“Kickback” definition in False Claims Act cases
Previously, I have blogged about the inherently complex and nuanced nature of qui tam litigation. Today I want to talk a little bit about the word “kickback” and the history of that word in the English language and in FCA jurisprudence.
While the concept of kickbacks is central to many different types of FCA cases, we most often see it in the health care context. That is because (1) there are lucrative incentives for physicians and other health care providers to pay or receive kickbacks for the referral of health care services; and (2) there are stringent prohibitions on the payment or receipt of kickbacks in exchange for the referral of health care services for which the government will ultimately pay.
These stringent prohibitions include the Anti-Kickback Statute (“AKS”) (42 U.S.C. § 1320a-7b(b)). The AKS is criminal statute which prohibits any person from making or accepting payment to induce or reward any person for referring, recommending, or arranging for the purchase of any item for which payment may be made under a federally-funded health care program.
Where reimbursement for health care services is claimed from the government, the provider is required to verify that no kickbacks were paid and/or received for the referral of the services for which reimbursement is requested. Every cost report, for example, contains a certification that must be signed by the chief administrator of the provider or a responsible designee of the administrator. Each and every cost report requires providers to certify that:
Misrepresentation or falsification of any information contained in this cost report may be punishable by criminal, civil and administrative action, fine and/or imprisonment under federal law. Furthermore, if services identified in this report were provided or procured through the payment directly or indirectly of a kickback or where otherwise illegal, criminal, civil and administrative action, fines and/or imprisonment may result.
This is just one example, but the overtones should be clear—government health care programs will not pay claims that are tainted in any way, shape, or form, by kickbacks. Thus, although AKS is a criminal statute with no private right of action, a violation of AKS renders each and every tainted claim submitted to the government “false” within the meaning the federal False Claims Act and/or Virginia Fraud Against Taxpayers Act.
So when is a payment a kickback? It turns out there are an almost infinite amount of ways for health care providers to pay or receive kickbacks, and a lawyer exploring the jurisprudence defining the term kickback is apt to be confused.
For example, some cases state that in order to be a kickback, the payments must be based on a percentage of the value of the services referred. In other words, “Provider A” agrees to refer patients in need of specific services to “Provider B” who will then pay Provider A a fee equal to 10% of the value of the imaging work.
It is true that where one provider pays another provider a percentage of the reimbursable value of the services referred, we normally have a clear-cut AKS violation. (I say “normally” because there are several safe-harbors, created by HHS-OIG, that permit arrangements that would otherwise be illegal).
Although percentage-based payments made by one health care provider to a provider with the power to refer patients may be clearly unlawful, it is by no means required that the payment amounts be based on a percentage in order to be kickbacks. You will, however, find published cases to this effect.
Perhaps more importantly, any qui tam lawyer handling a kickback case where the payments were not based on a percentage is apt to find themselves facing that argument on a 9(b) motion.
The idea that in order to be a kickback a payment must be based on a percentage does not come from FCA jurisprudence, but rather from some definitions of the term “kickback.” In fact, Webster’s Third International Dictionary defines a kickback as “a percentage payment … for granting assistance by one in a position to open up or control a source of income …”
But a payment does not have to be on a percentage basis in order to be a kickback. In fact, any payment from one provider to another with with a corrupt or unlawful purposes, and that will be covered in the next post in this series.