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Third Circuit Reaffirms that Kickbacks Cause False Claims in United States ex rel. Greenfield

Courts have long held that, a plaintiff need not prove that kickbacks cause specific false claims because “[t]he Government does not get what it bargained for when a defendant is paid by CMS for services tainted by a kickback. ”  See, e.g., U.S. ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 314 (3d Cir. 2011); United States ex rel. Hutcheson v. Blackstone Medical, Inc., 647 F.3d 377, 393 (1st Cir. 2011) (rejecting defense “services that would have been provided in the absence of” violations). The Third Circuit recently addressed this standard in affirming a district court’s False Claims Act dismissal. United States ex rel. Greenfield v. Medco Health Sols., Inc., No. 17-1152, ___ F.3d ____ (3d Cir. Jan. 19, 2018).

Predictably, commentators are already claiming that the decision alters the analysis by now requiring plaintiffs to link kickbacks to “specific false claims” to make out a False Claims Act violation. But, Greenfield reflects no such sea-change in law.  Rather, it applied the Wilkins rule–under which claims “tainted” by kickbacks are considered to be false–to the less common situation where kickbacks are paid in exchange for “recommendations” rather than referrals.

The Anti-Kickback Statute

The Medicare and Medicaid Fraud and Abuse Statute (a.k.a., the “Anti-Kickback Statute” or “AKS”), 42 U.S.C. § 1320a-7b(b), is a criminal statute that prohibits soliciting, receiving, offering, or paying anything of value to induce any person to induce use of a service for which payment may be made under a federally-funded health care program. 42 U.S.C. § 1320a-7b(b).  This may include:

The prohibitions on referring and furnishing (“A prohibitions”) are generally directed at health care professionals and prevent the corruption of their medical judgement when they perform procedures or refer their patients to other providers.  § 1320a-7b(b)(1)(A), (b)(2)(A).  The prohibitions on “purchasing, leasing, or ordering” and “arranging or recommending” (“B prohibitions”) are much broader and directed to patients themselves, marketers, and authoritative third-parties to protect the public fisc against their corruption. § 1320a-7b(b)(1)(B), (b)(2)(B).  Since 2010, the AKS has explicitly stated that “a claim that includes items or services resulting from a violation of this section” is a false claim.  Id. at § 1320a-7b(g).  That language reflects pre-2010 case law as well.  See United States ex rel. Westmoreland v. Amgen, Inc., 812 F. Supp. 2d 39, 52 (D. Mass. 2011).

Most AKS litigation involves “A prohibitions” where the connection between the kickback and the good or service is straightforward.  In other words, when a physician receives kickbacks for a particular good or service, they cause false claims for the services actually performed and goods or services actually referred. But with “B prohibitions” it is less clear which claims “resulted from” kickbacks.  That was the issue presented in Greenfield.

Greenfield Confirms that Kickbacks Cause False Claims

In Greenfield, Medco subsidiary Accredo Health Group, Inc., a specialty pharmacy focused on hemophilia patients donated several hundred thousand dollars to hemophilia-related charities in exchange for recognition as an “approved” provider that provides “the highest quality of care” and links from the charities’ websites along with an admonition to visitors to “[r]emember to work with our” approved providers.  Greenfield, Slip Op. at 5.  Later on, the charities provided their “treatment centers with lists identifying [approved] specialty pharmacies,” including Accredo.  Id.

Thus, Accredo’s hundreds of thousands of dollars in “charitable donations” induced trusted patient-focused charities to recommend Accredo’s services to the vulnerable populations they served.  This is precisely the corruption of trust that the AKS prohibits, nor was there any dispute in Greenfield that this arrangement violated the AKS.

The only question was which claims “resulted” from the kickback arrangement.  The district court concluded that “resulted” means “caused” and held that a plaintiff must provide “some evidence” that federal beneficiaries “chose [the good or service] because of” the kickbacks. Greenfield, 223 F.Supp.3d at 230.  In other words, a plaintiff would have to produce evidence regarding the subjective intent of the patients.

Subsequently on appeal, the U.S. Government filed an amicus brief arguing that this requirement misstated the law.  Reviewing the statutory text and legislative history, the Third Circuit agreed with the Government and Plaintiff that nothing “requires a plaintiff to show that a kickback directly influenced a patient’s decision to use a particular medical provider.”  Greenfield, Slip Op. at 18.

The Third Circuit Interprets “Link” Between Kickbacks and Claims Broadly

While “a ‘link’ is required” to establish that kickbacks “cause” false claims, the appeals court’s analysis makes clear that the link may be quite broad.  Id.  Therefore, in the context of Greenfield, that meant only that the plaintiff must produce some evidence that patients who utilized Accredo’s services had been exposed to the charities’ recommendations.  Id. at 21.

The plaintiff, however, offered no evidence whatsoever of any link, relying on the mere fact that Accredo submitted claims during the same time period that it paid kickbacks.  The Third Circuit recognized that the outcome would have been different with appropriate evidence.  Evidence, for example, “that any of Accredo’s 24 federally insured patients viewed [the] approved provider list or that [the charities] referred the federally insured patients to Accredo through some other means” or even that “federally insured patients were members of [of the charities] and thus recipients of [the] communications.”  Id.

Thus Greenfield does not in any way suggest the need to show a heightened link between kickbacks and the resulting claims.  Indeed, Greenfield appears to make no change when false claims result from a medical professionals referrals under “A prohibitions” and illustrates the breadth of kickback arrangements that give rise to False Claims Act liability.

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