On Sept. 22, the U.S. District Court for the Middle District of Tennessee issued an opinion in United States, et al., ex rel. Nolan, et al. v. HCA Healthcare, Inc., 2025 WL 2713747 (M.D. Tenn. Sept. 22, 2025) that signals a dramatic limitation on the scope of False Claims Act liability for alleged violations of the Anti-Kickback Statute.
Under current regulations, independent laboratories can bill Medicare for the professional component — but not the technical component — of physician pathology services furnished to hospital inpatients. The Centers for Medicare and Medicaid Services (CMS) expects independent laboratories to make arrangements with hospitals for payment of the technical component for Medicare inpatients. CMS notes, “If a hospital were to condition, express or implied, the referral of physician pathology services to a clinical laboratory on the lab’s agreement to accept less than fair market value for the technical component, it would implicate the anti-kickback statute.” CMS, Medicare Program: Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2000, 64 Fed. Reg. 59408 (Nov. 2, 1999).
In Nolan, the whistleblowers — physician owners of an independent pathology laboratory — reached an agreement with the defendant hospitals to pay the technical component of pathology services for Medicare inpatients, but not costs associated with patients covered by Medicare Advantage or other insurers. When the whistleblowers pushed the hospitals to pay for the technical component of pathology services covered by those other insurers, the hospitals contracted with a different laboratory that did not seek reimbursement of those costs. The whistleblowers alleged this arrangement, under which the new laboratory agreed to assume the technical component costs for other insurers — saving the hospitals money and resulting in a net financial gain — violated the Anti-Kickback Statute. The district court disagreed, making several important rulings:
- Remuneration. The court held the arrangement did not include “remuneration” to the hospitals under the Anti-Kickback Statute because the hospitals had no legal obligation to pay for the technical component of pathology services provided to Medicare Advantage and other, non-Medicare inpatients. In other words, the hospitals did not save what they did not have to pay.
- Causation. The Sixth Circuit holds that, in Anti-Kickback Statute cases, the False Claims Act is only implicated when claims “result from” an illegal kickback. The Nolan court held that alleging a claim is “tainted by” a kickback is not sufficient to establish that the claim “resulted from” the kickback. Critically, the Nolan court – citing an earlier case from this month, United States, et al., ex rel. Folse v. Napper, et al., 2025 WL 2585680 (M.D. Tenn. Sept. 5, 2025) – further held it is not sufficient and too “attenuated” to allege a kickback led to patient referrals for covered services. The Nolan court would require additional proof that “but for the kickback violation, [a provider] would not have asked the Government to reimburse them for [health care] services.” If the court’s causation ruling stands, it signals a dramatic limitation on False Claims Act liability in kickback cases.
These recent district court decisions, interpreting the Sixth Circuit’s decision in United States ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023), reflect an increasingly practical and commercially rational approach to the historically expansive application of the Anti-Kickback Statute in False Claims Act cases. The Nolan court characterized the whistleblowers’ complaint as “describ[ing] ... normal marketplace competition. ... [The hospitals] simply bet on the market that they could find a lab who would cover those charges instead. ... These business practices reflect the market functioning as expected ... [and] this marketplace activity does not create a plausible inference that the [hospitals] solicited or received remuneration in exchange for patient referrals.”
