Source: https://www.employmentlawgroup.com/in-the-news/articles/health-care-law-expands-false-claims-act-liability-anti-kickback-statute/
Timestamp: 2019-04-26 05:57:24+00:00

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The Affordable Care Act expanded liability for claims under the Anti-Kickback Statute. In brief, violations of the AKS are now "per se" violations of the False Claims Act. For providers, this means that even unintentional violations of the AKS can serve as the basis for claims of fraud under the FCA.
This article by TELG managing principal R. Scott Oswald and David L. Scher was published by Westlaw Journal Health Care Fraud on May 1, 2012.
With President Obama’s signing of the Patient Protection and Affordable Care Act in 2010, the Anti-Kickback Statute has more teeth than ever before. Now, violations of this statute are per se violations of the False Claims Act. This means even unintentional violations of the statute can be grounds for fraud liability. Moreover, an unwitting and non-beneﬁting party within the stream of a reimbursement claim to Medicare or Medicaid may be liable for fraud if unlawful kickbacks taint any part of the claim. Also, because of the PPACA, as of Jan. 1 all manufacturers of drugs, devices, biologic agents and medical supplies covered under federal health care programs must record all transfers of value.
Failing to do so will subject those entities to fraud litigation as well. Recent court decisions conﬁrm that the measure of damages in Anti-Kickback Statute fraud claims is the full value of the services provided, even though the patients in question often receive the medical beneﬁts claimed because the unlawful kickback renders the health care provider ineligible under federal programs. Accordingly, any sum received from the government is therefore forfeited.
On March 23, 2010, President Obama signed the PPACA into law. The PPACA changed the language of the Anti-Kickback Statute to provide that claims submitted in violation of the statute automatically constitute false claims for purposes of the False Claims Act. The new language provides that “a claim that includes items or services resulting from a violation of [the Anti-Kickback Statute] constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of Title 31 [the False Claims Act].” 42 U.S.C.
Congress also added a new section that eliminates the requirement that a person have actual knowledge of the law or speciﬁc intent to commit a violation of the statute. See 42 U.S.C. § 1320a-7b(h). In effect, the PPACA renders moot the former reliance on the implied-certiﬁcation theory in order to bring a False Claims Act claim based on the Anti-Kickback Statute. Furthermore, providers will no longer be able to successfully argue that they did not have the requisite intent, e.g., that they were ignorant of the requirements of the Anti-Kickback Statute, to be liable under the False Claims Act. The PPACA also created reporting requirements for pharmaceutical and medical device manufacturers regarding payments to doctors. These requirements are known as the Physician Payments Sunshine provisions. See Pub. L. No. 111-148.
In turn, the HHS will submit summary reports to Congress and to each state. Each disclosure in the report must contain the receiving physician’s name, address, national provider identiﬁer, value of transfer, form and nature of the payment and the date of the payment. The payments referenced in these reports will include transfers to physicians and teaching hospitals as compensation, food, entertainment, gifts, travel, consulting fees, honoraria, research funding, grants, education or conference funding, stocks or stock options, ownership or investment interest, royalties or license and charitable contributions. Failure to report payments will result in ﬁnes of up to $10,000 for each violation, but not to exceed $150,000 annually. If a company knowingly fails to report payments, each violation will result in a ﬁne of up to $100,000, but not exceeding $1 million annually.
The PPACA gave the HHS and the Centers for Medicare and Medicaid Services until Oct. 1, 2011, to establish procedures for applicable manufacturers and group purchasing organizations to submit the required disclosures, and for the distribution of those disclosures to the public.On Dec. 14, 2011, more than two months after the deadline, CMS released its proposed regulations regarding the PPACA’s reporting requirements, to be codiﬁed as 42 C.F.R. Parts 402 and 403. CMS published its proposed rules in the Federal Register Dec. 19, 2011. See 76 FR 78742-01. 42 C.F.R. § 403.904 will contain the necessary procedures and contents for reports on all transfers of value from manufacturers to covered recipients, including physicians. Comments on the proposed rules were due Feb. 17.
There are substantially more indictments of doctors under the Anti-Kickback Statute itself than there are False Claims Act cases against doctors for violations of the Anti-Kickback Statute. Large health care providers and pharmaceutical companies, such as United Health Group, HCA Healthcare and Amgen, tend to bear the brunt of False Claims Act suits. Individual physicians and associations of physicians often do not have the necessary assets to pay out the types of awards the United States and whistleblowers, referred to as “relators,” seek under the False Claims Act.
It is also more likely that the entity providing the illegal kickback to doctors is the same entity that bills Medicare and Medicaid. In such occurrences, it is the health care provider, not the physician, that is submitting the false claim to the government and liable under the False Claims Act.
(the False Claims Act does not create liability for violations of federal law independent of any false claim); United States ex rel. Karvelasv. Melrose-Wakeﬁeld Hosp., 360 F.3d 220, 225 (1st Cir. 2004) (“Evidence of an actual false claim is ‘the sine qua non of a False Claims Act violation.’”).
Physicians can, and do, ﬁnd themselves within the cross hairs of the United States, the Department of Justice and their relators.
F. Supp. 1504 (S.D. Ohio 1994), the plaintiff brought a qui tam suit against two physicians arising out of alleged kickbacks they received for referring Medicare and Medicaid patients for medical services.
The qui tam provision of the False Claims Act allows private citizens to ﬁle suit on behalf of the government in cases involving federal funds fraud and to share in any consequent settlement or court award.
The court did not rule on the merits of the plaintiff’s case, but held she could bring a private cause of action against physicians and medical imaging companies under the False Claims Act for unlawful kickbacks.
In United States ex rel. Singh v. Bradford Regional Medical Center, 752 F. Supp. 2d 602 (W.D. Pa. 2010), relators brought a qui tam action against two physicians who made referrals to a medical center.
The District Court held that the compensation the medical center paid to the physicians did not fall under any safe-harbor provision of the Anti-Kickback Statute, but denied summary judgment against the defendants because there was a genuine issue of fact as to whether defendants acted knowingly and willfully.
The relator and the United States reached a settlement agreement with the doctor prior to trial. By submitting claims for reimbursement tainted by kickbacks, causing a health care provider to submit such claims or conspiring with a provider to submit false claims through unlawful kickbacks, physicians render themselves individually liable for violations the False Claims Act.
This does not, however, solve the practical issue that most individual physicians would be ﬁscally unable to pay a moderate, let alone substantial, award for damages and penalties. Small claims under the False Claims Act are not less worthy, but they enjoy less attention and suffer from the unlikelihood of government intervention.
False Claims Act claims based on the Anti- Kickback Statute provide an interesting question as to the calculation of damages for successful cases. The False Claims Act provides that any person who causes a false claim to be submitted to the government is liable for a civil penalty between $5,500 and $11,000 per claim, plus three times the amount of damages the government sustained. See 31 U.S.C. § 3729(a); see also 28 C.F.R. § 85.3.
In most Anti-Kickback Statute cases, the patient receiving government aid through Medicare, Medicaid or other programs does, in fact, receive the services the health care provider bills to the government. Ostensibly, there are no real damages or loss to the government. That is not, however, how courts have ruled on the issue.
The measure of damages the United States is entitled to recover under the False Claims Act is the amount of money the government paid by reason of the false claims over and above what it would have paid if the claims had not been false or fraudulent. See U.S. ex rel. Marcus v. Hess, 317 U.S. 537, 543-545 (1943); United States v. Neifert-White Co., 390 U.S. 228, 232 (1968). The calculation of damages is irrespective of any mitigation. See United States v. Am. Precision Prod. Corp., 115 F. Supp. 823, 828 (D.N.J. 1953).
Consequently, federal courts have held that because Anti-Kickback Statute violations render the providers ineligible for compensation, they are not entitled to any reimbursement, even for non-fraudulent services performed.
In afﬁrming the District Court’s ruling, the 7th Circuit explained that it is not important that most of the patients for which claims were submitted received some medical care, because the Government “offers a subsidy (from the patients’ perspective, a form of insurance), with conditions.” United States v. Rogan, 517 F.3d 449, 453 (7th Cir. 2008).
When the conditions are not satisﬁed, nothing is due, and so the defendant must return the entire amount received from its ineligible claim.
Medicare, Medicaid and other government health care programs depend on physicians and other health care professionals to exercise independent judgment in the bestinterests of patients. Although monetary and other incentives tied to referrals are commonly accepted and legal in many businesses, such acts can corrupt the health care industry and harm federal programs.
When a physician refers a patient to a provider because of some ﬁnancial self- interest, the physician is not necessarily making the decision in the patient’s best interests. Unfair competition results when honest providers must compete with those who unlawfully pay to generate business. This systemic corruption of federal health care programs defrauds the public.
Given these concerns, Congress ﬁrst passed the Anti-Kickback Statute in 1935.
The statute makes it improper for anyone to solicit, receive, offer or pay remuneration in exchange for referring patients to receive certain services that are paid for by the government. Codiﬁed at 42 U.S.C. § 1320a-7b(b), the Anti-Kickback Statute makes it a felony, with a ﬁne up to $25,000 and imprisonment up to ﬁve years, for knowingly and willfully soliciting, receiving or offering any remuneration in return for referring an individual to a person for the furnishing of any item or service, or for purchasing or recommending purchasing any item or service, for which payment may be made under a federal health care program.
Congress also created 10 safe-harbor provisions, eliminating certain acts from liability under the statute. These safe harbors are listed at 42 U.S.C. § 1320a-7b(b)(3), with additional implementing regulations at 42 C.F.R. § 1001.952.
The False Claims Act is the government’s primary tool to recover losses due to fraud and abuse by persons seeking payment from the United States. See S. Rep. No. 345, 99 Cong., 2d Sess. at 2 (1986), reprinted in 1986 U.S.C.C.A.N 5266. The False Claims Act makes it unlawful for any person to knowingly present a false or fraudulent claim, record or statement to the government for payment or approval. See 31 U.S.C. § 3729.
The act provides for a civil penalty of between $5,000 and $10,000 for each false claim, plus three times the amount of damages the government sustained because of the fraud.
Under Section 3730(b), a private person, known as a relator or qui tam relator, may bring an action for a violation of Section 3729 for the person and for the U.S. government. See id.; see also Cook County v. United States ex rel. Chandler, 538 U.S. 119, 123 (2003). When a private person brings an action under Section 3730(b), the government may elect to proceed with the action or it may decline to take over the action, in which case the person bringing the action shall have the right to conduct the action. See Rockwell, 549 U.S. at 477.
The defendant made a false statement or engaged in a fraudulent course of conduct.
The defendant carried out such statement or conduct with the requisite scienter (or intent).
The statement or conduct was material.
The statement or conduct caused the government to pay out money or to forfeit money due.
Under the False Claims Act, a statement or course of conduct is material if it has a natural tendency to inﬂuence agency action or is capable of inﬂuencing agency action.
Peterson v. Weinberger, 508 F.2d 45, 52 (5th Cir. 1975)); see also Cade v. Progressive Cmty. Healthcare, No. 09-CV-3522-WSD, 2011 WL 2837648 (N.D. Ga. July 14, 2011).
The “cardinal rule of federal health insurance reimbursement policy” is that providers are generally entitled to be paid for medical testing only when such testing “is medically necessary and/or done at the direction of a patient’s physician.” United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1303 (11th Cir. 2002), cert. denied, 537 U.S. 1105 (citing 42 U.S.C. §§ 1395f[a], 1395x[v]and 1395y[a]).
When a provider submits claims for reimbursement for services that were never provided or submits claims for more expensive services than were provided, that provider may be held liable for submitting a false claim under the False Claims Act. See, e.g., United States v. Joiner, 910 F. Supp. 270 (S.D. Miss. 1995).
A false statement or fraudulent course of conduct.
Causing the government to pay out money or forfeit moneys due. See United States ex rel. Unite Here v. Cintas Corp., 2007 WL 4557788, at *2 (N.D. Cal. 2007). A claim for payment is false when it rests on a false representation of compliance with an applicable federal statute, federal regulation or contractual term. See Mikes v. Straus, 274 F.3d 687, 696 (2d Cir. 2001).
False certiﬁcations can be either express or implied.
United States ex rel. Thompson v. Columbia/ HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir. 1997); United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266-67 (9th Cir. 1996).
S. Rep. No. 99-345, at 9, reprinted in 1986 U.S.C.C.A.N. 5266, 5274, and in the U.S. Supreme Court’s admonition that the act intends to reach all forms of fraud that might cause ﬁnancial loss to the government. See Neifert-White Co., 390 U.S. at 232.
v. Sci. Applications Int’l Corp. (SAIC), 626 F.3d 1257, 1269 (D.C. Cir. 2010).
A claim may be false or fraudulent due to an implied representation of compliance with a precondition of payment that may not be expressly stated in a statute or regulation. See United States ex rel. Hutcheson v. Blackstone Med., 647 F.3d 377, 387 (1st Cir. 2011).
The 10th Circuit’s decision in Conner held that for purposes of an implied-false- certiﬁcation theory, “the analysis focuses on the underlying contracts, statutes, or regulations themselves to ascertain whether they make compliance a prerequisite to the government’s payment.” 543 F.3d at 1218.
The 10th Circuit has found claims false or fraudulent because a defendant failed to comply with the terms of underlying contractual provisions. See Shaw v. AAA Eng’g & Drafting, 213 F.3d 519, 531-32 (10th Cir. 2000); see also United States ex rel. Lemmon v. Envirocare of Utah Inc., 614 F.3d 1163, 1170 (10th Cir. 2010) (ﬁnding that a defendant’s failure to comply with certain regulations with requirements that were incorporated into a government contract rendered a claim false or fraudulent).
The D.C. Circuit also held that noncompliance with contract terms might give rise to false or fraudulent claims, even if the contract does not specify that compliance with the contract term is a condition of payment. See SAIC, 626 F.3d at 1269.
The U.S. Court of Federal Claims applied the implied-certiﬁcation theory in Ab-Tech Construction Inc. v. United States, 31 Fed. Cl. 429 (Fed. Cl. 1994), aff’d, 57 F.3d 1084 (Fed.
Cir. 1995) (unpublished table decision). It held that the defendants’ submission of payment vouchers, although containing no express representation, implicitly certiﬁed their continued adherence to the eligibility requirements of a federal small-business statutory program. See id. at 434. The failure by defendants to honor the terms of this certiﬁcation rendered their claims for payment false, resulting in False Claims Act liability. See id. at 433-34.
Most courts interpreted the False Claims Act to mean that claims submitted as a result of Anti-Kickback Statute violations were false claims and therefore gave rise to False Claims Act liability. Prior to the passing of the PPACA in 2010, the primary foundation for this interpretation was the false-certiﬁcation theory.
In order for health care providers to receive reimbursements from Medicare and Medicaid, they must certify that theycomply with all applicable laws, such as the Anti-Kickback Statute. Under 42 C.F.R.§ 413.24(f), providers must ﬁle cost reports on an annual basis on or before the last day of the ﬁfth month following the close of the period covered by the cost report.
In United States ex rel. Thompson v. Columbia/ HCA Healthcare Corp., 20 F. Supp. 2d 1017, 1046 (S.D. Tex. 1998), on remand from United States ex rel. Thompson v. Columbia/ HCA Healthcare Corp., 125 F.3d 899 (5th Cir. 1997), the court concluded that the relators properly stated a claim for a violation of the False Claims Act through the defendants’ false certiﬁcation in their annual hospital cost reports that they complied with the laws and regulations dealing with the provision of health care services.
In so arguing, the relators showed that the government conditioned its approval, payment and the defendants’ retention of payment funds on those certiﬁcations.
In other words, the government would not have paid the claims submitted by the defendants had it known of the alleged self-referral and kickback violations. Id. at 1047. Because of the Anti-Kickback Statute violations, the defendants became statutorily ineligible for reimbursement under Medicare. Id.
Additional regulatory support for Anti- Kickback Statute compliance as a precondition of payment can be found in 42 C.F.R. § 424.510(d)(3), which requires a provider to “attest … that the information submitted is accurate and that [he or she] is aware of, and abides by, all applicable statutes, regulations and program instructions” when signing the provider agreement with HHS. See United States ex rel. Westmoreland v. Amgen Inc., No. CIV-A- 06-10972-WGY, 2011 WL 4342721 (D. Mass.
in 1972, it was part of Title XVIII of the Social Security Act. See Pub. L. No. 92-603, 86 Stat. 1419 (1972).
One of the ﬁrst, and most inﬂuential, decisions regarding False Claims Act claims based on Anti-Kickback Statute violations is the decision in United States ex rel. Pogue v. American Healthcorp Inc., 914 F. Supp. 1507 (M.D. Tenn. 1996).
In the qui tam suit, the relator alleged that the defendants’ scheme violated the self- referral and the anti-kickback statutes in inducing physicians to refer Medicare and Medicaid patients to the defendant, West Paces Medical Center. Upon reconsideration, the District Court concluded that in submitting their claims, the defendants implicitly certiﬁed that they complied with all statutes, rules and regulations governing the Medicare Act, including the federal anti- kickback and self-referral statutes.
F. Supp. 1504 (S.D. Ohio 1994);5 Ab–Tech Constr. v. United States, 57 F.3d 1084 (Fed. Cir. 1995); United States v. Inc. Village of Island Park, 888 F. Supp. 419 (E.D.N.Y. 1995).
F. Supp. at 1511. The court pointed to the legislative history showing that Congress felt “claims may be false even though the services are provided as claimed if, for example, the claimant is ineligible to participate in the program.” Id. (citing S. Rep. No. 345, 99th Cong., 2d Sess. 9 , reprinted in 1986 U.S.C.A.A.N. 5266, 5274. “[T]he False Claims Act was intended to govern not only fraudulent acts that create a loss to the government[,] but also those fraudulent acts that cause the government to pay out sums of money to claimants it did not intend to beneﬁt.”). Id. at 1513.
v. Rogan, 459 F. Supp. 2d 692, 717 (N.D. Ill. 2006), aff’d, 517 F.3d 449 (7th Cir. 2008); United States ex rel. Schmidt v. Zimmer Inc., 386 F.3d 235, 243 (3d Cir. 2004). Arguably, the PPACA renders moot any reliance on a false certiﬁcation theory for an Anti-Kickback Statute False Claims Act claim. In effect, the PPACA codiﬁes as law more than 17 years of federal court decisions afﬁrming fraud liability for Anti-Kickback Statute violations.
The Anti-Kickback Statute not only provides criminal penalties to physicians and health care providers who engage in improper ﬁnancial relationships, but it also provides a viable basis for False Claims Act liability on behalf of both parties. Although such suits once relied upon the controversial implied- certiﬁcation theory, the PPACA now renders Anti-Kickback Statute violations per se violations of the False Claims Act. Individual physicians have suffered numerous indictments under the criminal provisions of the Anti-Kickback Statute but have generally stayed under the radar in terms of False Claims Act liability. This has less to do with legal hurdles, of which there are few, and is more likely the effect of the government’s desire to prosecute only big, asset-rich violators. With the PPACA’s amendments to the Anti-Kickback Statute and elimination of the requirement to demonstrate intent, this trend may soon change.
1 As an obvious reference to the Stark Law, 42 U.S.C. § 1395nn, these same entities must also report any ownership or investment interest held by a physician.
2 Recently, on Dec. 12, 2011, Medtronic Inc. settled two False Claims Act suits in California and Minnesota for $23.5 million. The U.S. Department of Justice alleged that Medtronic paid kickbacks to doctors of $1,000 to $2,000 for each patient in whom they implanted one of the company’s pacemakers or deﬁbrillators. Medtronic did not admit to wrongdoing in the settlement. The whistleblowers who initially ﬁled the qui tam suits will receive more than $3.96 millionfrom the federal recovery. See Tom Schoenberg, Medtronic Agrees to $23.5M Kickback Settlement, BLOOMBERG, Dec. 13, 2011, available at http://www.bloomberg.com/ news/2011-12-13/medtronic-to-pay-23-5-million- to-settle-allegations-of-doctor-kickbacks.html.
3 Related to the Anti-Kickback Statute is the Stark Law, also known as the Physician Self- Referral Law, 42 U.S.C. § 1395nn. Under the Stark Law, if a physician or immediate family member has a direct or indirect ﬁnancial relationship with an entity that provides any of a list of designated health services, the physician cannot refer patients to the entity and the entity cannot submit a claim to CMS for those health services unless the ﬁnancial relationship ﬁts within a statutory or regulatory exception. The Stark Law intends to prevent physicians from proﬁting from their own referrals.
4 Because the states themselves provide funding for the Medicaid program, False Claims Act claims related to Medicaid fraud also fall within the scope of various state anti-kickback and false-claims statutes. For example, in New York v. Amgen Inc., 652 F.3d 103 (1st Cir. 2011), the 1st Circuit held that the relator stated claims under the false-claims statutes of Illinois, Indiana, New York, Massachusetts, California and New Mexico against the defendants for using kickbacks to induce healthcare providers to present false Medicaid claims. As with the federal Anti- Kickback Statute, similar state laws rendered Medicaid claims tainted by unlawful kickbacks ineligible for payment. Many other states also have their own anti-kickback and false-claims laws. 5 United States ex rel. Roy v. Anthony was one of the ﬁrst courts to address whether a defendant can be held liable under the False Claims Act for violations of the Anti-Kickback Statute. Without any real case law for guidance, the District Court opined that the defendants’ claims to Medicare and Medicaid were “constructively false or fraudulent” because the defendants were engaged in continuing violations of the statute. 914 F. Supp. 1504, 1506-07 (S.D. Ohio 1994).

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