The Anti-Kickback Statute (AKS) is a criminal statute that, in broad strokes, bars the payment or receipt of “remuneration” in exchange for referrals. It has become one of the most lucrative theories of civil liability under the False Claims Act (FCA). Many of the recent eye-popping FCA settlements and verdicts sprang from AKS theories. Drawn by the possibility of multimillion-dollar bounties, qui tam relators have been creative in alleging that a vast array of modern healthcare arrangements are tainted by improper remuneration.
On March 28, 2023, the US Court of Appeals for the Sixth Circuit issued a common-sense and textualist analysis that pushes back on some of the broadest interpretations of the AKS. United States ex rel. Martin v. Hathaway et al., No. 22-1463 began as a relator-initiated FCA case. The relator, an ophthalmologist named Dr. Martin, alleged that a small-town hospital rescinded its offer to hire her because her current employer (the other ophthalmologist in town) would stop sending referrals to the hospital if it hired Dr. Martin. She responded by filing a qui tam lawsuit alleging that the hospital’s decision not to hire her was “remuneration” to her current employer and that it tainted all referrals between her employer and the hospital going forward. The government declined to intervene, and the district court dismissed her claims twice—first for lack of specificity, then on the merits and with prejudice.
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 from’ violations of the statute.” In affirming the ruling dismissing the case, the Sixth Circuit answered “no” to both questions.
REMUNERATION IS NOT “ANYTHING OF VALUE TO ANOTHER”
The initial question the Sixth Circuit considered is how broadly to construe “remuneration.” (The AKS does not define this term.) Does remuneration cover “just payments and other transfers of value” or does it include “any act that may be valuable to another”? The Court meticulously reviewed the following:
The plain language of the AKS
How “remuneration” was defined in dictionaries contemporaneous to the enactment of the statute
Other circumstances where Congress used the term “remuneration”
The common-sense context of the word
The Office of Inspector General’s (OIG) guidance and interpretation of the term
The rule of lenity (given the dual criminal/civil context of the AKS)
Perhaps most importantly, the pragmatic reality that hospitals and medical providers face.
On the last point, the Sixth Circuit pointed to the real-world problems that the broadest interpretations of “remuneration” would pose:
Consider the hospital that opens a new research center, purchases top of the line surgery equipment, or makes donations to charities in the hopes of attracting new doctors. Or consider the general practitioner who refuses to send patients for kidney dialysis treatment at a local health care facility until it obtains more state-of-the-art equipment. Are these all forms of remuneration? Unlikely at each turn.
The Sixth Circuit explained that each of these factors weighs against the sort of broad interpretations of “remuneration” on which many AKS/FCA qui tam complaints rely. In short, such interpretations fail because they “lack a coherent endpoint.”
There is a familiar refrain from relators and the government in FCA and AKS cases that turn on questions of statutory interpretation: they point to the remedial and anti-fraud purposes of these statutes and argue that any doubt or ambiguity should be resolved against the defendants they accuse of fraud. But the Sixth Circuit emphasized that the “statutory purpose is best gleaned from the four corners of the statute.” What Congress wrote was “remuneration” and a careful examination of the word’s meaning and context shows that this term is limited to “payments and other transfers of value,” not “any act that may be valuable to another.”
CAUSATION: WHAT THE AKS PROHIBITS ARE REFERRALS RESULTING FROM IMPROPER REMUNERATION
The Sixth Circuit found a second and independent problem with Dr. Martin’s theory: even if the decision not to hire her were “remuneration” (and the Court said it was not), her complaint did not identify claims to Medicare or Medicaid that resulted from that decision.
The facts of this case illustrate the problems inherent in the limitless interpretations of the words “resulting from” often championed by FCA plaintiffs. Under Dr. Martin’s theory, once the hospital decided not to hire her, every claim for reimbursement for medical care that the hospital referred to her employer or that her employer referred to the hospital was a violation of the AKS. Each time that a patient received treatment (from the only providers in town) amounted to a crime under Dr. Martin’s theory, as well as a basis for treble damages and penalties under the FCA.
The Sixth Circuit observed that Congress had codified the “resulting from” standard in the AKS in 2010 and did so “against the backdrop of a handful of cases” that required proof that the referral would not have happened but for the remuneration. But despite the backdrop, the Court reasoned that this does not mean “resulting from” should be read even more broadly than its ordinary meaning. In other words, it does not mean that “resulting from” should be read to say “tainted by” or “provided in violation of”—Congress could have used those terms, but it didn’t. In any event, the Court held that the legislative history was of no moment in construing the language of a criminal statute.
What this means for Dr. Martin is that evidence that her employer and the hospital referred cases to each other is not enough. In particular, the absence of a (1) temporal connection between the referrals and the hiring decision, and (2) a logical endpoint doomed Dr. Martin’s open-ended theory.
IMPLICATIONS FOR FCA CASES BASED ON KICKBACK THEORIES
This decision does not mean that the AKS no longer has teeth in the Sixth Circuit. The Court’s opinion makes clear that a “faithful interpretation of the ‘remuneration’ and ‘resulting from’ requirements still leaves plenty of room to target genuine corruption.” However, this decision reigns in overbroad and aggressive AKS theories. As the Court notes, “[m]uch of the workaday practice of medicine might fall within an expansive interpretation of the Anti-Kickback Statute. Worse still, the statute does little to protect doctors of good intent, sweeping in the vice-ridden and virtuous alike.”
The circuits continue to offer differing interpretations of important aspects of the AKS and FCA, and the Supreme Court has shown that it is willing to address these—with important FCA cases on its docket nearly every recent term. The Sixth Circuit’s opinion in Martin appears carefully tailored to appeal to the textualist tools that many of the justices on the Supreme Court favor, and it presents a powerful argument for a common-sense interpretation of the AKS that protects ordinary and benign practices while leaving room to address fraud.