The emerging circuit split on the causation standard used to identify claims “resulting from” violations of the Anti-Kickback Statute (AKS) for purposes of the False Claims Act (FCA) raises proof problems for relators and the government in litigation. Last summer, the Eighth Circuit Court of Appeals held that a plaintiff relying solely on the “resulting from” language in the AKS to establish FCA liability must show “but for” causation – that but for the kickbacks, the claims at issue would not have included the item or service that was the subject of the kickback.
This stands in contrast to a Third Circuit opinion on the same issue that rejected the but-for causation standard, holding instead that a plaintiff need only show causal link between the kickback and the submission of claims for payment to the government. The Sixth Circuit is scheduled to take up the issue this spring when it hears argument in a declined qui tam that drew the attention of the government and the American Hospital Association, both appearing as amicus.
The statutory provision at the center of this circuit split was enacted in 2010, purportedly to simplify what had become the disparate approaches applied by courts to address the intersection of the AKS and the FCA.1 Through the Affordable Care Act, Congress amended the AKS to specifically 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” the FCA.2 Thus, the government and relators argue that a claim resulting from an AKS violation is false per se. The question now in dispute is whether the phrase “resulting from,” as employed in the new AKS provision, should be applied in a manner consistent with the Supreme Court’s interpretation of that phrase in other statutes.
In its 2014 decision in Burrage v. United States, the Supreme Court closely evaluated the phrase “resulting from” in the Controlled Substances Act.3 In Burrage, the Court explained that the “ordinary meaning” of “results from” in statutes “imposes ... a requirement of actual causality.”4 To show that one thing “results from” another “requires proof ‘that the harm would not have occurred’ in the absence of—that is, but for—the defendant’s conduct.”5 The circuit split that emerged in 2022 is concerned with whether Congress intended the phrase “resulting from” to require proof of some lesser causal nexus with respect to violations of the AKS.
Differing standards of causation
The Third Circuit was the first Court of Appeals to address the causation standard under the new AKS provision. In 2018, the Third Circuit in United States ex rel. Greenfield v. Medco Health Sols., Inc. explicitly rejected an argument that the new AKS provision required a showing of “but for” causation.6 Although the Greenfield court gave a passing acknowledgement to the high court’s holding in Burrage,7 its analysis focused less on the text of the AKS provision and instead employed a purposive approach, agreeing with the government’s view that a requirement of actual causation would thwart the intent of the drafters of the new AKS provision.8 The Third Circuit held that the causation standard for FCA liability premised on an AKS violation requires only “a link between the alleged kickbacks and the medical care received” and that such a link could be established when “a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.”9
However, last July the Eighth Circuit rejected the Third Circuit’s view. In United States ex rel. Cairns v. D.S. Medical LLC, the Eighth Circuit held that more proof of a causal nexus is required to demonstrate that an AKS violation caused particular false claims to be submitted.10 In Cairns the Eighth Circuit endorsed the but-for causation standard, holding that the phrase “resulting from” requires that “defendants would not have included particular ‘items or services’ in claims for payment absent the illegal kickbacks.”11 In an opinion that focused on the textual similarity between the new AKS provision and the one at issue in Burrage and other cases, the Cairns panel rejected the Third Circuit’s conclusion in Greenfield. The Eighth Circuit stated that while it “understood” the Third Circuit’s approach, it could not accept the Greenfield court’s focus on the legislative history and drafter’s intent.12
The dismissal of a declined qui tam now on appeal in the Sixth Circuit, United States ex rel. Martin et al v. Hathaway et al, pits these two causation standards against each other, with the parties and amici weighing in on both sides of the debate.13 The relators-appellants in Martin sought to hold the defendants-appellees – a rural Michigan hospital and a local ophthalmologist with a long-standing practice of reciprocal patient referrals – liable under the FCA for patient referrals that took place between them.14 Relator-appellant Dr. Shannon Martin alleged that she was set to run the hospital’s in-house ophthalmology unit until the hospital’s board rejected management’s plan to convert ophthalmology to a hospital-based service line, a decision relators blamed on interference from Defendant Hathaway, who they alleged was concerned about losing referrals to his practice.15 Martin and her husband brought suit under the FCA, arguing that, among other theories, the continuing referrals between the hospital and Dr. Hathaway after the hospital declined to establish an in-house ophthalmology unit constituted illegal remuneration under the AKS, and that all subsequent patient claims for services Dr. Hathaway rendered at the hospital were “tainted” by this AKS violation and thereby rendered false under the FCA. The District Court dismissed the case, finding that the factual details included in the complaint did not make the alleged scheme “plausible.”16 It also held, in the alternative, that the complaint did not establish the required causal nexus between the alleged scheme and the false claims, noting that some patients were referred both before and after the alleged beginning of the scheme.17 Without taking a position on the proper standard to apply, the District Court found that the allegations showed only a temporal relationship; even the Greenfield court had rejected that standard.18
Demonstrating the significance to the government of the emerging Circuit split, the United States filed an amicus brief in the Sixth Circuit in support of the plaintiffs-appellants in Martin, arguing that the Eighth Circuit was wrong in Cairns to hold that but-for causation is required for FCA liability premised on an AKS violation.19 In its brief, the United States reiterated the purposive arguments accepted in Greenfield and rejected in Cairns, and argued that a requirement of but-for causation would “significantly complicate the litigation of FCA cases based on AKS violations, requiring extensive efforts to disentangle the motivations of treatment physicians ... for every treatment decision or referral at issue ... ”20 Instead, it supported the application of the Greenfield causation standard in order to lessen the requirement of establishing that an FCA claim results from an AKS violation.
In contrast, the American Hospital Association and all four state hospital associations within the Sixth Circuit, represented by Hogan Lovells, filed an amicus curiae brief in support of the defendants-appellees. The hospital amici argued that: (1) under Burrage and as explained in Cairns, but-for causation is required to establish FCA liability premised on an AKS violation; and (2) that hospitals would face even higher rates of meritless qui tam suits if the causation standard was “watering down” to allow the theoretical “taint” advocated by the plaintiffs-appellants and the United States as a substitute for evidence of causation.21 Focusing on the related question of whether continued referrals between defendants described in the complaint following a decision not to change the way the hospital-defendant delivered a particular surgical service could have amounted to remuneration under the AKS, the hospital amici argued that relator-appellants’ theory would “convert the ordinary flow of patients between hospitals and physicians who practice at those hospitals into unlawful ‘remuneration’ under the AKS.” In addition, amici contend that this “misuse of the FCA threatens the independent judgment and autonomy of hospitals everywhere to decide, every day, how best to manage their own finances and operations to most effectively serve their communities.”22
The pending Sixth Circuit appeal illustrates the risk that a lax causation standard linking the FCA to the AKS could allow proliferating qui tam litigation to set enforcement policies under the AKS. And it appears that this debate is not going away, as the United States is continuing to advocate for a relaxed standard of causation for FCA liability under the AKS. In December 2022 in the District of Massachusetts, the United States moved for partial summary judgment in a FCA-AKS case on the issues of materiality, causation, and damages, arguing that it need not establish that a false claim would not have been submitted “but for” illegal remuneration.23 Instead, the United States argued that in order to satisfy “the government’s view of causation in AKS-based FCA cases,” it “must establish only that the claims at issue were exposed to illegal remuneration.”24 In that pending matter, the United States again endorses Greenfield and explicitly rejects Cairns, arguing that Cairns “conflicts with binding First Circuit precedent” and should not be followed.25 Whether “exposed” means even less influence than “tainted” and whether either will suffice in the First Circuit as evidence of “but for” causation are but two of the questions to be resolved in 2023.
As this burgeoning circuit split extends to the Sixth Circuit and beyond, we expect relators to avoid filing AKS-based qui tams in the Eighth Circuit and, along with the government, to plead alternate theories of liability in an attempt to avoid the application of the “but for” causation standard established in Cairns. In those cases, a new question will emerge: do the old certification theories of FCA liability for violations of the AKS survive for claims submitted after the AKS was amended in 2010? The relationship between the AKS amendment prior case law, just like the new causation standard, will be developed by courts in years to come.
1 S.Rept. No. 110-507, at 19 (2008) (citations and footnotes omitted), available at https://www.congress.gov/110/crpt/srpt507/CRPT-110srpt507.pdf.
2 False Claims Act Corrections Act, 42 USCA § 1320a-7b(g) (2009).
3 571 U.S. 204, 210-11 (2014).
4 Id. at 211 (emphasis added).
6 880 F.3d 89, 98 (3d Cir. 2018).
7 See id. at 96.
8 Id. at 96-98.
9 Id. at 99–100 (emphasis added).
10 42 F.4th 828, 835 (8th Cir. 2022).
12 Id. at 834–36.
13 Case No. 22-1463 (6th Cir.), appeal from 1:19-cv-00915 (W.D.Mich.).
14 Opinion and Order at 2-3, United States ex rel. Martin et al v. Hathaway et al, No. 19-cv-00915 (May 11, 2022 W. D. Mich.), ECF No. 108.
16 Id. at 11-12.
17 Id. at 12-14 & n.4.
18 Id. at 13 (quoting Greenfield, 880 F.3d at 100).
19 Brief for the United States as Amicus Curiae in Support of Appellants at 14-25, United States ex rel. Martin et al v. Hathaway et al (6th Cir. Sep. 13, 2022) (22-1463), ECF No. 30.
20 Id. at 22.
21 Brief of Amicus Curiae American Hospital Association, Michigan Health & Hospital Association, Kentucky Hospital Association, Ohio Hospital Association, and Tennessee Hospital Association in Support of Defendants-Appellees and Affirmance, United States ex rel. Martin et al v. Hathaway et al, ECF No. 43.
22 Id. at 4-5.
23 United States’ Memorandum in Support of its Motion for Partial Summary Judgment on Materiality, Causation, and Damages under the False Claims Act at 7-9, United States of America v. Regeneron Pharmaceuticals, Inc., Case (D. Mass. Dec. 28, 2022) (No. 20-cv-11217), ECF No. 225.
24 Id. at 7, 9 (emphasis in original).
25 Id. at 9, n.3.