On March 28, 2023, the U.S. Court of Appeals for the Sixth Circuit affirmed the dismissal of a qui tam action brought under the False Claims Act based on an illegal kickback under the Anti-Kickback Statute. This decision not only curtails the scope of the Anti-Kickback Statute (“AKS”) within the Sixth Circuit by limiting “remuneration” under that statute to “payments and other transfers of value” but also widens the circuit split on the meaning of “items or services resulting from [the] violation” of the AKS to state a claim under the False Claims Act.
The case arose out of somewhat peculiar facts. Oaklawn Hospital extended a tentative employment offer to Dr. Martin to join the hospital as an internal ophthalmologist — a service the hospital previously did not offer. Dr. Martin worked for the only local ophthalmology practice, which was owned by Dr. Hathaway. When Dr. Hathaway got wind of the offer, he told Oaklawn that he would continue to refer patients to Oaklawn if the hospital did not hire Dr. Martin but would be forced to make referrals elsewhere if it did.
Oaklawn ultimately pulled its offer to Dr. Martin, and she brought a qui tam action. Her complaint alleged that Dr. Hathaway and Oaklawn engaged in an illegal kickback scheme under the AKS (continued referrals in exchange for not hiring Dr. Martin) and that any claims for Medicare and Medicaid reimbursement resulting from the kickbacks violated the False Claims Act. After the U.S. District Court for the Western District of Michigan dismissed the complaint, Dr. Martin appealed to the Sixth Circuit.
At issue in the appeal was whether Oaklawn’s decision not to hire Dr. Martin constituted “any remuneration” under the AKS and whether Dr. Martin could establish that the claims for Medicare or Medicaid reimbursement “resulted from” a violation of the AKS to state a claim under the False Claims Act. In an opinion authored by Judge Sutton, the Sixth Circuit first held that “any remuneration” covers only payments and other transfers of value, not any act that may be valuable to another. Under that standard, Oaklawn’s decision not to hire Dr. Martin — which didn’t transfer anything to Dr. Hathaway — did not qualify as remuneration.
The Sixth Circuit also held that for purposes of AKS violations, a claim “results from” a violation only when the violation is the “but-for” cause of the alleged false claim. Under this standard, the court held that Dr. Martin did not plausibly allege but-for causation because Oaklawn’s and Dr. Hathaway’s referral practices were the same both before and after Oaklawn decided not to hire Dr. Martin. In other words, the complaint was grounded in reimbursement claims that would have occurred anyway.
The court’s decision on causation reinforces a preexisting circuit split. By adopting the but-for standard, the Sixth Circuit joins the Eighth Circuit, which held last year that a False Claims Act plaintiff must demonstrate that the defendant would not have included particular items or services “but-for the illegal kickbacks.” Those circuits part ways with the Third Circuit, which previously held that there need only be “some connection” between a kickback and subsequent reimbursement claim. The circuit split increases the likelihood that the Supreme Court will weigh in on the issue.
Although the Sixth Circuit’s decision may make it more difficult to prove certain AKS and False Claims Act claims in that circuit, health care organizations should continue to be mindful that their programs comply with the AKS, the False Claims Act, and other fraud and abuse laws. Warner’s White Collar Criminal Defense Practice Group and Health Care Industry Group can help you develop, implement and audit your organization’s compliance program. And Warner recently unveiled a variety of products and services that can help you ensure you and your company are ready and protected at a moment’s notice.
For questions or legal assistance with this or other health care-related litigation issues, please contact Madelaine Lane, Charlie Quigg, Katherine Boothroyd or your Warner attorney.