This week, the Sixth Circuit closed two paths the government and relators have tried to take to expand liability for medical providers under the Anti-Kickback Statute (AKS) and False Claims Act (FCA): the meaning of “remuneration” under the AKS and the causation standard for AKS-based FCA claims.

Key Takeaways

The AKS, which prohibits referrals in return for “remuneration,” can create FCA liability when the government is billed for items or services “resulting from” improper referrals. In United States ex rel. Martin, et al. v. Hathaway, et al., the Sixth Circuit held:

1. “Remuneration” under the AKS means only payments or other transfers of value — not, as the government and relators argued, any act that may be valuable to another.

2. Alleging FCA liability “resulting from” an AKS violation requires showing but-for causation. In other words, an FCA plaintiff must show “that the referrals would not have been made without the remuneration, and that the claims would not have been submitted to the government without those referrals.”

   • This holding shuts down the government’s favored “taint” theory of AKS-FCA liability, under which FCA liability would attach to any claim “tainted” by an improper referral.

   • The Sixth Circuit joins the Eighth Circuit in reaching this conclusion, but splits with the Third Circuit. With the circuit split deepening, keep an eye out for this issue at the Supreme Court.

All in all, reading causation too loosely or remuneration too broadly appear as opposite sides of the same problem. Much of the workaday practice of medicine might fall within an expansive interpretation of the Anti-Kickback Statute. Worse still, the statute does little to protect doctors of good intent, sweeping in the vice-ridden and virtuous alike.

Background

The case began with a dispute between two ophthalmologists who practiced together in a small, one-hospital town. Dr. Darren Hathaway owned the only ophthalmology practice in the area. As the only games in town, Hathaway and the hospital enjoyed a long-standing, two-way referral relationship: Hathaway referred patients to the hospital for surgery, and the hospital referred ophthalmology patients to his practice. Hathaway’s practice employed another ophthalmologist, Dr. Shannon Martin, and the trouble started when she sought to break away from Hathaway and work directly for the hospital. Ultimately, the hospital decided not to hire her, and in her view, that decision was all about not losing referrals from Hathaway.

Martin and her husband (who happened to be an executive at the hospital) filed a qui tam lawsuit under the FCA against both Hathaway and the hospital. According to the complaint, Hathaway threatened to stop referring patients to the hospital for surgery if the hospital hired Martin. So, under the relators’ theory, the hospital’s decision not to hire Martin was “remuneration” to Hathaway in return for continued referrals, which violated the AKS.

The government declined to intervene in the case in the trial court, but after the district court dismissed the complaint, the government joined the appeal as an amicus and took the lead at oral argument in support of the relators’ position.

Meaning of “Remuneration” Under the AKS

Affirming the dismissal, the Sixth Circuit held that the relators failed to establish a cognizable theory of remuneration. After methodically applying several tools of statutory interpretation, the court concluded that “remuneration” covers only payments and other transfers of value and not any act that may merely be valuable to another. The hospital’s decision not to hire Martin did not entail a payment or transfer of value to Hathaway, even if that decision was beneficial to him.

The court warned that a broader “anything-of-value” definition of remuneration would lack a coherent end point and haphazardly create liability for hospitals who merely sought to attract referrals by getting new equipment or doctors who only refer patients to hospitals with new equipment.

Causation Standard for AKS-Based FCA Cases

In an FCA case based on a violation of the AKS, only claims for payment “resulting from” AKS violations can form the basis for liability. The Sixth Circuit found that the plain meaning of “resulting from” requires “but for” causation, which the relators couldn’t establish.

In requiring “but for” causation, the Sixth Circuit followed the Eighth Circuit’s approach in United States ex rel. Cairns v. D.S. Medical LLC (see our previous post). The Third Circuit’s decision in United States ex rel. Greenfield v. Medco Health Sols., Inc. is now the minority position. There, the Third Circuit rejected a “but for” requirement and instead found causation satisfied when “a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.”

Conclusion

In Kentucky, Michigan, Ohio, and Tennessee, the Sixth Circuit’s thorough and straightforward statutory construction should rein in some AKS and FCA theories. But the government and relators will undoubtedly keep pushing the boundaries on AKS “remuneration” and FCA causation until the Supreme Court or Congress weighs in.