AKS Safe Harbor Defeats FCA Claim in Eleventh Circuit

In Carrel v. AIDS Healthcare Foundation, No. 17-13185 (August 7, 2018) the Eleventh Circuit affirmed summary judgment for the defendant on Anti-Kickback Statute-based FCA claims, holding that incentives to employees for referring patients for its services were covered by the employee safe harbor to the Anti-Kickback Statute, and that these payments in particular served the congressional intent of the Ryan White Act to provide AIDS patients with ease of access to services. The Court also upheld the prior dismissal of all other allegations for a lack of particularity, noting that the only instances that relators alleged with particularity were actually covered “services” under the Ryan White Act and that they would not “infer fraud from instances of lawful conduct.”

The Eleventh Circuit agreed with the district court that $100 bonuses that the Foundation provided to employees for each patient who completed follow-up procedures at Foundation clinics violated the Anti-Kickback Statute. The court was unmoved by plaintiffs’ argument that the Foundation was implicitly barred from “buying” referrals based on the drafting history, policy concerns, tangentially related regulations and case law because “buy[ing] referrals categorically violates the principle of honesty in medical services.”  Instead, the court relied on the plain letter language of the Anti-Kickback statute’s employee exemption, which provides a safe harbor for “any amount paid by an employer to an employee (who has a bona fide employment relationship with such an employer) for employment in the furnishing of any item or service” § 1320a-7b(b)(3)(B).  The court further noted that a parallel regulation provides that a “remuneration does not include any amount paid by an employer to an employee, who has a bona fide employment relationship with the employer, for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal healthcare programs.” 42 C.F.R. § 1001.952(i).  When coupled with the language of the Ryan White Act—in which the services referenced by the relators were provided under and which states that the referral of patients is a standalone compensable “service”—the court held that these payments were clearly within the employee safe harbor and that it “lack[s] the authority to ignore the texts of these laws in the service of general purposes and selective legislative history.”  Notably, DOJ had filed a statement of interest in support of the Foundation, in which it argued that the relevant statutes and regulations do not restrict grant recipients from paying employees to refer patients to the same grant recipient if it is an otherwise qualified Ryan White provider.

With respect to Rule 9(b), the court held that the “mosaic of circumstances” alleged regarding the false claims did not have the sufficient particularity to produce an actual false claim in which the Foundation unlawfully recruited a patient and then billed the government for the services provided. The court concluded that it is not sufficient to allege that a scheme in detail and then “without reason” allege that claims were believed to be submitted, were likely submitted, or should have been submitted, relying on Clausen v. Lab Corp. of America, 290 F. 3d 1301, 1311 (11th Cir. 2002). Even an employee with insider knowledge must allege that a specific fraudulent claim or “specific details” about a false claim submitted to the government in order to provide the necessary reliable indicia.

The court declined to accept the relators’ reliance on mathematical probability to show that claims were submitted.  The court further reasoned that although the Relators supposedly had access to pertinent data, they were still unable to pinpoint specific false claims, which made it unlikely that they possessed the necessary personal knowledge required for to demonstrate a reliable indicia. Since the only claims the relators alleged with sufficient particularity fell within the employee statutory safe harbor, the court declined to “infer fraud from instances of perfectly lawful conduct.”

A copy of the Eleventh Circuit’s opinion can be found here.