On March 28, 2023, the Sixth Circuit issued a decision interpreting the definition of remuneration under the Anti-Kickback Statute (AKS) and the level of causation necessary for a False Claims Act (FCA) action to be premised on the AKS. The Sixth Circuit’s narrow interpretation of remuneration requires alleging just payments and other transfers of value. The court also held that relators must meet an exacting “but for” causation standard when alleging FCA actions premised on the AKS. This decision widens a pre-existing circuit split as to what a relator must allege to plead that a false claim “results from” an AKS violation.
Background
The AKS is a criminal statute that bars defendants from willfully offering, paying, soliciting or accepting remuneration to induce referrals of items or services reimbursable by a federal healthcare program. The FCA is a civil statute imposing liability on defendants that submit or cause the submission of false claims to the federal government. The government and qui tam relators have connected the two statutes, positing that if a defendant commits an AKS violation, it follows that all related claims to the government are also false under the FCA. Initially, courts disagreed on when and how AKS violations led to FCA liability, but in 2010, Congress amended the FCA to provide that a claim “resulting from” a violation of the AKS is necessarily a false claim under the FCA. Notably, the FCA, as amended, does not define “remuneration” or “resulting from.” The Sixth Circuit interpreted both undefined terms in United States ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023).
United States ex rel. Martin v. Hathaway
In Martin, the relator, an ophthalmologist named Dr. Martin, alleged that a small-town Michigan hospital declined to hire her in order to maintain a steady flow of referrals from a different ophthalmologist, Dr. Hathaway. Dr. Martin alleged the hiring decision was “something of value” and thus constituted improper remuneration in exchange for Dr. Hathaway’s referrals. Relator also alleged that the claims submitted to Medicare “resulted from” that purported kickback and thus violated the FCA. The district court dismissed the complaint with prejudice for failure to state a claim upon which relief could be granted.
On appeal, the Sixth Circuit considered “(1) whether a hospital’s decision not to hire an ophthalmologist in return for a general commitment of continued surgery referrals from another ophthalmologist for patients from the local community counts as the kind of ‘remuneration’ covered by the Anti-Kickback Statute, and (2) whether claims from such continued referrals ‘result[ed] from’ violations of the statute.” The Sixth Circuit affirmed the district court’s dismissal, and answered “no” to both questions.
The Sixth Circuit held that remuneration means “just payments and other transfers of value,” not “any act that may be valuable to another,” as proposed by the relator and the federal government. The Sixth Circuit looked to a number of sources to reach this determination, including the plain language of the AKS, dictionary definitions, other Congressional uses of the term, common-sense, OIG guidance, and real-world problems faced by medical providers and hospitals. Despite the fact that the case arose in the civil context, the court also considered the rule of lenity because the AKS is a criminal statute. The court held that the broader interpretation advocated by the relator and government “lacks a coherent endpoint.” As applied to the facts of the case, the court held even though the hiring decision may have benefitted Dr. Hathaway, there was “no evidence that anyone paid anyone anything or changed the value or cost of any services that otherwise would have been received.”
The Sixth Circuit also held that even if the hiring decision had been remuneration, the relator failed to allege that any claims to a federal healthcare program “resulted from” that decision. The court reasoned that an FCA plaintiff must establish “but-for” causation to prove false claims “result from” an AKS violation. The Sixth Circuit held the ordinary meaning of the phrase “resulting from” requires but-for causation, the ordinary meaning controls unless strong textual or contextual sources show a contrary meaning, and there was no contrary meaning.
The “but-for” causation standard requires showing that a claim would not have occurred absent the alleged kickback. The Sixth Circuit explained that independent decisions of physicians may break any plausible chain of causation. Additionally, temporal proximity between an alleged kickback and a claim, without more, is not enough to show causation.
In interpreting both “remuneration” and the causation standard, the court cautioned that reading the terms too loosely risks implicating doctors of good intent merely engaging in the “workaday practice of medicine.” As an example of this point, the court describes a hypothetical doctor concerned with the outdated surgical equipment at a hospital. If the doctor tells the hospital she will only send referrals if the hospital updates the equipment, that is a promised referral. If the AKS were to view anything of value as remuneration, then upgraded surgical equipment could be an AKS violation, and any subsequent referral by the doctor to the hospital an FCA violation. The court rejected these “boundless” interpretations, which risked “sweeping in the vice-ridden and virtuous alike.”
Impact of Holding
This decision is a significant victory for FCA defendants. Both definitions limit the potential scope of conduct that may constitute an AKS violation as the basis of a FCA claim. There has been a pre-existing circuit split between the Third and Eighth Circuits on the applicable standard for evaluating whether a FCA violation “results from” an alleged kickback, with the Third Circuit taking a more lenient interpretation and merely requiring a “link” or “some connection” between a kickback and a claim. See United States ex rel. Cairns v. D.S. Medical L.L.C., 42 F.4th 828, 834–36 (8th Cir. 2022); United States ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 100 (3d Cir. 2018). The Sixth Circuit expressly rejected the Third Circuit’s interpretation, explaining that the Third Circuit’s decision improperly relied on legislative history. The Sixth Circuit’s interpretation of the but-for causation standard joins the Eighth Circuit, and adds weight to appellate authority favoring the but-for standard.
The Martin opinion is available here.
