Health Law Daily Jury to determine whether kickbacks met elements under AKS statute
Thursday, January 21, 2021

Jury to determine whether kickbacks met elements under AKS statute

By Jeffrey H. Brochin, J.D.

Elements necessary to prove AKS claims are different from those required for FCA claims, so each of the alleged kickback scenarios needed to be reviewed individually.

A federal district court in Minnesota has denied the cross-motions for summary judgment filed by the respective parties in a combined False Claims Act (FCA) (31 U.S.C. §3729 et seq.) and anti-kickback statute (AKS) (42 U.S.C. §1320a-7b) qui tam lawsuit involving intra-ocular lenses (IOLs) implanted in cataract surgery. Questions of material fact existed as to whether some of the payments in fact equaled remuneration within the meaning of the AKS, and as to whether the element of causation was proven for FCA purposes (U.S. ex rel Fesenmaier v. The Cameron-Ehlen Group, Inc., January 12, 2021, Wright, W.).

Mixing business with pleasure. A Minnesota manufacturer of IOLs (Ehlen) maintained a slush fund from which they would pay for physician-customer trips to California, New York, and Midwest sporting events in addition to paying for lavish dinners. Although some physicians paid a share of the expenses of the trips or dinners, in twelve of the eighteen cases reviewed, the AKS element of remuneration, (i.e., transfer of anything of value for less than its fair market value) was satisfied. But as to the other six cases, testimony as to the decades-long social relationship between the company’s owner and some of the physicians, raised questions of fact as to whether remuneration had been paid within the meaning of the AKS.

Element of inducement. The elements of an AKS violation are: (1) the defendant acted knowingly and willfully; (2) the defendant offered or paid any remuneration—including a kickback, bribe, or rebate—directly or indirectly, overtly or covertly, in cash or in kind, to any person; (3) the remuneration was offered or paid to induce such person to purchase, lease, order—or arrange for or recommend purchasing, leasing, or ordering—any good, facility, service, or item, or to refer an individual to a person for the furnishing of any item or service; and (4) such good, facility, service, or item was one for which payment may be made in whole or in part under a federal healthcare program.

Although there was no dispute that the fourth element was satisfied, the other three came under the scrutiny of the court in ruling on the motions for summary judgment. In addition to the element of remuneration being questionable in some cases as cited above, the court also reviewed whether the cases of remuneration also induced Medicare purchases. Various appellate courts have held that an AKS violation exists if one purpose of the remuneration was to induce Medicare purchases, even if other legitimate purposes for remuneration existed.

Exceptions to the one purpose rule. However, even under the one purpose standard, the instant case raised genuine issues of material fact that precluded summary judgment in favor of the relator as to inducement. Ehlen testified that inducement was not the intent when inviting physicians to social events and on trips, and it was undisputed that the company sought legal and ethical advice as to kickbacks, which could suggest an intent to comply with the AKS rather than to violate it. The company cited evidence that, on at least some occasions, they charged physicians for trips and other entertainment and believed that the rates they charged were fair. Some physicians even complained that the amounts the company charged them for trips were too high. Accordingly, a genuine dispute as to material fact existed as to the element of inducement as well.

Meeting elements of FCA claims. Although the relator’s motion for motion for summary judgment focused on the elements of the alleged underlying AKS violations, the company’s motion focused on the essential elements of an FCA claim. The FCA imposes liability on anyone who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" to the United States. Notably, the FCA attaches liability, not to the underlying fraudulent activity, but to the claim for payment.

Of the 93,032 Medicare claims at issue in the instant case, 47,122 fell into the Professional Fee Medicare claims category, meaning a fee for the physician’s services, and 45,910 were deemed Facility Fee Medicare claims for use of the surgical facilities. The company raised separate arguments as to the Professional Fee Medicare claims versus the Facility Fee Medicare claims.

Professional Fee Medicare claims. The company argued that the Relator lacked evidence to prove that the 47,122 Professional Fee Medicare claims resulted from any allegedly false or fraudulent conduct (i.e., kickback), because those Medicare claims reimbursed the cost of a physician’s services rather than the cost of the company’s products. Accordingly, they contended that the relator could not prove that the Professional Fee Medicare claims were either false or caused by the company’s conduct because those claims did not result from the sale of their products.

The court disagreed, because the company did not demonstrate that the Professional Fee Medicare claims at issue were categorically insulated from liability merely because the claims involved medical services provided by physicians as opposed to medical supplies provided by the company. Therefore, the court denied the company’s motion for summary judgment as to the Professional Fees Medicare claims.

Facility Fee Medicare claims. Although the company conceded that the allegedly false Facility Fee Medicare claims included reimbursement for products sold by them, they maintained that the relator nonetheless lacked sufficient evidence to prove a causal connection between the alleged kickbacks and the Facility Fee Medicare claims. Because the AKS provides that a claim is false or fraudulent if it "includes items or services resulting from" an AKS violation, the relator was required to have some record evidence showing a link between the alleged kickbacks and the medical care received. The court found that the company did not establish that the relator lacked evidence of such a link. To the contrary, the relator presented evidence that the physicians who allegedly received kickbacks were responsible for choosing or recommending which lenses would be used in cataract surgeries.

For the foregoing reasons, the court denied both parties’ cross-motions for summary judgment.

The case is No.: 13-cv-3003 (WMW/DTS).

Attorneys: Andrew Tweeten, United States Attorney's Office, for the U.S. Jessica Lynn Ellsworth (Hogan Lovells US LLP) for Cameron-Ehlen Group, Inc., The d/b/a Precision Lens. Alethea M. Huyser (Fredrikson & Byron, P.A.) for Paul Ehlen.

Companies: Cameron-Ehlen Group, Inc., The d/b/a Precision Lens

MainStory: TopStory CMSNews AntikickbackNews FCANews FraudNews ProgramIntegrityNews

The department, which delegated the authority to administer HIPAA privacy standards to the Office for Civil Rights, developed many of these proposals after consideration of public responses to its December 2018 Request for Information on Modifying HIPAA Rules to Improve Coordinated Care.

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