Third Circuit Affirms Dismissal of FCA Claim Premised Upon Alleged Anti-Kickback Scheme, While Clarifying that Plaintiffs Need Not Show “But For” Causal Link Between Scheme and FCA Claim

by Saul Ewing Arnstein & Lehr LLP
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The Third Circuit’s decision in Medco Health Solutions, affirming the dismissal of a relator’s qui tam suit against his former employer, offers mixed news for False Claims Act defendants and plaintiffs as to the kind of causation required to be shown where a kickback is alleged to be the basis for a false claim.

In United States ex rel. Greenfield v. Medco Health Solutions, Inc., 880 F.3d 89 (3d Cir. 2018), the Third Circuit affirmed the district court’s dismissal of a relator’s qui tam suit against his former employer, whom he accused of submitting false claims to the government in violation of the Anti-Kickback Statute (“AKS”). The Third Circuit upheld the award of summary judgment to the defendant, but clarified the lower court’s holding on the causal connection required to connect an alleged kickback scheme to a False Claims Act (“FCA”) violation. While a relator need not show that a kickback actually influenced a patient’s or medical professional’s subjective judgment, the relator must show more than mere temporal proximity between a defendant’s alleged kickback plot and the submission of claims for reimbursement. The court held that a relator must show, at a minimum, that at least one of the treated patients for whom the defendant medical provider submitted reimbursement claims was exposed to a referral or recommendation to that provider in violation of the AKS.  In Greenfield, the relator could not do so, warranting dismissal of his claim.

Background of the Kickback Scheme

Steve Greenfield, a former vice president of Accredo Health Group, Inc., accused Accredo and its affiliates (collectively, “Accredo”) of participating in a kickback scheme arising from donations made to two charities who recommended Accredo as an approved medical provider to their patient base. Accredo is a specialty pharmacy providing home care to patients with hemophilia. Between 2007 and 2012, Accredo made donations to Hemophilia Services, Inc. (“HSI”) and Hemophilia Association of New Jersey (“HANJ”) ranging from $200,000 to $550,000 annually. Funds HSI received from Accredo were, in turn, used for grants to HANJ, which HANJ used in part to support outpatient hemophilia treatment centers.

In apparent recognition of the contributions it received from Accredo, HANJ identified Accredo as an “HSI-approved vendor” on its website. HANJ recognized HSI-approved vendors as maintaining the “highest quality of care” and “constantly supporting the community in numerous ways.” Notably, the website also directed users to “[r]emember to work with our HSI [approved] providers,” and published links to those providers’ websites. Although Accredo historically made significant donations to HSI/HANJ, one year it announced plans to reduce its contributions. HSI responded by sending letters to its members condemning Accredo for reducing its contributions, and requested they write to Accredo to restore funding.

Greenfield, then a vice president of Accredo, was asked by his company to analyze Accredo’s potential return on investment if it were to restore its donations to prior amounts. Greenfield concluded that if Accredo failed to do so, “all new and existing business [could be] at risk.”  Recognizing this risk, Accredo responded by restoring its donations. Thereafter, Greenfield filed a qui tam suit against Accredo, alleging that it violated the FCA by falsely certifying its compliance with the AKS. Notably, the United States declined to intervene in Greenfield’s suit, which would have allowed it to participate in the case as a plaintiff.

The AKS prohibits knowingly and willfully offering or paying remuneration to any person to “induce such person” to (A) “refer an individual to a person for the furnishing … of any item or service for which payment may be made in whole or in part under a Federal health care program” or to (B) “purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program.” 42 U.S.C. § 1320a-7b(b)(2). The purpose of the AKS is to ensure that health care provided to beneficiaries of public health insurance programs is the product of sound medical judgment, not illegal kickbacks. The statute was amended in 2010 to recognize explicitly the interplay with the FCA: “a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of,” the FCA.  42 U.S.C. § 1320a-7b(g).

Greenfield claimed that Accredo’s charitable contributions to HSI/HANJ were kickbacks intended to induce recommendations from HSI/HANJ to its members to utilize Accredo’s services. Greenfield argued that this amounted to an FCA violation because at least some of the referrals were directed to Medicare recipients, and Accredo falsely certified its compliance with the AKS when it sought reimbursement for claims.

On consideration of cross-motions for summary judgment, the district court denied Greenfield’s motion and granted Accredo’s. In contrast to Greenfield’s position, Accredo argued there was no evidence that any Medicare recipient purchased Accredo’s prescriptions because of Accredo’s charitable contributions. The court agreed with Accredo, assuming (without explicitly deciding) that if there was an AKS violation, there was insufficient evidence of a resulting FCA violation. Even though Accredo submitted claims to the government for 24 federally insured patients during the time period in which the alleged kickback scheme was ongoing, this was too tenuous a link to establish an FCA violation. The lower court held: “Absent some evidence … that those patients chose Accredo because of its donations to HANJ/HSI,” there could be no FCA claim.

The Third Circuit Takes the Middle Road

At issue on appeal was “what ‘link’ is sufficient to connect an alleged kickback scheme to a subsequent claim for reimbursement: a direct causal link, no link at all, or something in between.” The court focused on the relevant language of the AKS which provides that “a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the FCA].” 42 U.S.C. § 1320a-7b(g) (emphasis added). The court’s holding turned upon its interpretation of the phrase “resulting from” as used in the AKS. 

On appeal, the United States intervened as an amicus but did not support either party, submitting a brief focused primarily on explaining this required causal connection. The United States has an interest in avoiding precedent which may impair its ability to bring FCA claims, as noted in a recently leaked DOJ memo that we previously discussed here, but the DOJ has historically sought dismissal of qui tam suits only “where truly warranted,” thus explaining why the United States may have instead chosen to intervene here as an amicus in support of neither party. The United States insisted in its brief that actual “but-for” causation would produce anomalous results in this context, arguing that “a defendant could be convicted of criminal conduct under the AKS for paying kickbacks to induce medical referrals, but would be insulated from civil FCA liability for the exact same conduct, absent additional proof that each medical decision was in fact corrupted by the kickbacks.” It continued, “[t]he district court was wrong to require this sort of patient-specific causal proof in order to establish that a claim is ‘false’ under the FCA.”

Looking at the legislative history and purpose of the AKS, which was intended to combat fraud and abuse, and the 2010 amendment which was written to strengthen whistleblower actions based on medical care kickbacks, the Third Circuit held that requiring a plaintiff to prove that a kickback actually influenced a patient’s or a professional’s medical judgment would “hamper [FCA] cases under that provision,” in conflict with Congress’s legislative intent.

At the same time, the Third Circuit was unwilling to accept Greenfield’s position that a temporal connection between the alleged kickback scheme and the submission of claims to the government is sufficient to prove an FCA violation at summary judgment. The court explained, “A plaintiff cannot ‘merely … describe a private scheme in detail but then … allege … that claims requesting illegal payments must have been submitted, were likely submitted[,] or should have been submitted to the Government.’” (quoting United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1311 (11th Cir. 2002)). Instead, Greenfield needed to “point to at least one claim that covered a patient who was recommended or referred to Accredo by HSI/HANJ.”

Because Greenfield failed to show that any of Accredo’s 24 federally insured patients ever saw HSI/HANJ’s approved provider list or received HSI/HANJ’s communications, his FCA claim could not succeed. The court was unwilling to accept the argument that the “taint of a kickback renders every reimbursement claim false.” It explained, “[a] kickback does not morph into a false claim unless a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.” (emphasis added).

Implications for FCA Defendants

The Third Circuit’s decision in Greenfield is both good news and bad news for defendants in FCA actions. Importantly, this decision forces relators and the government to identify precisely the causal link between an alleged kickback scheme and the submission of claims for reimbursement to the government. A relator must provide some evidence that at least one claim was submitted to the government for services provided to a patient who was illegally referred to the provider. In cases where such evidence is lacking, Greenfield’s holding is positive for FCA defendants.

At the same time, this decision clarifies that the district court’s original language cannot be construed to require a relator to prove that federal beneficiaries would not have used the relevant services absent the alleged kickback scheme. Indeed, the Third Circuit accepted the argument of the United States as amicus that, “the district court incorrectly appeared to believe it was necessary for relator to show that the kickbacks in fact corrupted the charities’ decision to refer patients to Accredo and recommend Accredo’s services, and that those referrals and recommendations in fact corrupted the patients’ decisions to use Accredo’s services.” In sum, the Third Circuit’s holding both giveth and taketh from the perspective of defendants: while some causal connection between a kickback scheme and a FCA claim is essential, “but for” causation is not required.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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