Health Law Daily $5M judgment for FCA violations upheld in spinal surgery kickback scheme
Wednesday, April 22, 2020

$5M judgment for FCA violations upheld in spinal surgery kickback scheme

By Jeffrey H. Brochin, J.D.

Invalidity of ACA did not void defendants’ liability under fraudulent and false claims provisions where liability was not dependent on the ACA’s amendments to the AKS in 2010.

A federal district court in Missouri has denied the motions for a new trial and for judgment as a matter of law filed by a medical device distributor and other defendants in a qui tam case brought pursuant to the False Claims Act (FCA) (31 U.S.C. §3729 et seq.) and the Anti-kickback Statute (AKS) (42 U.S.C. §1320a-7b). Their argument that an FCA conspiracy claim could not be sustained without a finding of liability for an underlying substantive FCA offense was deemed waived due to not having been raised prior to judgment, and their argument that the Fifth Circuit eliminated the 2010 AKS amendments when it invalidated the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) was rejected by the court because the liability charged was not dependent on the ACA’s amendments to the AKS in 2010 (U.S. ex rel. Cairns v. D.S. Medical, L.L.C., April 15, 2020, Flessig, A.).

Allegations of kickbacks. The relator alleged that a spinal surgery practitioner and a spinal implant device distributor violated the FCA by submitting or causing to be submitted to the Medicare and Medicaid programs false claims for reimbursement for the surgeon’s services in performing spinal surgeries between December 2008 and March 2012, and for the purchase of implant devices through defendant D.S. Medical, a distributor of medical devices, used in those surgeries. The claims for reimbursement were allegedly false because they were the result of kickbacks that violated the federal criminal AKS.

The three claims submitted to the jury at trial corresponded to the three counts of the complaint that: (1) the device distributor gave kickbacks to the surgeon in exchange for the surgeon arranging the purchase of spinal implants through the distributor; (2) all four defendants solicited or received kickbacks from two implant manufacturers in exchange for arranging the purchase of the manufacturers’ products by the medical center; and (3) that all four defendants conspired to violate the FCA by entering into an agreement that involved soliciting or receiving kickbacks from six implant manufacturers in exchange for arranging the purchase of those companies’ products by the medical center.

Judgments entered. As to Count I, the jury found in favor of all four defendants, and the Court entered judgment accordingly. On Count II, the jury found in favor of the device distributor but against the surgeon with respect to certain of the claims, and in favor of the defendants with respect to the remaining 48 claims. After trebling the damages pursuant to the applicable statute, the court entered judgment against the surgeon and the surgical practice jointly and severally in the amount of $303,529.50. The court also assessed statutory civil penalties against the surgeon in the amount of $27,500, and against the surgical practice in the amount of $16,500. Regarding Count III, after reducing the verdict in part based on the relator’s concessions and defendants’ arguments, and after trebling the damages and assessing a civil penalty pursuant to the applicable statute, the court entered judgment on Count III against all four defendants, jointly and severally, in the amount of $5,495,931.22.

Argument as to conspiracy. The defendants’ first and primary argument in support of their motion was that an FCA conspiracy claim cannot succeed without a finding of liability for a substantive FCA offense. However, the court denied that motion, finding that whatever merit there might be in that argument, because it was not raised in their Rule 50(a) motion nor otherwise addressed in jury instructions or at any time before the jury began deliberations, that argument was waived.

2010 AKS Amendments in the ACA. The defendants moved for judgment as a matter of law or for a new trial as to all three counts, and also to dismiss or for judgment as a matter of law as to all counts, based on the position that DOJ took in the Fifth Circuit in the case of Texas v. United States. In that case, the court held that the ACA’s individual mandate was unconstitutional, and further determined that the individual mandate was "inseverable" from the rest of the of the ACA, thereby rendering the entire ACA invalid. In that litigation the DOJ did not defend the individual mandate, but argued that other provisions of the ACA were severable. However, in 2019, the DOJ informed the Fifth Circuit that it had changed its position with respect to severability, and agreed with the lower court that the entire ACA was invalidated by Congress’s action in 2017.

The instant defendants relied on the invalidity of the ACA—and its 2010 AKS amendments—as the rationale as to why they were not liable for the alleged AKS violations. The court rejected that argument, ruling that their actions—which occurred both before and after the 2010 amendment—were a violation under the then-existing law, and would remain a violation even if the 2010 amendments to the AKS were to be invalidated.

For the foregoing reasons, the court denied the motions for a new trial and for judgment as a matter of law, and their motion to dismiss based on Texas v. United States.

The case is No.: 1:12-cv-00004-AGF.

Attorneys: Gilbert C. Sison, U. S. Attorney's Office, for the United States. Drey A. Cooley (Capes Sokol PC) for D.S. Medical LLC. James G. Martin (Dowd Bennett, LLP) for Midwest Neurosurgeons, LLC.

Companies: D.S. Medical LLC; Midwest Neurosurgeons, LLC

MainStory: TopStory CMSNews AntikickbackNews FCANews FraudNews ProgramIntegrityNews MissouriNews

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