Massachusetts District Court Judge Applies Heightened Causation Standard in FCA Case

Massachusetts District Court Judge Applies Heightened Causation Standard in FCA Case

On January 6, a District Court of Massachusetts judge granted summary judgment for defendants on allegations of violating the Anti-Kickback Statute (AKS) and False Claims Act (FCA), based in part on lack of evidence that the alleged kickbacks caused the submission of false or fraudulent claims. Judge Patti Saris applied a heightened causation standard previously adopted by the Sixth and Eighth Circuit Courts of Appeals and held that FCA claims premised on AKS violations must show actual causality, i.e., but-for causation.

Relator Omni Healthcare filed this qui tam action in 2018 against MD Labs and its owners, arguing that defendants violated the FCA by submitting false claims for urinary tract infection (UTI) tests “resulting from” illegal kickbacks. Omni claimed that MD Labs violated the AKS by making commission-based payments to independent-contractor sales representatives to promote MD Labs’ services and influence health care providers’ decisions, and this violation resulted in the submission of false claims for UTI tests. Omni also asserted that MD Labs violated the FCA by submitting false claims for medically unnecessary UTI tests.

Judge Saris granted the defendants’ summary judgment motion, holding that Omni failed to show the AKS violation was a “but-for cause” of the inclusion of an item or service in a claim. In 2010, the AKS was amended to include language that a claim “resulting from” an AKS violation is a false claim for purposes of the FCA. Judge Saris reasoned that under US Supreme Court precedent, the ordinary meaning of the phrase “resulting from” mandates a showing of actual causality, i.e., but-for causation, and there is no indication that US Congress intended to give a different meaning to the phrase.

The causation standard for FCA claims “resulting from” AKS violations has created a circuit split. The Sixth and Eighth Circuit Courts of Appeals endorse the heightened standard, but the Third Circuit Court of Appeals apply a less stringent standard, requiring only that the plaintiff show at least one claim sought reimbursement for medical care that was provided in violation of the AKS. The position of the First Circuit, which includes Massachusetts, remains to be determined. The First Circuit is expected to rule on the issue in the Regeneron case, which has been pending before the court since oral arguments in July 2024.

The case is Omni Healthcare, Inc., et al. v. MD Spine Solutions LLC, et al., No. 18-cv-12558-PBS, in the US District Court for the District of Massachusetts.

Health Plan Settles FCA Allegations for More Than $520,000, Receives Credit for Disclosures and Remedial Measures

Commonwealth Care Alliance agreed to pay $520,355.65 to resolve allegations that its subsidiary, Reliance HMO, violated the AKS and FCA by making payments to induce the referral of Medicare beneficiaries to enroll in Reliance’s Medicare Advantage (MA) Plan. In 2019, Reliance received authorization to operate a MA plan for Medicare beneficiaries in Michigan. In 2022, Commonwealth Care acquired Reliance and identified concerns regarding certain marketing-related payments that Reliance agents made to physician practices. Commonwealth Care then made voluntary disclosures to the US Department of Health and Human Services, Office of Inspector General regarding these payments.

Commonwealth Care disclosed two payment schemes by Reliance. From 2019 through 2020, Reliance paid physician practices in exchange for contact information of patients who agreed to be contacted by Reliance regarding its MA plan offerings. Additionally, in 2019, before it launched its MA plan, Reliance made $2,500 payments to four physician practices as advances on the physicians’ “coordination of care” services to beneficiaries in connection with the forthcoming MA plan. The government alleged that Reliance’s payments were intended to induce the referral, recommendation, or arrangement of enrollment of Medicare beneficiaries in Reliance’s MA plan.

As part of the settlement to resolve these allegations, the government credited Commonwealth Care for its voluntary disclosures, cooperation, and remedial measures. Commonwealth Care’s remedial measures included terminating the employees directly involved in the decision to offer the payments and providing the government with detailed written statements describing its internal investigation and other supplemental information.

The US Department of Justice’s (DOJ) press release is available here.

DOJ Intervenes in FCA Suit Against Walgreens Pharmacies Regarding Opioid Prescriptions

Last week, the DOJ filed a complaint alleging that multiple subsidiaries of Walgreens dispensed millions of unlawful prescriptions and then filed false claims for reimbursement, in violation of the Controlled Substances Act (CSA) and the FCA. The DOJ alleges that from 2012 to now, Walgreens systematically pressured its pharmacists to quickly fill prescriptions for opioids despite clear “red flags” indicating that the prescriptions were unlawful, and Walgreens ignored evidence from pharmacists and internal data that its stores were dispensing unlawful prescriptions. The government asserts that by prescribing substances in violation of the CSA and then seeking reimbursement from federal health care programs, Walgreens also violated the FCA. If found liable, Walgreens could face civil penalties of up to $80,850 for each unlawful prescription, and treble damages and applicable penalties for each false claim paid by federal programs.

The case is United States ex rel. Novak v. Walgreens Boots Alliance Inc., No. 18 C 5452, in the US District Court for the Northern District of Illinois. The case consolidates four qui tam actions from whistleblowers who previously worked for Walgreens. The DOJ’s press release is available here.

Skilled Nursing Facilities Settle FCA Case Regarding PPP Loans for $18 Million

Last week, Unified Care Services, a California-based chain of skilled nursing facilities, along with its affiliates and its owners, agreed to pay $18 million to resolve FCA allegations that they submitted false information to obtain Paycheck Protection Program (PPP) loans. According to the allegations, the defendants falsely certified on their loan applications that they were a small business with fewer than 500 employees even though each applicant was part of a larger chain of facilities that all shared common ownership and control, rendering them ineligible for PPP loans. The FCA lawsuit was filed by a whistleblower who will receive over $2 million in connection with the settlement.

The DOJ’s press releases are available here.