Brooklyn Law Review


In June of 2016, the U.S. Supreme Court issued an opinion in the case of Universal Health Services, Inc. v. United States ex rel. Escobar, in order to resolve a circuit split regarding the viability of the “implied false certification” theory of liability under the False Claims Act (FCA). This article examines what has happened in the twelve months since the Escobar opinion by observing the reaction and subsequent arguments arising out of the Department of Justice and exploring the analyses of district courts and courts of appeals in trying to apply a new and more demanding materiality standard as set forth in Escobar. While lower courts seem to be taking Escobar to heart and applying this more rigorous materiality standard for implied false certification claims, there remains a great deal of variability in the lower courts about what may or may not be actionable under the FCA. With nearly 60 percent of recoveries from the FCA since 1986 attributable to the healthcare industry, this article examines Escobar through the unique lens of the healthcare industry. While Escobar does seem to be motivating lower courts to apply a rigorous and demanding materiality standard, the back-to-basics approach to examining materiality for fraud seems to be providing little consistency regarding what type of evidence would need to be proffered to satisfy such materiality standard. To the extent such lack of consistency remains, providers, suppliers, manufacturers, and other parties potentially subject to application of the FCA in the healthcare setting will continue to struggle to determine how to consider Escobar for purposes of assessing and prioritizing compliance risk.