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Don’t Believe the Hype – United States ex rel Greenfield v. Medco Health Solutions: Third Circuit Reaffirms the Breadth of False Claims Act Liability for Illegal Kickbacks

Courts have long held that to prove a False Claims Act case premised on illegal kickbacks, a plaintiff need not prove that kickbacks caused specific 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 its affirmance of a district courts dismissal of FCA claims in  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 this analysis now requiring plaintiffs to link kickbacks to “specific false claims” to make out a False Claims Act violation.

Greenfield reflects no such sea-change in law.  Rather, it applied the Wilkins rule — that claims “tainted” by kickbacks are false — to the less common situation where kickbacks are paid in exchange for “recommendations” rather than referrals.

Anti-Kickback Statute

The Medicare and Medicaid Fraud and Abuse Statute (the “Anti-Kickback Statute” or “AKS”), 42 U.S.C. § 1320a-7b(b), is a criminal statute that prohibits soliciting or receiving or 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).


The prohibitions on referring and furnishing – (“‘A’ Prohibitions”), are generally directed at healthcare professionals and prevent the corruption of their medical judgement when they perform procedures 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 –when a medical professional receives kickbacks for a particular good or service, the services actually performed and goods or services actually referred are false or fraudulent under the FCA. But with “B Prohibitions” it is less clear which claims “resulted from” kickbacks.  That was the issue presented in Greenfield.

Greenfield Confirms 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. 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.  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.

Third Circuit Interprets “Link” Between Kickbacks and Claims Broadly

While “a ‘link’ is required” to establish that claims “resulted” from kickbacks, the appeals court’s analysis makes clear that the link may be quite broad.  Id.  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 evidence ”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.

Florida Home Health Care Kickbacks to Doctors

In the past month, the Justice Department has settled two cases involving kickbacks between doctors and home health care companies providing services to Medicare patients.


Offering and/or accepting kickbacks has been banned by Congress and violates the False Claims Act .


As the Justice Department said in a recent release:


“The Anti-Kickback Statute and the Stark Law are intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives.  The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare.  The Stark Law forbids a home health care provider from billing Medicare for certain services referred by physicians who have a financial relationship with the entity.”


The first case involved two South Florida medical doctors and their wives who allegedly accepted sham marketer salaries in exchange for their husbands’ referrals to A Plus Home Health Care Inc.  Dr. Alan and Lynn Buhler agreed to pay to the United States $1.047 million and Dr. Craig and Cynthia Prokos agreed to pay $90,000 to settle allegations that accepting such kickbacks violated the False Claims Act.


The second case involved Recovery Home Care Inc. and Recovery Home Care Services Inc.  who allegedly paid dozens of physicians thousands of dollars per month to perform patient chart reviews in return for referring their patients to Recovery Home Care. The government contended that these doctors were over-compensated for any actual work they performed and the payments were an illegal inducement.


Recovery Home Care agreed to pay $1.1 million to resolve allegations that the Recovery Home Care entities violated the False Claims Act.  Whistleblower Gregory Simony, a former employee of Recovery Home Care, will receive $198,000 of the recovered funds.  The government continues to litigate this case against Recovery Home Care’s previous owner, Mark Conklin.


As they say, “it takes two to tango” and in health care that often means the “partners” are the doctors and another health care provider. The cases above involved home health care companies, but in other instances improper relationships could involve, for example, hospitals, hospice care,  to name just a couple. Any health care provider who depends on physician referrals is in a position to improperly influence the doctor’s judgment with illegal kickbacks. Medicare patients deserve conflict free medical care, as do the taxpayers.


For more on home health care fraud, see the announcement last year of the largest home health care fraud settlement against Amedisys – United States ex rel. CAF Partners v. Amedisys, et al., Civ. No.:10-cv-02323 (E.D. PA) – in which the Whistleblower Law Collaborative represented one of the relators.

RELATED: Florida Home Health Care Company Agrees to Pay $1.1 Million to Resolve False Claims Act Allegations RELATED: Two Florida Couples Agree to Pay $1.13 Million to Resolve Allegations that They Accepted Kickbacks in Exchange for Home Health Care Referrals

Elizabeth Warren Proposes to Make Pharma Pay

Elizabeth Warren, Senator from Massachusetts known for sticking up for consumers in the face of corporate interests, has recently turned her focus on the pharmaceutical industry.  Noting that a substantial number of pharma companies have paid multi-billion dollar settlements, Senator Warren has introduced a bill called the Medical Innovation Act, which would require pharma companies to pay into a medical research fund any time they settle a fraud-related scheme.
Warren notes that companies that have successfully produced blockbuster drugs have often realized these profits on the basis of research initially funded by the federal government.  It’s only fair then, she proposes, that when these manufacturers violate the rules in pursuit of greater profits, they pay into a fund that goes back into the research mechanisms that made them rich in the first instance.
“It’s like a swear jar,” Warren colorfully notes.  “Whenever a huge drug company that is generating enormous profits as a result of federal research investments gets caught breaking the law and wants off the hook, it has to put some money in the jar to help fund the next generation of medical research,” Warren said. “Instead of letting companies that break the law get off with a slap on the wrist, the Medical Innovation Act will make sure that they pay up in a way that really makes a difference. A difference to the health of all Americans, and a difference to all of the company’s competitors who are playing by the rules.”

Omnicare, Inc. Continues to Rip Off Medicare and Medicaid

Repeat False Claims Act offender Omnicare, the country’s largest nursing home pharmacy, faces yet another allegation of misconduct with respect to nursing home patients. Last month the United States intervened in two whistleblower cases against Omnicare accusing it of accepting kickbacks from drug manufacturer Abbott Laboratories in return for promoting Abbott’s drug Depakote, an anti-epileptic drug, for controlling behavioral disturbances exhibited by dementia patients residing in nursing homes serviced by Omnicare. According to the United States’ complaint, Omnicare’s pharmacists reviewed nursing home patients’ charts at least monthly and made recommendations to physicians on what drugs should be prescribed for those patients.  The government alleges that Omnicare touted its influence over physicians in nursing homes in order to secure kickbacks from pharmaceutical companies such as Abbott, and disguised the kickbacks it received from Abbott in a variety of ways.


Over the last several years, Omnicare has settled several FCA cases alleging it violated the law with respect to nursing home patients. Among these were a $124 Million settlement in June 2014; and $112 Million settlement in November 2009.


All of this might lead  one to wonder how it is that Omnicare (and none of its officers or employees) has not been charged criminally or been excluded from serving Medicare and Medicaid nursing home patients. Instead, HHS-OIG has allowed Omnicare to enter into Corporate Integrity Agreements in an effort to retrain Omnicare and its employees.  Repeat offenders such as Omnicare contribute to the ongoing debate about the effectiveness of FCA settlements and CIAs in deterring future misconduct.

Health Care Fraud & Abuse Gets First Person Account

Students in the Health Care Fraud and Abuse seminar led by whistleblower attorney Bob Thomas were treated to a fascinating retrospective from a successful whistleblower, Elin Baklid-Kunz, the former employee of Halifax Hospital, which recently settled False Claims Act accusations against it for $85 million. Ms. Kunz and her attorney Marlan Wilbanks spoke to the students by telephone connection, and answered a variety of excellent questions from the students.


Having covered the most important areas of health care fraud law (the False Claims Act, the Anti-Kickback Act, the off-label/misbranding/adulteration prohibitions of the Food Drug & Cosmetic Act, and the Stark Laws) earlier in the semester, the students are being exposed in the final four weeks of the seminar to the thoughts of different participants in this dynamic field. Last week, they visited Cambridge biotech Ironwood Pharmaceuticals to hear from its chief compliance officer. Yesterday they heard from a whistleblower and her attorney (concerning a case they had studied previously in the course with respect to the Stark law). In the following two weeks, they will be hearing from two former Assistant U.S. Attorneys, who will be addressing the prosecutorial and defense perspectives.


In preparation for the class on “the whistleblower perspective,” the class read a number of articles about people who had gone through the experience, as well as a study of the collective experiences of all whistleblowers, published in the New England Journal of Medicine in December 2010. That study corroborated what most whistleblower lawyers will tell you: that the process is difficult and long, that the whistleblower must be prepared for personal and professional isolation, and that only those whose motivations are primarily principle-based (as opposed to purely monetary) will have the stomach to ride out the unpredictable turns of a False Claims Act case.


Which brings us back to Elin Baklid-Kunz. Ms. Kunz worked in finance at the Halifax Hospital in Florida. She noticed that neurosurgeons and oncologists at the hospital were being accused of conducting unnecessary medical procedures and that their compensation packages were heavily weighted towards a bonus based on number of patient referrals brought in, a highly circumspect arrangement under the Stark law. Her attempts to ascertain the legitimacy of these arrangements were not well-received, particularly by the doctors themselves, some of whom were earning close to $2 million per year. An in-house attorney at Halifax seemed to substantiate her claim, however, drafting a legal memo concluding that the Hospital was in fact violating the Stark law and that the physician bonuses could be legally challenged by the government. Discovery would later reveal that the hospital sought a second opinion (from the firm that ultimately tried unsuccessfully to defend it in court), which said that the arrangement did not violate Stark. The judge presiding over the case ruled that the hospital improperly withheld the first legal memo from the government in discovery, under the “crime-fraud exception” to the attorney-client privilege, making the opinion discoverable and presumptively admissible at trial. Needless to say, the hospital had little wiggle room at that point, and eventually cuts its losses by settling the case for $85 million (plus the tens of millions it paid its law firm, the same law firm that had issued the questionable second opinion).


Ms. Kunz reflected on the ultimate take-away from the case and her experience. She noted that when the settlement was announced internally at the company, there was great applause because the amount of the settlement was much lower than expected. None of the company management has been forced to resign or face litigation or indictment; indeed, several have been promoted and been given raises and kept their lucrative pension plans. Most disappointing, she said, is that the culture of the hospital seems not to have changed, based on what she hears from her former colleagues.


One particularly interesting side note to all of this. Ms. Kunz, who is originally from Norway, reported that her Norwegian friends, who learned of the case through media reports in that country, were astounded by two things in particular: 1) that there was such a huge discrepancy in compensation for certain types of doctors over others, related to how much business they brought in, which was quite different from how doctors are paid in Norway and elsewhere in Europe, and 2) that a whistleblower who turned out to be right would be subject to retaliation. In Norway, she was told, the emphasis would be on fixing the problem, and thus the whistleblower would be appreciated for having alerted the company to what needed to be fixed.


Equity and integrity. Not unreasonable principles from which to ground a medical practice.

Fifteenth Annual Pharma Congress 2014

Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum (The 2014 Pharma Congress),
November 3-5, 2014, Hyatt Regency, Capitol Hill, Washington, D.C.


Attorney Suzanne E. Durrell, Durrell Law Office

Attorney Suzanne E. Durrell, Durrell Law Office

Suzanne Durrell to join the /Qui Tam/ panel at the upcoming Fifteenth Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum – www.PharmaCongress.com


November 3 – 5, 2014, Hyatt Regency on Capitol Hill in Washington, DC. The Congress is by far the largest annual gathering of pharmaceutical company compliance professional and in-house counsel and is attended by approximately 400 annually.


The Pharmaceutical Compliance Forum (PCF) is a coalition of senior compliance professionals and legal counsel from more than 50 of the largest research based pharmaceutical manufacturers. The PCF was founded in early-1999 by compliance professionals from the pharmaceutical industry to promote effective corporate compliance programs. The members meet twice a year, for two days, focusing on open and informal sharing of compliance information, best practices, and current developments in the field.

PCF also sponsors a three-day compliance congress each Fall. Learn more.

Related: Corporate Integrity Agreements can be the basis for a False Claims Act Case (PDF paper),  by Suzanne E. Durrell, Esq. – Washington DC, November 2014