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Mass. case before Supreme Court could expand fraud law

A case heard Tuesday by the US Supreme Court’s eight justices could broaden incidents of fraud brought against government contractors. Alex Brandon/Associated Press/File

WASHINGTON — The 2009 death of a young Massachusetts woman who was prescribed medication by improperly supervised caregivers at a Lawrence mental health clinic reached the Supreme Court Tuesday in a case that could dramatically expand civil fraud cases against government contractors.

The outcome could affect not only hospitals, nursing homes, and drug companies filing Medicaid or Medicare claims, but also myriad other businesses and nonprofits from defense contractors to private colleges and universities.

The case before the court focuses on a Civil War-era law meant to stop contractors from selling the Union Army faulty guns, shoddy uniforms, and rancid food. That law, the False Claims Act, continues to be the government’s most important tool for ferreting out fraud as it disburses trillions of dollars each year for goods and services.


At issue is whether Arbour Health System violated the law when it allegedly permitted an unsupervised nurse practitioner to prescribe medication to 19-year-old Yarushka Rivera. Rivera’s parents claim the clinic defrauded the government by not following Massachusetts law requiring that nurse practitioners prescribe medication only under supervision by a certified staff psychiatrist.

The company says exposing contractors to civil fraud cases for not adhering to state regulations would be an unwarranted expansion of the federal False Claims Act. Arbour Health System and its national owner, Universal Health Services, which has 235 medical facilities in 37 states, has the backing of numerous government contractors and lobbying groups who warn that an unfavorable decision could unleash a rash of unfair litigation against companies. They contend that contractors should not be exposed to the risk of a legal judgment under federal law for not following every state and local ordinance where they do business.

Justice Sonia Sotomayor sounded dubious about the contractors’ warnings.

“I always thought that when you asked for payment, you’re making a promise: I did what I agreed to do. Pay me, please. That’s, to me, what’s sort of understood,” Sotomayor said during Tuesday’s oral arguments. “If I hired you to provide me with doctor services, you ask me for money, I’m assuming you provided me with doctor services. And you know you didn’t. Why isn’t that a fraud?”


“Because it’s a contract breach,” responded Roy Englert Jr., the attorney arguing for Universal.

“So providing a gun that doesn’t shoot to the Army is simply a contract breach?” Sotomayor said.

“It depends on the facts of the case,” Englert said.

“What more facts do you need?” Sotomayor said. “Government contracted for guns. All of a sudden you deliver guns that don’t shoot. . . . Do you think that anybody, except yourself, would ever think that it wasn’t a fraud to provide guns that don’t shoot if that’s what the government contracted for?”

Justices Elena Kagan, Stephen Breyer, and Ruth Bader Ginsburg also appeared skeptical of the health clinic’s position in their questioning.

Chief Justice John Roberts seemed to momentarily sympathize with the health clinic’s complaint that it would be burdened by a morass of government regulations.

“The difficulty comes in when you have hundreds, thousands of pages of regulations,” said Roberts, expressing concern for potentially allowing whistle-blowers to bring False Claims suits over minor violations such as using the wrong syringe.

Carmen Correa and Julio Escobar allege that unlicensed and unsupervised therapists at Arbour Health System in Lawrence diagnosed their daughter with bipolar disorder, and that a nurse, without adequate supervision, prescribed an antiseizure medication. But after Rivera stopped taking the drug because of an adverse reaction, she suffered a seizure and died.


The family’s lawsuit alleges that nearly every therapist who came in contact with Rivera at the Lawrence clinic was unlicensed and unsupervised, and that the staff psychiatrist there had failed her clinical board exams years ago. Escobar and Correa declined to be interviewed.

“The case is a lot broader than the mental health counseling that their daughter received. It involves fraud on the federal treasury and the taxpayer,” said Thomas Greene, the family’s lawyer, who sat in the courtroom Tuesday as oral arguments unfolded. “Had the government known the truth, that unlicensed counselors were unsupervised, it wouldn’t have paid for the services. That type of fraudulent practice was rampant and occurring at all their clinics in Massachusetts.”

An opinion is expected in the case by the end of June. If the court rules in favor of the family and allows the case to continue, the family would then have the opportunity to prove in a trial court that fraud occurred.

Under the False Claims Act, the government could receive double to triple the damages from Universal, and the family, as the whistle-blowers, would be entitled to 25 to 30 percent of what the government receives, Greene said.

Arbour Health System is the largest private provider of mental health care in Massachusetts. Universal Health Services asked the Supreme Court to review the case after a lower court ruled in favor of the family on pretrial procedure.


The Medicaid program, which covered Rivera’s treatment, provides health coverage for the poor and disabled, and is paid for by the federal and state governments. Universal argues that nowhere in Massachusetts law does it explicitly require companies to comply with state regulations governing supervision of staff members in order to be reimbursed for care.

More than a dozen business and industry groups filed amicus briefs siding with Universal, including the US Chamber of Commerce, American Hospital Association, Pharmaceutical Research and Manufacturers of America, Generic Pharmaceutical Association, American Medical Association, and Association of Private Sector Colleges and Universities.

Massachusetts Attorney General Maura Healey wrote in an amicus brief on behalf of the parents that Universal Health Services engaged in a “serious fraud against the Commonwealth that may have led to significant patient harm” and that it was “but one of a vast and complex range of fraudulent schemes to obtain government funds.”

Congress passed the Civil War-era False Claims Act in 1863 in response to widespread military contractor fraud against the Union Army. The same mules were being sold over and over again to Army quartermasters. Rotted ship hulls had been repainted and sold as new to the Navy. Infantry boots were constructed of cardboard, uniforms made from recycled rags. Guns did not fire.

The impulse of swindlers to attempt to cheat the government has only grown since, wrote Senator Charles Grassley, an Iowa Republican who cosponsored the 1986 False Claims Amendment Act, in an amicus brief siding with the parents.


“The government needs lots of help to adequately protect the Treasury against growing and increasingly sophisticated fraud,” Grassley said.

Grassley said the law must be broadly construed because its intent was to capture every form of fraudulent scheme that threatens taxpayer dollars.

The Department of Justice reported recovering more than $3.5 billion in False Claim Act cases in 2015, including $1.9 billion involving health care fraud.

Tracy Jan can be reached at Follow her on Twitter @TracyJan.