BROADENING OF FALSE CLAIMS ACT LIABILITY BY INCLUSION OF KICKBACK VIOLATIONS
 
 
By: Daniel G. Guiaquinto, Esq.
Guillermo J. Beades, Esq.
 
Introduction
The False Claims Act (FCA), 31 U.S.C. § 3729 (a), is a civil statute that prohibits the knowing submission of false or fraudulent claims to the government for payment. As its moniker-Lincoln’s Law- reflects, the FCA dates back to the Civil War and was originally focused on preventing fraud perpetrated against the government by suppliers. Armed with revisions and amendments throughout the years, the FCA has morphed into the biggest federal tool used in the battle against health care fraud. 
 
The Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b, is a criminal statute that broadly prohibits anyone from “knowingly or willfully” offering, paying or receiving remuneration in exchange for a referral for a health care service or for the purchase of health care equipment that is paid for by a federal health care program (Medicare, Medicaid, Tricare, etc.). Although it does not necessarily call into play what one would typically think of as a false claim (a health care service that was billed but not rendered, that was rendered but falsely billed, or that was medically unnecessary), the Patient Protection and Affordable Care Act (Affordable Care Act or ACA), contained provisions which broadened FCA civil liability to include violations of the AKS. This article will explore that expansion and its implications.
 
HEAT Initiative 
First it should be noted that there has been a great increase in the number of FCA actions and AKS prosecutions in health care. In May of 2009, the Government emphasized combating Medicare fraud and in a joint venture, the Department of Health and Human Services (HHS) and the Department of Justice (DOJ) created the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative. Then Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius launched this joint effort to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.   
 
HEAT’s mission statement is: 
  • To gather resources across the government to help prevent waste, fraud, and abuse in the Medicare and Medicaid programs.
  • To crack down on the people and organizations who abuse the system and cost Americans billions of dollars each year.
  • To reduce health care costs and improve quality of care by preventing fraudsters from preying on people with Medicare and Medicaid.
  • To highlight best practices by providers and organizations dedicated to ending waste, fraud, and abuse in Medicare.
  • To build upon the existing partnerships between HHS and DOJ to reduce fraud and recover taxpayer dollars.
HEAT has made liberal and effective use of both the FCA and the AKS. Since January 2009, the Justice Department has recovered a total of more than $23.1 billion through False Claims Act cases, with more than $14.8 billion of that amount recovered in cases involving fraud against federal health care programs. In addition, between 2008 and 2011, HEAT actions led to a 75% increase in individuals charged with criminal health care fraud. The HEAT initiative’s successes are well documented and have led to an expansion of the HEAT program as well as increases in FCA civil and AKS criminal actions.  
 
The FCA
Pursuant to the FCA, a violator of the Act, is liable to the United States for a civil penalty of between $5,500 and $11,000 per claim filed, plus treble (triple) damages sustained by the Government because of the false claim, and reimbursement to the Government for the costs of a civil action brought to recover any such penalties or damages. 
 
The FCA also includes a “qui tam” lawsuit provision (from a Latin phrase meaning “he who brings a case on behalf of our lord the King, as well as for himself”), found in 31 U.S.C. § 3730(b), which allows private parties to bring an action on behalf of the United States. This provision allows private persons, known as relators (whistleblowers), to bring a lawsuit on behalf of the United States where the relator has information that the named defendant has knowingly submitted or caused the submission of false or fraudulent claims to the United States. The relator need not have been personally harmed by the defendant’s conduct but must have personal knowledge of the conduct alleged.
 
The incentive for employees of a health care practice or entity to bring an action on behalf of the United States as a relator has been greatly increased by the potential financial rewards contained in the FCA. A relator may share in a percentage of the proceeds from an FCA action or settlement as per 31 U.S.C. § 3730(d)(1). Notwithstanding some exceptions, under the FCA, when the Government has intervened in the lawsuit, the relator shall receive at least 15% but not more than 25% of the proceeds of the action. The amount the relator is awarded depends upon the extent to which the relator substantially contributed to the prosecution of the action. When the Government does not intervene, under 31 U.S.C. § 3730(d)(2), the relator shall receive an amount that the court decides is reasonable, however, said amount shall not be less than 25% and not more than 30%.
 
Additionally a relator is protected from being discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of his or her employment as a result of the furtherance of an action under the  provisions of § 3730(h) of the FCA. Remedies available to a relator under the FCA include reinstatement with comparable seniority as the relator would have had but for the discrimination, two (2) times the amount of any back pay, interest on any back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees. 
 
The AKS
The AKS makes it a criminal offense to “knowingly and willfully” offer, pay, solicit, or receive any remuneration to induce, or in return for, referrals of health care services or items paid for by a federal health care program. As such it provides penalties for individuals and/or entities on both sides of a prohibited transaction. Remuneration is interpreted broadly, it not only includes a typical kickback consisting of a cash payment, but can also take the more subtle form of  arrangements such as lease agreements, consulting agreements, speaker fees, no show jobs, etc., particularly when arrangements are in excess of fair market value. The foundation of the law is based on a realization that kickbacks in health care can lead to overutilization of medical services, increased program costs, corruption of medical decision making, patient steering, and unfair competition.
 
There are regulatory “safe harbors” (exceptions) for certain transactions. General guidance on safe harbors, fraud alerts and advisory opinions may be found on the website of the Office of Inspector General, Department of Health and Human Services (OIG) at www.oig.hhs.gov. Notwithstanding this public disclosure by OIG, this is a very complicated area that should not be navigated alone and without the benefit of competent health care counsel.
 
A violation of the AKS is a felony offense which carries potential penalties of imprisonment of up to five years, up to $25,000 in fines, and mandatory exclusion from federal health care programs. Even where there is no criminal conviction, the AKA provides for administrative remedies, authorizing the Government to assess civil monetary penalties and bring action to exclude (permissive exclusion) any provider who OIG believes violated the AKS. Unlike the FCA, the AKS provides no private cause of action, that is, the Government or a relator may not sue civilly under the AKS. 
 
The Broadening of FCA Liability
Although there is no basis in the AKS for a private cause of action, in the past the Government and relators have successfully argued in some jurisdictions that violations of the AKS can serve as the basis for liability under the FCA. This was done under the implied certification theory, which basically stands for the proposition that the health care insurance program would not have paid the claim had it known of the improper referral and kickback relationship. That is because when submitting a claim for a health care service or item the provider must certify that they complied with all applicable laws. Under this theory, a claim to the Government is rendered "false" for purposes of the FCA if the medical services or items were furnished in violation of the AKS, notwithstanding the fact that the services or items provided were medically necessary, provided, and appropriately billed. However this was not the case in every jurisdiction and there was confusion whether a violation of the AKS constituted a violation of the FCA, as well as room for defense counsel to argue that it was not.
 
Any uncertainty was eradicated with the amendment to the AKS. Specifically under 42 U.S.C. § 1320(a)-7b(g), a violation of the AKS now constitutes a false or fraudulent claim under the FCA. Thus, a violation of the AKS - even if the service or item was medically necessary, provided, and appropriately billed - constitutes a per se violation of the FCA. Moreover, the ACA further amended the AKS to provide that “a person need not have actual knowledge … or specific intent to commit a violation” of the AKS. Basically this means that actual knowledge of an AKS violation or the specific intent to commit a violation of the AKS is not necessary for conviction under the statute. It is enough that a defendant knew, or should have known (a disregard of readily available information in the profession), that the conduct was generally unlawful.
 
Conclusion
Violations of the Anti-Kickback Statute are now per se violations of the False Claims Act. Therefore health care entities and providers engaged in improper financial (referral - kickback) relationships in violation of the Anti-Kickback Statute are now exposed not only to criminal prosecution and penalties, but also to False Claims Act civil liability as well. This revision is particularly meaningful given the elimination of the requirement to prove a specific intent. The end result of this expansion of liability, together with the HEAT program, will be increased use of the False Claims Act civil actions against practices and individual providers for billings that are tainted by improper referral - kickback relationships, even in situations where criminal prosecution is not warranted.  
 
 
Kern Augustine Conroy & Schoppmann, P.C., Attorneys to Health Professionals, DrLaw.com, is solely devoted to the representation and defense of physicians and other health care professionals. The authors may be contacted at 1-800-445-0954 or via email at DGiaquinto@DrLaw.com and GBeades@DrLaw.com.