A False Claims Act case rarely turns on whether a claim was false. It almost always turns on whether the defendant knew it. The Supreme Court's decision in United States ex rel. Schutte v. SuperValu Inc., 598 U.S. 739 (2023), resolved a question that had split the circuits on exactly that point: when a billing rule is ambiguous, does an interpretation a court later calls objectively reasonable defeat scienter, even if the defendant did not hold that belief when it submitted the claim? The Court's answer, unanimous, was no. For a compliance officer, the weight of that ruling falls on one thing: a contemporaneous record of what the provider knew, asked, and was told, built before the claim went out, not assembled afterward to explain it.
The Three Knowing States Under the FCA
The FCA imposes liability on anyone who “knowingly” submits a false claim to the government, and the statute defines that term at 31 U.S.C. Section 3729(b)(1)(A). Three mental states satisfy it: actual knowledge that the claim is false, deliberate ignorance of the truth or falsity of the claim, and reckless disregard of the truth or falsity of the claim. No proof of specific intent to defraud is required, 31 U.S.C. Section 3729(b)(1)(B). Each state is about the defendant's own state of mind when the claim was submitted. Deliberate ignorance covers a provider that senses a substantial risk its billing is wrong and avoids confirming it. Reckless disregard covers a provider that is conscious of that risk and submits the claim anyway.
What the Supreme Court Held in SuperValu
Tracy Schutte and a co-relator, Thomas Proctor, brought qui tam suits alleging that SuperValu and Safeway pharmacies billed Medicare and Medicaid at their higher retail prices while quietly matching competitors' lower prices for most customers, then reported the retail price as their “usual and customary” charge. The Seventh Circuit had granted the pharmacies summary judgment: because “usual and customary” was facially ambiguous, it reasoned, an objectively reasonable reading of it defeated scienter regardless of what the pharmacies actually believed. The Supreme Court vacated that judgment. Writing for a unanimous Court, Justice Thomas held that the FCA's scienter element refers to a defendant's knowledge and subjective beliefs, not to what an objectively reasonable person may have known or believed.
Why a Reasonable Reading After the Fact Is Not Enough
The Court's reasoning tracked the common law of fraud, which asks whether the defendant held an honest belief in the truth of its own statement. The record showed the pharmacies had received notice that regulators read “usual and customary” to mean the discounted price charged to most customers, and that internal communications discussed keeping that pricing from auditors. If a provider understood a billing rule one way and billed differently anyway, a court-constructed alternative reading does not erase that knowledge. Facial ambiguity in a rule is a starting point for a scienter defense, not the end of one.
What the defendant believed and knew when the claim went out controls; a reasonable interpretation invented afterward does not.
The Contemporaneous Record Is the Defense
SuperValu changes what counts as proof. A memo written after the government's inquiry begins, explaining why an ambiguous rule could reasonably be read a certain way, answers a question the FCA no longer asks. What matters is the guidance the provider relied on, the questions it raised, and the answers it received, dated before the claim was filed: coverage bulletins reviewed at the time, a compliance memo addressing the ambiguous term, and documentation of any correction made once the correct interpretation became known. The same analysis reaches individual executives named in a suit, whose own knowledge controls their exposure separately from the company's. Liability under the FCA can carry treble damages, per-claim penalties, and a negotiated corporate integrity agreement or OIG exclusion that follows a provider for years.
Why Early Legal Counsel Is Critical
It is critical that healthcare providers promptly retain experienced healthcare defense counsel upon receiving a subpoena, a civil investigative demand, or notice of a qui tam suit under the FCA. Early legal intervention can identify what contemporaneous record already exists, preserve it before it is lost, and separate a genuine scienter defense from a rationale built after the fact that SuperValu no longer credits. Scienter is only one element of an FCA case, alongside materiality and falsity, so counsel retained early can assess every available defense before the record has to speak for itself.
How Health Law Alliance Can Help
Health Law Alliance has handled 5,000+ matters across healthcare regulatory and audit defense over 25+ years, including False Claims Act matters turning on this scienter question. If your practice received a civil investigative demand, a qui tam complaint, or notice the government is examining what you knew about a billing interpretation, contact Health Law Alliance's False Claims Act defense attorneys for a free, confidential consultation before that contemporaneous record has to speak for itself.
