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A decision last week by a Federal Appeals Court could impact the False Claims Act.

The Eighth Circuit Court of Appeals, which covers states in the middle part of the country from Minnesota and the Dakotas down to Missouri and Arkansas, concluded that to prevail in a False Claims Act (FCA) case, the relator/government must show that the bills in question would not have been submitted to the government “but for” the kickback. The relator in the case (United States ex rel. Cairns v. D.S. Medical, LLC, 2022 WL 2930946 [8th Cir. July 26, 2022]) asserted that kickbacks paid by a device company to a physician meant that any bill for a service performed by that physician involving the device were false. The plaintiff’s theory, in essence, was “Once there is a kickback, the work of the physician related to the kickback is tainted. The trial court agreed, and the physician lost at trial. But the Eighth circuit reversed, ruling that for the government to prevail in this sort of case, it must prove that “but for” the alleged kickback, the claim in question would not have been submitted.

The case is an interpreting of a sentence from 2010 Amendments to the False Claims Act that says that “A claim that includes items or services resulting from a violation of the Anti-kickback Statute constitutes a false claim.” The case is interpreting the phrase “resulting from.” The Eighth Circuit concluded that the phrase “resulting from” should be interpreted as meaning that if the kickback would not have occurred, the claim would not have been submitted. This interpretation greatly narrows the sorts of kickback cases than can result in false claims. It’s relatively common to have situations where a physician is going to perform a particular procedure and the only question is whether they will use product A or product B.  For example, imagine that a physician has decided that a patient requires a knee replacement. There are a variety of implants available. If “Knees R Us” has paid the physician a kickback, and the physician uses their implant rather than one by a different vendor, the bill to Medicare will be the same. The knee replacement will be paid based on a DRG if done as in inpatient, or under the ASC fee schedule or an APC if done in an ASC or outpatient hospital setting. The Eighth Circuit is saying that with those facts, there is no liability under the FCA. I want to stress that this does not legalize kickbacks. Under these facts, the physician could still be criminally prosecuted. But the court is making an important distinction between criminal cases and false claims act cases, noting that if the government didn’t pay more money than it would have absent the kickback, there should not be liability under the FCA. Given the extreme financial penalties associated with the FCA, such a result makes a lot of sense.

The bottom line is that while there might still be criminal liability for the kickback, at least in the Eighth Circuit, when a kickback results in a physician choosing a particular product that is bundled in the cost of a procedure that they were going to perform anyway, there is no false claim. This question likely to be hotly contested because Third Circuit reached the opposite conclusion in United States ex rel. Greenfield v. MedCo Health Solutions. The Third Circuit covers Pennsylvania, New Jersey, Delaware and the Virgin Islands.  

So, what does this mean? In at least some parts of the country it will be much harder for someone to bring a False Claims Act case in situations where a kickback may have encouraged a physician to choose a drug or device, but there was no over-utilization of services. In addition, this may be a question that goes to the Supreme Court. The Supreme Court chooses what cases it will take, but it often takes significant issues when there is a dispute between the appeals courts.

This is certainly a decision which can have large financial implications, so it is very possible that this issue will someday be addressed by the high court.

Programming Note: Listen to healthcare attorney David Glaser’s Risky Business segment every Monday on Monitor Mondays.

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