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As a Memphis, Tennessee qui tam and whistleblower attorney, I wanted to share the following.
The Anti-Kickback Statute (“AKS”), 42 U.S.C. §1320a-7b(b), prohibits any person from knowingly and willfully offering to pay any remuneration to another person to induce the purchase, order, or recommendation of any good or item for which payment may be made in whole or in part under federal health care programs, including Medicare and Medicaid. As far back as 1994, the Department of Health & Human Services, through its Office of Inspector General (“HHS OIG”), addresses the question of when payments made to doctors-either by a hospital seeking referrals, or by a pharmaceutical company seeking prescriptions-would violated the AKA. HHS OIG, in a formal publication known as a Fraud Alert, made clear that the AKS was not limited to cash payments. Rather, gift that are “more than nominal in value” violate the AKS if they are tied in some way to referrals or prescriptions. See OIG Special Fraud Alerts, Dec. 19, 1994.
What was left unaddressed at that time was whether the claims made on federal health care programs as a result of such gifts were “false claims” subject to the False Claims Act (“FCA”). The intersection of the AKS and the FCA has now been clarified by the courts, in part through two appellate decisions issued this year.
U.S. ex rel. Hutcheson
On June 1, 2011, the United States Court of Appeals for the First Circuit handed down its decision in U.S. ex rel. Hutcheson v. Blackstone Medical, Inc., No. 10-1505. The Relator, Susan Hutcheson, worked as a Regional Manager of Blackstone for approximately two years. In her Complaint, Hutcheson alleged that “Blackstone paid kickbacks to doctors across the country so they would use its products in certain spinal surgeries.” The alleged “kickbacks,” according to Hutcheson’s complaint, including payments under “sham” consulting agreement, research grants, entertainment expenses, and “high-end” travel and accommodations. The surgeries conducted with Balckstone’s products included, surgeries on Medicare and Medicaid beneficiaries. Hutcheson alleged that these gifts and payment violated the AKS and, because compliance with the AKS is condition of receiving payment from Medicare, Blackstone knowingly caused healthcare providers to present false or fraudulent claims to the government when they submitted kickback-tainted claims.
The district court dismissed Hutcheson’s case under Fed. R. Civ. P. 12(b)(6), holding that Hutcheson failed to identify a materially false or fraudulent claim for purposes of the FCA. In doing so, the lower court employed a rigid interpretation of the express vs. implied certification framework laid out in some FCA jurisprudence and held that, because the relevant statutes and regulations did not expressly condition payment on AKS compliance, Hutcheson failed to state a claim under the “implied certification” theory. The district court also held that the claims submitted by the doctors were not materially false or fraudulent because, even though the doctors had submitted express false certifications, Hutcheson failed to allege that the kickbacks at issue induced doctors to submit claims for surgeries that were otherwise medically unnecessary.
On appeal, the First Circuit categorically rejected both the framework and substance of the lower court’s opinion. In doing so, the Court made clear that it would not “adopt any categorical rules as to what counts as a materially false or fraudulent claim under the FCA.” The Court further explained, “Courts have created these categories in an effort to clarify how different behaviors can give rise to a false or fraudulent claim. Judicially-created categories sometimes can help carry out a statute’s requirements, but they can also create artificial barriers that obscure and distort those requirements. The text of the FCA does not refer to ‘factually false’ or ‘legally false’ claims, nor does it refer to ‘express certification’ or ‘implied certification.’ Indeed it does not refer to ‘certification’ at all. … In light of this, and our view that these categories may do more to obscure than clarify the issues before us, we do not employ them here.”
The Court then went on to address the two primary issues in the case: (1) whether a claim can be false or fraudulent for impliedly misrepresenting compliance with a condition of payment if that condition is not expressly stated in the relevant statute or regulations; and (2) whether a certification of compliance made by the party actually submitting the claims to the government may incorporate an implied representation about the conduct of third parties.
In addressing the first question, the First Circuit rejected Blackstone’s reliance on non-binding case law-including the Second Circuit’s decision in Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001)-for the proposition that FCA liability under the “implied certification” theory is limited to certifications of compliance with expressly stated preconditions of payment found in statutes or regulations. The Court noted that nothing in the FCA itself supported such a narrow reading and it rejected Blackstone’s protestations that failure to follow such an approach would lead to unchecked expansion of the FCA. To the contrary, the First Circuit explained that other checks-both in the plain language of the FCA and the relevant jurisprudence-exist to “cabin the breadth of the phrase ‘false or fraudulent’ as used in the FCA” including the knowledge and materiality requirements.
As to the second question related to “non-submitting party conduct[,]” the First Circuit again refused to impose limitations on FCA claims under the guise of “certification” theories. Specifically, the Court rejected Blackstone’s argument that a submitting entity’s truthful certification cannot be rendered false due to the unlawful acts of a non-submitting third party. Citing the provisions of the FCA that provide for liability against a person that “causes to be presented” a false claim or “causes to be made or used” a false record or statement, the First Circuit made it clear that FCA liability extends to non-submitting entities that knowingly cause a submitting entity to make false claims and that such liability is not conditioned “on whether the submitting entity knew or should have known about the non-submitting entity’s unlawful conduct.” And, again, the Court rejected Blackstone’s claims that such a holding would stretch the FCA beyond the intent of its drafters, noting, for example, that the term “causes”-and the case law concerning the meaning of that term-provides a necessary constraint.
U.S. ex rel. Wilkins
On June 30, 2011, the United States Court of Appeals for the Third Circuit issued its decision in United States ex rel. Wilkins v. United Health Group, Inc., No. 10-2747, which similarly concluded that violations of the AKS can give rise to liability under the FCA. Defendant United Health, through certain subsidiaries, offered Medicare Advantage plans (“MA plans”). Among the claims made by the Relator was the United Health made kickbacks to physicians for referring patients to the United Health MA plan. Relator alleged that these kickbacks violated the AKS, and thus that monies received by United Health from the government for the MA plans were obtained in violation of the FCA. The district court dismissed all of Relators claims, including the claims based upon the alleged AKS violations.
The Third Circuit reversed as the AKS violations. The Court adopted an “implied false certification” theory of liability under the FCA. The Court reasoned that not violating the AKS was a “condition of payment” for the MA plans. In other words, that had the government known of the alleged AKS violations, it would not have made payment to United Health. Adopting language from the government’s own amicus brief in the case, the Court noted that “[t]he Government does not get what it bargained for when a defendant is paid by [the Medicare system] for services tainted by a kickback.
In sum, both U.S. ex rel. Hutcheson and U.S. ex rel. Wilkins make clear that when a provider violates the AKS by making gifts or payments to physicians to induce the use of a particular product, or to induce a referral, that any subsequent claims to the Medicare or Medicaid systems may be considered “tainted,” and thus “false” within the meaning of the False Claims Act. We would note, finally, that this issue relates primarily to claims submitted prior to 2010, because a statutory amendment made as part of the 2010 healthcare overhaul legislation explicitly ties the AKS and the FCA. Congress amended the AKS to confirm that a “claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the False Claims Act]. Patient Protection and Affordable Care Act of 2010 (“PPACA”), Pub. L. No. 111-148, §6402(f), 124 Stat. 119 (codified at 42 U.S.C. 1320a-7b(g)). Accordingly, on a going-forward basis there is no question that gifts to doctors in violation of the AKS can give rise to FCA liability.
As a whistleblower attorney, we are interested in speaking with persons willing to make known the truth about company practices and are willing to file a qui tam or whistleblower action. One area in particular we are interested in discussing are lawsuits involving medical device companies where the company is alleged to have overcharged, engaged in kickback programs, and the like. We will nevertheless investigate claims in a variety of areas.
Workers and persons all across the country witness actions at their work that may be unlawful or even corrupt. Unfortunately, some employees and workers feel that they will be fired, terminated, harrassed or punished if they report an unlawful or corrupt action. These reporters, however, are protected by the law as a Whistleblower and can receive compensation because of the False Claims Act or the Medicaid False Claims Act. If you have reported actions that may be fraudulent, then you should talk to a Whistleblower or qui tam lawyer about your facts.
Whistleblowers help the government to get back billions of dollars each year with the help of the False Claims Act. In fact, fraudulent Medicaid claims are also caught by whistleblowers having the Medicaid False Claims Act on their side. If you report a false claim or fraudulent action to the government, then the government will give you, the whistleblower, a part of the money that gets recovered. This is because of qui tam requirements. Qui Tam means that a person files a lawsuit for the king and also for him or herself. These requirements and lawsuits were made popular during the Civil War when many people were getting away with fraudulent actions against the government. In 1986, the False Claims Act was amended to raise the total compensation given to people who reported fraudulent actions, or whistleblowers. If a whistleblower works with a lawyer then it may be possible for them to get three times the amount the government would get in damages and also get additional compensation for general fines.
For more information, please contact whitsleblower and qui tam attorney Ed Wallis at 1-800-632-1404 or send Mr. Wallis an email below for a free initial consultation.