taxpayers Against Fraud
W. Meisinger, Thomas R. Barker, Kristyn M. DeFilipp, and
Foley Hoag, LLP, on brief for amicus curiae National
Association of Psychiatric Health Systems.
Lawrence M. Kraus, Lawrence W. Vernaglia, Jason L. Drori, and
Foley & Lardner LLP, on brief for amicus curiae
Massachusetts Hospital Association.
P. Elwood, Craig D. Margolis, Jeremy C. Marwell, Tirzah S.
Lollar, Christian D. Sheehan, Vinson & Elkins LLP,
Kathryn Comerford Todd, Steven P. Lehotsky, and U.S. Chamber
Litigation Center, on brief for amicus curiae Chamber of
Commerce of the United States of America.
Howard, Chief Judge, Stahl and Barron, Circuit Judges.
Rivera died of a seizure in 2009 after receiving mental
health treatment at Arbour Counseling Services in Lawrence,
Massachusetts, a facility owned and operated by
Defendant-Appellee Universal Health Services
("UHS"). UHS submitted reimbursement claims for
these services to MassHealth, the state's Medicaid
Yarushka's death, her mother and stepfather learned that
Arbour had employed unlicensed and unsupervised personnel, in
violation of state regulations -- many of whom were involved
in treating their daughter during the years leading up to her
death. Relators subsequently brought a qui tam
action against UHS under the False Claims Act (FCA), alleging
that Arbour had employed unlicensed and unsupervised
personnel, in violation of state regulations, and that UHS
had fraudulently submitted reimbursement claims to the
Commonwealth, despite knowing that they were in violation of
relevant state regulations dealing with mental health and
counseling facilities. This is a theory of FCA liability
known as the "implied false certification theory."
district court granted defendant's motion to dismiss,
concluding that the regulatory violations were conditions for
participation in the state Medicaid program, but were not
conditions of payment as required for a claim to be
actionable under the FCA. We reversed, holding that the
regulatory violations in question were, in fact, conditions
for payment and that the Relators' complaint had
"properly pleaded that the condition of payment at issue
was a material one, " given the ubiquity of the
licensing and supervision requirements throughout the
MassHealth regulations governing the state's Medicaid
program with respect to mental health services. United
States and Commonwealth of Mass. ex rel. Escobar v. Universal
Health Servs., Inc., 780 F.3d 504, 514 (1st Cir. 2015)
sought review in the Supreme Court, the Court granted
certiorari, and ruled that the implied false certification
theory can be a basis for FCA liability. However, the Supreme
Court vacated our judgment and remanded the case for further
consideration of whether Relators' complaint sufficiently
alleged that the regulatory violations in question were
material to the government's payment decision, a
requirement for an actionable FCA claim. Universal Health
Servs., Inc. v. United States and
Commonwealth of Mass. ex rel. Escobar, 136 S.Ct. 1989,
2004 (2016) ("Escobar II").
the Supreme Court's guidance on the question of whether
UHS's misrepresentations were material, we again find
that Relators' complaint sufficiently states a claim
under the FCA. We therefore REVERSE the district court's
grant of UHS' Motion to Dismiss and REMAND for further
proceedings consistent with this opinion.
Facts and Background
previously had occasion to discuss the underlying facts that
gave rise to this litigation, see Escobar I, 780
F.3d at 508-510, we briefly recount the most salient facts
before proceeding to an analysis of the materiality of the