By Sheryl Allenson, J.D.
A federal district court in Illinois issued an opinion regarding legal referral in violation under the Anti-Kickback Statute, improperly entering judgment for the defendants according to the Second Circuit.
An entity known as Stop Illinois Health Care Fraud, LLC (SIHCF) brought a qui tam suit against two healthcare-related agencies and related entities, asserting that they engaged in illegal referral practice under the Anti-Kickback Statute. In light therefore, there would be liability under the state and federal False Claims Acts. In response, after the close of SIHCF’s presentation of its case to the court without a jury, the district court found in favor the Management Principles, Inc defendant (MPI) upon its movement for judgment. The Seventh Circuit disagreed, reversing the district court judgment (Stop Illinois Health Care Fraud, LLC v. Sayeed, April 29, 2020, Scudder, M).
By way of background, the court explained The Healthcare Consortium of Illinois (HCI), which deals with, among other things, referral of clients who need in-home to certain health care providers under the umbrella of MBI. SIHCF filed its suit under both the Illinois state and False Claims Acts. The court detailed background on the use of relators in the matter, and the history behind qui tam actions.
According to the court, the complaint filed in district court alleged that MPI and HCI had a contract whereby MPI paid HCI gift cards. In return, MPI got certain benefits. There was another referral source, whereby MCI received certain sums under an agreement in exchange for certain referral sources. Apparently, MCI "called Medicare-eligible seniors and offered them the services of its two home healthcare companies." The relator claimed MPI’s payments to HCI were in violation of the Anti-Kickback Statute. The court explained that despite provisions of the Statute, in which it makes it illegal to "pay someone to induce them to refer a patient for services that will be paid for by a federal healthcare program." In this instance, the relator sued under the federal and state False Claims Act. Specifically, this is designed to prevent "claims for payments on services resulting from violations’ of the Anti-Kickback Statute.
For its part, HCI settled out of the suit, but the individual defendant and his companies proceeded on to the bench trial. A witness on their behalf testified on how referrals were made, and that the transmission of gift cards did not play a role. The appeals court pointed out that the parties spent little time on the transmission of cards, which appeared to be more in the nature of social gifts.
On the other hand, the appeals court analyzed a management services agreement where MPI paid HTI a sum certain a month. According to the appeals court, the contract was vague, so it was unclear what the payments were for. The plaintiff’s theory is that agreement if meant to disguise a kickback for patient records, which could ultimately lead to referrals. The court deeply analyzed this theory, detailing the individual defendant.
For its part, the remaining defendants moved for directed verdict, which the district court granted in a short opinion the court found no evidence the gift cards were anything of value in exchange for value. On the other hand, turning to the management service agreement, there was a much deeper issue according to the Seventh Circuit. In its opinion, the court took a deep dive into the definition of what amounts to a referral. Citing authority from its own circuit, the court said it rejected a narrower review of a referral.
In its analysis, the Seventh Circuit concluded that it was left with uncertainty as to whether and what approach the defendant adopted with respect to referrals from file sharing. In its opinion, the district court should have applied the more stringent application of the term.
In any event, in the court found that in the absence of a clear meaning of the term referral as regards to the conduct between the parties, it vacated the district court’s judgment, leaving it open to make more specific findings of fact as to the term referral.
The case is No. JD-2020-03.
Attorneys: Christopher D. Willis (Grasse Legal, LLC) for Stop Illinois Health Care Fraud, LLC. Barry A. Spevack (Monico & Spevack) for Asif Sayeed and Management Principles, Inc.
Companies: Stop Illinois Health Care Fraud, LLC; Management Principles, Inc.
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