Whose Knowledge Counts? The Expanding Scope of Government Knowledge in FCA Cases

Next week marks the four-year anniversary of the Supreme Court’s landmark False Claims Act (“FCA”) decision in Universal Health Services, Inc. v. Escobar, 136 S. Ct. 1989 (2016). In Escobar, the Court set a high bar for demonstrating the materiality of an alleged violation to the Government’s payment decision, declaring that “if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.” In so holding, the Supreme Court confirmed that the question of government knowledge lies at the heart of FCA liability determinations, but it did not specifically address who counts as “the Government” for purposes of this materiality inquiry. The answer to this question has far-reaching consequences for both determinative legal questions and government discovery disputes. As discussed below, a number of circuits have made clear that the relevant scope of government knowledge includes both the payor agency and other agencies with regulatory oversight and enforcement responsibilities.