Dueling Ophthalmologists: Accusations of Violations of the False Claims Act for Refusal to Hire?
Today I have a story about dueling ophthalmologists. And, yes, I wrote “dueling,” as in fighting. This is a true story that the 6th Circuit heard about the False Claims Act (“FCA”). With the Appellate Circuit Courts split regarding the issue I will be discussing in this blog, I foresee the U.S. Supreme Court taking an appeal of this case for a final review if the losing ophthalmologist appeals. So, be on the watch. Because this case is defining what the FCA statute does not….remuneration.
Issue: Does renumeration cover (1) just payments and transfers of value; or (2) any act that may be valuable to another?
The case was published March 28, 2023, from the 6th Circuit. United States ex rel. Martin v. Hathaway, No. 22-1463, 2023 WL 2661358 (6th Cir. Mar. 28, 2023). In a rural part of Michigan, there was an ophthalmology group consisting of two physicians, the owner of the practice, Dr. Hathaway, and one employee physician, Dr. Martin. Dr. Martin overheard Dr. Hathaway negotiating a sale to a larger practice, and began to question her employment path. The sale fell through, but she had begun negotiations with the local hospital to become the hospital’s sole ophthalmologist. Well, Drs. Hathaway and Martin were the only ophthalmologists in this area, and Dr. Hathaway knew that if Dr. Martin went in-house to the local hospital Oaklawn that his business would suffer because his now-employee would become a competitor.
The hospital gave her a pending offer. Dr. Hathaway was infuriated. He told the hospital that if it hired Dr. Martin that he would move all his surgeries to another hospital. He even told the local hospital’s CEO that if the Board approved the hiring of Dr. Martin, it would be the “death knell” of his practice because the hospital’s future patients referrals would go to Dr. Martin and not him.
Dr. Hathaway pled with the CEO. It would be a lose-lose if you hire Dr. Martin, he said. It will cost hundreds of thousands of dollars to set up an internal ophthalmology line, while it would force Dr. Hathaway to pull his cases and go elsewhere.
Perhaps due to Dr. Hathaway’s threats, the Board elected to not hire Dr. Martin.
Dr. Martin did not take the rejection well.
She sued Dr. Hathaway, South Michigan, and Oaklawn in a qui tam action under the False Claims Act and Michigan’s False Claims Act. She accused Dr. Hathaway and Oaklawn Hospital of engaging in an illegal fraudulent scheme under the Anti-kickback Statute (“AKS”) and that claims for Medicare and Medicaid reimbursement resulting from the kickbacks violated the False Claims Act.
The definition of remuneration was at stake. The statute does not define renumeration. Does renumeration cover just payments and transfers of value or any act that may be valuable to another. The 6th Circuit held that renumeration only cover payments and other transfers of value.
The Complaint’s main theory of remuneration turns on the Oaklawn Board’s refusal to hire Dr. Martin in return for Dr. Hathaways general commitment to continue sending surgery referrals for his patients to Oaklawn.
You may recall that the FCA uses the word “payment,” whereas the AKS uses the word “remuneration,” which prompts the question whether remuneration means something broader.
The Court held, “no” – money and value needs to be defined as just that…money and value.
Dr. Hathaway gave Oaklawn no payment, no value. Dr. Martin lost in this case, but if she appeals, like I said, I foresee the US Supreme Court to weigh in.
Gift Cards Violate AKS? Maybe NOT!!!
Is Giving Gift Cards to Medicaid Consumers Suffering Substance Abuse Issues Who Comply with Weekly Criteria To Promote Wellness Against the Anti-Kickback statute (AKS)?
Yes, but who cares?
OIG does not care and even published an opinion stating that OIG would not penalize the practice.
The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks-those who offer or pay remuneration- as well as the recipients of kickbacks-those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS.
Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs. Physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.
Safe harbors protect certain payment and business practices that could otherwise implicate the AKS from criminal and civil prosecution. To be protected by a safe harbor, an arrangement must fit squarely in the safe harbor and satisfy all of its requirements. Some safe harbors address personal services and rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees.
However, study after study after study have demonstrated that people with substance abuse issues have a higher likelihood of success with monetary incentives. See article as an example.
OIG obviously understands the efficacy of gift cards. Maybe Congress can back up OIG because, you can be sure that, if the proposed rule is passed, litigation will ensue. People will claim that the FTC does not have the legal authority to issue such a rule in violation of the AKS.
Do the Anti-Kickback and Stark Laws Apply to Private Payors?
Anti-Kickback statutes (AKS) and Stark law are extremely important issues in health care. Violations of these laws yield harsh penalties. Yet, many healthcare professionals have little to no knowledge on the details of these two legal beasts.
The most common question I get regarding AKS and Stark is: Do AKS and Stark apply to private payers? Health care professionals believe, if I don’t accept Medicare or Medicaid, then I don’t need to worry about AKS and Stark. Are they correct??
The general and overly broad response is that the Stark Law, 42 USC § 1395nn, only applies to Medicare and Medicaid. The AKS, 42 USC § 1320a-7b(b)),applies to any federal healthcare program.
Is there a difference between AKS and Stark?
Answer: Yes. As discussed above, the first difference is that AKS applies to all federal healthcare programs. This stark difference (pun intended) makes the simple decision to not accept Medicare and Medicaid, thus allowing you to never worry about AKS, infinitely more difficult.
Let’s take a step back… What are AKS and Stark laws and what do these laws prohibit? When you Google AKS and Stark, a bunch of legal blogs pop up and attempt to explain, in legalese, what two, extremely esoteric laws purport to say, using words like “renumeration,” “knowing and willful,” and “federal healthcare program.” You need a law license to decipher the deciphering of AKS and Stark. The truth is – it ain’t rocket science.
The AKS is a criminal law; if you violate the AKS, you can be prosecuted as a criminal. The criminal offense is getting something of value for referrals. You cannot refer patients to other health care professionals in exchange for money, reduced rent, use of laboratory equipment, referrals to you, health services for your mother, marketing, weekly meals at Ruth’s Chris, weekly meals at McDonalds, oil changes, discounted theater tickets, Uber rides, Costco coupons, cooking lessons, or…anything of value, regardless the value.
Safe harbors (exceptions to AKS) exist. But those exceptions better fit squarely into the definition of the exceptions. Because there are no exceptions beyond the enumerated exceptions.
AKS is much more broad in scope than Stark. Other than Medicare and Medicaid, AKS applies to any health care plan that utilizes any amount of federal funds. For example, AKS applies to Veterans Health Care, State Children’s Health Programs (CHIP), Federal Employees Health Benefit Program, and many other programs with federal funding. Even if you opt to not accept Medicare and Medicaid, you may still be liable under AKS.
Stark law, on the other hand, is more narrow and only applies to Medicare and Medicaid. I find the following “cheat sheet” created by a subdivision of the Office of Inspector General to be helpful in understanding AKS and Stark and the differences between the two:
One other important aspect of Stark is that is considered “strict liability,” whereas AKS requires a proving of a “knowing and willful” action.
Feel free to print off the above chart for your reference. However, see that little asterisk at the bottom of the chart? It applies here as well.