Jan 132025

District Court Allows Summary Judgment on Medically Unnecessary and AKS Arguments, Joins Conversation on AKS Causation Standard

Jaime L.M. Jones, Brenna E. Jenny and Lauren McBride
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Judge Patti Saris in the District of Massachusetts recently granted a defense motion for summary judgment after concluding that relator failed to show that defendants knowingly submitted medically unnecessary tests or that any false claims were submitted as a result of independent contractor arrangements that allegedly violate the Anti-Kickback Statute (“AKS”).  See U.S. ex rel. Omni Healthcare v. MD Spine Solutions, 18-cv-12558 (D. Mass. Jan. 6, 2025).  With the latter ruling, Judge Saris joins a growing majority of courts holding that an AKS violation is only a false claim under the FCA if the claim would not have been submitted but for the kickback.

The relator, a medical practice that ordered tests from the defendant clinical laboratory, argued the lab and its owners violated the AKS when they paid independent contractor sales representatives a commission that varied with the volume of sales.  Although such arrangements with employees can satisfy an AKS safe harbor, similar independent contractor arrangements often do not.  The court sided with defendants based on a lack of causation.  The AKS states that a claim that “includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of” the FCA.  Defendants argued that the “resulting from” language requires a showing of but-for causation, while relator urged the court to adopt the more attenuated causal connection test from the Third Circuit.  While acknowledging the issue is currently on appeal in the First Circuit, as discussed here, the court adopted the Sixth and Eighth Circuits’ “but-for” causation approach (discussed here and here).

Applying this standard, the court determined no reasonable jury would find that the commission-based payments to independent contractor sales representatives caused the submission of false claims.  The court pointed to relator’s lack of evidence that the independent contractor status of some of the sales representatives unduly influenced any provider’s decision to order a test from defendants, and the fact the lab trained, managed, disciplined, and paid employee and contractor sales representatives identically.

The relator also alleged the lab and its owners knowingly submitted claims for medically unnecessary polymerase chain reaction (“PCR”) tests for urinary tract infections (“UTIs”).  The court sided with defendants on relator’s medically unnecessary argument, focusing on scienter.  The court disagreed that the absence of a National Coverage Determination or Local Coverage Determination relating to PCR UTI tests made defendants aware of a substantial risk that the PCR UTI tests were medically unnecessary.  Relator also put forth a non-random sample of 57 PCR tests the lab had performed for relator’s patients.  Relator noted a substantial number of the test forms did not have the box checked for the PCR UTI panel and/or did not have provider signatures and argued that the lab knowingly ran tests that were medically unnecessary, because these providers didn’t intend to order the test.  However, given the signature was optional, and the form was specific to the PCR UTI testing, the court said these paperwork errors at most reflected that defendants “negligently performed PCR tests that providers did not intend to order,” which falls short of the requisite scienter under the FCA.

A copy of the court’s decision can be found here.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.

Jaime L.M. Jones

Chicago

jaimejones@sidley.com

Brenna E. Jenny

Washington, D.C.

bjenny@sidley.com

Lauren McBride

Chicago

lmcbride@sidley.com

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