The Third Circuit has adopted a more plaintiff/relator friendly interpretation while the Eighth Circuit has reached the opposite conclusion. Until the U.S. Supreme Court settles the circuit split, choice of venue is key for those bringing claims under the Anti-Kickback statute.
In the December 1, 2022 edition of The Legal Intelligencer, Edward T. Kang and Kandis Kovalsky wrote “Fighting Fraud in Health Care Through the False Claims Act in the Third Circuit“
The U.S. health care industry is a fraudster’s paradise. While the vast majority of the players in the industry are focused on saving lives and improving health care for patients, fraudsters use this goodwill to their benefit. The health care industry is also buoyed by significant government funding—be it through Medicare, Medicaid, or the many grant programs designed to support health systems nationwide. Fraudsters manipulate these programs, and the goodwill associated with them, to steal funds from the government to line their pockets.
A major health care industry overhaul occurred in 2010 with the passage of the Patient Protection and Affordable Care Act, otherwise known as just the Affordable Care Act or, colloquially, Obamacare. The bill attempted to help block fraudsters by amending a longstanding Anti-Kickback statute to assure that fraudsters could not use the government funding programs contained in the ACA to further their fraudulent schemes. In the decade since the ACA’s passage, the courts’ interpretation of the Anti-Kickback statute in relation to ACA fraud has become split, with the split most notable between the U.S. Court of Appeals for the Third and the Eighth Circuits. The Third Circuit has adopted a more plaintiff/relator friendly interpretation while the Eighth Circuit has reached the opposite conclusion. Until the U.S. Supreme Court settles the circuit split, choice of venue is key for those bringing claims under the Anti-Kickback statute.
The federal Anti-Kickback Statute (AKS), 42 U.S.C. Section 1320a-7b, is a criminal statute that prohibits an exchange or offer to exchange anything of value to induce or reward the referral of business reimbursable by federal health care programs. Violations of the AKS are per se violations of the False Claims Act (FCA) pursuant to the ACA, which amended the AKS to provide that “a claim that includes items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of Title 31 the FCA.” In other words, a demonstrable violation of the AKS is sufficient to establish a violation of the FCA, including the oft-litigated element of materiality. In the past, many courts had interpreted the FCA to mean that claims submitted as a result of AKS violations were false claims and therefore gave rise to FCA liability though there were opportunities for courts to hold otherwise. The ACA codified the majority view that compliance with the AKS is a precondition to payment of a claim by the government.
When assessing AKS violations, a court must first examine the underlying FCA claim that the relator has brought. Under the AKS, “a claim that includes items and services resulting from a violation of that statute constitutes a false or fraudulent claim for purposes of the False Claims Act.” The statute does not define the term “resulting from.” The Supreme Court has traditionally interpreted “resulting from” in statutes as imposing “but-for” causation. See Burrage v. United States, 571 U.S. 204 (2014); University of Texas Southwestern Medical Center v. Nassar, 570 U.S. 338 (2013) (“‘Results from’ imposes, in other words, a requirement of actual causality. … This requires proof the harm would not have occurred in the absence of—that is, but for—the defendant’s conduct”). The Supreme Court has not established a nationwide standard for how courts should interpret the language within the AKS context, and so—in the Greenfield case— the Third Circuit had the opportunity to posit its own interpretation.
Greenfield v. Medco Health Solutions, 880 F.3d 89 (3d Cir. 2018) is a landmark case in the Third Circuit involving interpretations of kickbacks, misused funds and specialty pharmaceuticals. The events that led to the Greenfield case are as follows. Accredo Health Group, a specialty pharmacy that provides home care for patients with hemophilia, made donations to two charities who, in turn, recommended Accredo as an approved provider for hemophilia patients. After Accredo told the two charities that it planned to reduce the amount of donations in the following year, one of the two charities, Hemophilia Services, Inc. (HSI) wrote a letter to its members encouraging them to request Accredo to restore funding. As a result, Accredo received about 75 letters from HSI members requesting an increase in funding. Accredo, in turn, tasked Greenberg, an area vice president of Accredo, to analyze the potential return on investment if it were to increase the amount of its donation. Greenfield concluded that if Accredo did not increase the funding it would likely “lose 100% of the margin” associated with the HSI members. Based on this finding, Accredo increased (or restored) the amount of funding. Greenfield then filed a qui tam action against Accredo, alleging that violated the FCA by violating the AKS. The United States declined to intervene as a plaintiff, and Greenberg took the qui tam action to trial himself asserting a False Claims Act violation.
In the case, the Third Circuit expressly rejected the “but for” causation test for FCA claims premised on violations of the AKS. The Third Circuit examined the legislative history of both the FCA and AKS and found that while some “link” is required between the alleged false claim and the underlying AKS violation, a direct causal link is not required. The U.S. government, in an amicus brief, argued that imposing “but-for” causation in the context of AKS violations of the FCA would lead to an incongruous result where “a defendant could be convicted of criminal conduct under the AKS … but would be insulated from FCA liability for the exact same conduct, absent additional proof that each medical decision was in fact corrupted by the kickbacks.” The court agreed, finding that the imposition of “but-for” causation would be “inconsistent with the drafter’s intentions” underlying both he AKS and FCA.
The Greenfield court ultimately concluded that a relator does not need to prove that a kickback actually caused a patient to use a particular health care provider and that the “link” required is that at least one of the provider’s claims for reimbursement was for medical care provided in violation of the AKS, as a kickback renders a claim ineligible for payment. This standard for causation has continued to be used by courts within the Third Circuit. See Gohil v. Sanofi U.S. Services, 500 F. Supp. 3d 345, 360 (E.D. Pa. 2020) (While the relator does not need to prove a kickback “actually influenced a patient’s or medical professional’s judgment,” he must show that a “particular patient was exposed to an illegal recommendation or referral and a provider submited a claim for reimbursement pertaining to that patient.”).
Not every court has adopted the Third Circuit’s standard, however. Some courts, in fact, have outright rejected the government’s contentions about the efficacy of a “but for” causation standard. To that end, the Eighth Circuit has notably forged its own path on the issue in recent months. In Cairns v. D.S. Medical, 42 F.4th 828 (8thCir. 2022), the Eighth Circuit issued a decision that heightened the standard of proof for FCA claims based on a violation of the AKS. Under the Eighth Circuit’s promulgated standard, a plaintiff must prove that the false claim would not have been submitted “but for” the underlying illegal kickbacks. The Cairns decision was a windfall for FCA defendants, allowing them to assert that the plaintiffs have not shown sufficient connection between alleged wrongful acts and the claims submitted as a sufficient defense. As of yet, the Supreme Court has declined to intervene and cure the circuit split, meaning that forum selection by plaintiffs is extremely important.
The nation spent about $4.3 trillion in health care in 2021, of which about $1.5 trillion was for Medicare and Medicaid. The Centers for Medicare & Medicaid Services (CMS) Programs estimates that approximately 6.5% of its spending was for improper payments in 2021 In other words, almost $100 billion of the Medicare spending alone was directed for potentially fraudulent payments in 2021.
The government cannot fight this massive fraud alone. More relators should come forward and fight the fraud. For those relators seeking to file FCA claims relating to health care fraud and antikickback violations, they should think carefully about where they file their claims. The Third Circuit gives the plaintiff very favorable conditions for establishing the link between the fraudulent conduct and the government funding program. Additionally, in the Third Circuit the relator is not presented with the challenging “but for” causation standard. In other words, as relators continue to pursue these claims to combat health care fraud involving kickback schemes, they should keep in mind the Third Circuit as a favorable venue for pursuing the claims.
Edward T. Kang is the managing member of Kang Haggerty. He devotes the majority of his practice to business litigation and other litigation involving business entities. Contact him at firstname.lastname@example.org.
Kandis L. Kovalsky, a member at the firm, focuses her practice on representing both corporate and individual clients in a broad range of complex commercial litigation matters in Pennsylvania and New Jersey state, federal and bankruptcy courts. Contact her at email@example.com.