In an important decision limiting the reach of the Federal Anti-Kickback Statute (42 U.S.C. 1320a-7b(b)) (“AKS”) and its application to violations of the False Claims Act (31 U.S.C. 3729, et seq.) (“FCA”), the U.S. Court of Appeals for the Sixth Circuit (“Sixth Circuit”) recently contended that, “[w]hile the word remuneration may be broad, it customarily requires a payment or transfer of some kind,” and mandated “but-for” causation standard for determining whether claims paid by Federal health care programs were tainted by an AKS violation such that they violated the FCA.  See U.S. ex rel. Martin et al. v. Hathaway, et al., Case No. 22-1463, at 11 (6th Cir.) (appeal from 1:19-cv-00915, ECF Doc. No. 108 (W.D. Mich.)) (emphasis added).

At issue on appeal to the Sixth Circuit was an alleged quid pro quo arrangement—a hospital would not hire a certain physician at the request of another physician on staff and, in return, the requesting physician would continue his historical practice of referring patients to the hospital.  The Sixth Circuit concluded that the hospital’s refusal to hire the physician could not be deemed to be “remuneration” to the requesting physician because there was no transfer of value to that physician.  Hathaway, Case No. 22-1463 at 9–10.  The Sixth Circuit noted that the Department of Justice’s (“DOJ”) position that any action that resulted in a financial benefit to a referral source could violate the AKS was very difficult to limit in a rational manner.  Id. at 5–9, 14–16.  The Sixth Circuit specifically noted:

[I]t lacks a coherent endpoint.  Consider the hospital that opens a new research center, purchases top of the line surgery equipment, or makes donations to charities in the hopes of attracting new doctors.  Or consider the general practitioner who refuses to send patients for kidney dialysis treatment at a local health care facility until it obtains more state-of-the-art equipment.  Are these all forms of remuneration?  Unlikely at each turn.

Id. at 9. (emphasis added).  “Measured by this definition,” the Sixth Circuit concluded, “the complaint [by the plaintiffs] fail[ed] to allege a cognizable kickback scheme.”  Id.

The Sixth Circuit further determined that the referrals, if any, did not “result from” the AKS violation and, thus, could not be a basis for an FCA violation.  Id. at 12–16.  In so holding, the Sixth Circuit joined that which has been consistently held by the Eighth Circuit: “resulting from” means “but-for” causation.  Id.; U.S. ex rel. Cairns v. D.S. Medical LLC, 42 F.4th 828, 835 (8th Cir. 2022).  Because there was no change in the status quo, the Sixth Circuit concluded that no referrals resulted from the failure of the hospital to hire the physician as requested by the other physician.  Hathaway, Case No. 22-1463 at 11.

The Hathaway decision reflects continued judicial concern about the reach of the AKS and the FCA.  While the Sixth Circuit noted that the Third Circuit had rejected the “but-for” application of the AKS for purposes of demonstrating FCA violations, there appears to be a trend toward using a “but-for” rule.  (We note that the Third Circuit held that only a causal link between the remuneration and referral need be shown.  See U.S. ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 98, 99–100 (3d Cir. 2018).)

If the “but-for” rule is adopted, certain members of Congress may seek a legislative adjustment to the AKS to clarify its intent.  For now, outside of the circuits requiring use of the “but for” standard, DOJ is likely to continue to use other definitions such as “tainted by” an AKS violation or “provided in violation of” the AKS to prove up remuneration in exchange for a referral for purposes of demonstrating an FCA violation.  Hathaway, Case No. 22-1463 at 13.  Similarly, one may assume that DOJ and the Office of the Inspector General for the Department of Health and Human Services—the Federal agency that regularly interprets the AKS for purposes of issuing advisory opinions and for purposes of DOJ’s investigations of FCA violations—will maintain their longstanding view that any action by a recipient of referrals to financially benefit a referral source, even if it does not result in a direct “transfer” of value to that referral source, could be violative of the AKS.

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Photo of Edward S. Kornreich Edward S. Kornreich

Past long-standing chair of Proskauer’s Health Care Department, Ed Kornreich is a recognized authority on the legal, regulatory and business issues related to health care services.

Areas of Concentration

Ed works primarily on health care transactions, regulatory compliance, health care payment and governance…

Past long-standing chair of Proskauer’s Health Care Department, Ed Kornreich is a recognized authority on the legal, regulatory and business issues related to health care services.

Areas of Concentration

Ed works primarily on health care transactions, regulatory compliance, health care payment and governance issues for varied providers (both for-profit and not-for-profit), vendors, GPOs, distributors and entrepreneurs. His approach combines sensitivity to meeting regulatory business goals with a comprehensive and realistic assessment of the health care environment, and he is particularly experienced in dealing with the complex issues related to integrated health care systems.

Industry Experience

After working for the Legal Aid Society, Ed entered private practice, where he helped represent a major public hospital corporation in a series of reimbursement disputes with the state and federal governments, and counseled New York area hospitals and nursing homes on reimbursement and operational issues. Thereafter, Ed served as General Counsel of St. Luke’s-Roosevelt Hospital Center, one of the largest teaching hospitals in New York. After leaving St. Luke’s-Roosevelt Hospital Center, Ed joined Proskauer as a Partner in 1990.

Thought Leadership

Ed frequently writes and lectures on Medicare and Medicaid reimbursement, health care integration, not-for-profit law and corporate governance issues, and the application of federal and state anti-kickback and “Stark” laws to health care transactions.

Photo of Matthew J. Westbrook Matthew J. Westbrook

Matt Westbrook is an associate in the Corporate Department and a member of the Health Care Group. His practice focuses on providing regulatory compliance advice for the Firm’s health care clients, including service providers, health plans, operators, investors, and lenders, among others. Matt

Matt Westbrook is an associate in the Corporate Department and a member of the Health Care Group. His practice focuses on providing regulatory compliance advice for the Firm’s health care clients, including service providers, health plans, operators, investors, and lenders, among others. Matt specifically provides advice on fraud and abuse matters arising under the Federal False Claims Act (FCA), Civil Monetary Penalties Law, Federal Anti-Kickback Statute (AKS), and Physician Self-Referral Law (Stark Law), as well as on the regulations promulgated by the Drug Enforcement Administration (DEA) and the Department of Health and Human Services, including the Office of Inspector General (OIG), Centers for Medicare & Medicaid Services (CMS), and Food and Drug Administration (FDA).

Before joining the Firm, Matt served as senior counsel in OIG’s Administrative and Civil Remedies Branch. At OIG, Matt was responsible for determining whether to impose administrative sanctions, including civil money penalties and Federal health care program exclusions, against health care providers and suppliers, and whether to impose civil money penalties on hospitals and physicians in connection with matters referred to CMS under the Emergency Medical Treatment and Labor Act (EMTALA). During his tenure, Matt also litigated exclusion appeals before administrative law judges and appellate panels of the Departmental Appeals Board; advised United States Attorney’s Offices on exclusions appealed to Federal district courts; resolved voluntary self-disclosures submitted by providers and grant and contract recipients; and participated in the negotiations and settlements of FCA matters by the Department of Justice involving the AKS, Stark Law, CMS reimbursement issues, and DEA and FDA compliance issues. In connection with certain FCA resolutions, Matt also negotiated and monitored corporate integrity agreements.

On the Florida junior circuit and in college, Matt was a competitive tennis player. Matt played on the varsity team and was captain his senior year at Rhodes College, earning ITA Division III and SCAC All-Academic Honor Roll awards his sophomore, junior, and senior years. Matt is an active member of the American Health Law Association (AHLA) and currently serves as a Vice Chair of AHLA’s Fraud and Abuse Practice Group.