False claims attorneys must consider the federal Anti-Kickback Statute (“AKS”) 42 U.S.C. § 1320a-7b(b) as a possible basis for a false claims action. This statute arose out of congressional concern that remuneration provided to those who can influence healthcare decisions would result in goods and services being provided that are medically unnecessary, of poor quality, or harmful to a vulnerable patient population.
The AKS prohibits any person or entity from offering, making, soliciting, or accepting remuneration, in cash or in kind, directly or indirectly, to induce or reward any person for purchasing, ordering, or recommending or arranging for the purchasing or ordering of federally-funded medical goods or services:
- whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person-
- (A) to refer an individual to a person for the furnishing or arranging 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
- (B) to 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, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both. 42 U.S.C. § 1320a-7b(b). Violation of the statute also can subject the perpetrator to exclusion from participation in federal health care programs and, effective August 6, 1997, civil monetary penalties of $50,000 per violation and three times the amount of remuneration paid. 42 U.S.C. § 1320a-7(b)(7) and 42 U.S.C. § 1320a-7a(a)(7).
What Does “Offer” or “Induce” Under the Anti-Kickback Statute Mean?
Relatively few cases discuss what is meant by “offer” or “induce” under the AKS. United States v. Duz-Mor Diagnostic Lab., Inc., 650 F.2d 223 (9th Cir. 1981) is a criminal case where Duz-Mor contended that the acts on which its conviction were based were mere preliminary negotiations, and not an “offer” of a bribe or kickback proscribed by 42 U.S.C. Sec. 1395nn(b)(2)(A) and 1396h(b) (2)(A).
The court found that “The underlying contention that the contract law definition of offer should control is not supported by persuasive authority. The proposition also flies in the face of Congressional intent.” See, e.g., 3 U.S.Code Cong. and Adm.News 3039 (1977). Analogous federal bribery cases define an “offer” as a representation expressing an ability and desire to pay a remuneration coupled with the intent to induce a desired action, in this case the referral of Medi-Cal business. See, United States v. Johnson, 621 F.2d 1073, 1076 (10th Cir. 1980); United States v. Jacobs, 431 F.2d 754, 759 (2nd Cir. 1970), cert. denied, 402 U.S. 950, 91 S. Ct. 1613, 29 L.Ed.2d 120 (1971). Duz-Mor’s proposal, suggesting a 15 per cent rebate in exchange for the referral of Medicare and Medi-Cal business, clearly meets this standard”, id. at 227
The case of Hanlester Network v. Shalala, 51 F.3d 1390, 1398 (9th Cir. 1995) involved an appeal from a decision of an ALJ that defendants had violated Medicare and Medicaid anti-kickback provisions.
The court stated:
- Appellants are correct that mere encouragement would not violate the statute. However, the term “induce” is not defined simply by reference to influence or encouragement.
- The term “induce” has been defined as follows: to bring on or about, to affect, cause, to influence to an act or course of conduct, lead by persuasion or reasoning, incite by motives, prevail on. Black’s Law Dictionary, 697 (6th ed. 1990).
- The Secretary determined that the phrase “to induce” in § 1128B(b)(2) of the Act connotes “an intent to exercise influence over the reason or judgment of another in an effort to cause the referral of program-related business”. We agree with this interpretation. (id at 1398.)
The Hanlester court also stated that no contract or agreement was necessary for there to be a violation., id. at 1397.
The court in Osheroff v. Tenet Healthcare Corp, 2012 WL 2871264 at *8 (S.D. Fl. July 12, 2012) agreed with Hanlester as to the definition of induce. However, it found the complaint before it deficient in that no facts suggested that any physician-tenants were induced by their allegedly below market rent “to make referrals based on continued remuneration rather than concern for the health and well-being of each physician’s patient.”
The Court found it had “no basis upon which to reasonably infer that any alleged remuneration clouded the independent judgment of any physician-tenant.” id. Cf, U.S. v Omnicare, 2013 WL 3819671 (N. D. Ill. July 23, 2013) an FCA action which involved motions for summary judgment. The court found it was a jury question as to whether the sale of a pharmacy included payment for referrals. The inference that it did was buttressed by the economics of a defendant’s investment in the pharmacy of $4000 for which he earned $7,400,000 when the pharmacy was sold, id at * 14.
These cases suggest whether a kickback has induced a false claim is not always clear. Therefore, a whistleblower attorney who is considering filing a false claim based on a kickback must consider whether there is some evidence that an action was taken as a result of the inducement.
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