First Circuit Affirms Dismissal of Qui Tam for Failing But-For Test Linking AKS Violations to FCA Liability
In U.S. ex rel. Flanagan v. Fresenius Med. Care Holdings, Inc., 23-1305 (1st Cir. June 27, 2025), the First Circuit recently affirmed dismissal of an FCA complaint because it failed to adequately plead that alleged kickbacks were the “but for” cause of claims submitted to the government. As we previously reported here, the First Circuit recently joined the growing majority of circuits requiring that for a claim to “result[] from” a kickback under the FCA, the kickback must be the “but-for” cause of the claim. In Flanagan, the First Circuit affirmed dismissal because the relator had not adequately alleged any referrals that would not have been made had the alleged kickback never been paid.
The relator alleged that the defendant, a large dialysis provider, paid kickbacks for referrals to its dialysis clinics by compensating a doctor to be a medical director at two clinics. The relator alleged that the defendant wrote a report opining that renewal of the doctor’s medical director contract was “critical”—he was the “only physician referring to San Jose and has [the] majority of Los Gatos.” “He must be secured for at least one more year at San Jose and indefinitely in Los Gatos.” The relator further alleged that the doctor did refer sixty patients to the defendant’s clinics in 2012 and that the defendant tracked the number of patients that the doctor referred to clinics not operated by the defendant.
The district court dismissed the complaint for failing to meet Rule 9(b)’s requirement to plead causation with particularity. The First Circuit determined that the relator’s allegations did “nothing” to show that any of the doctor’s referrals actually “resulted from the alleged kickback scheme.” Citing Supreme Court guidance for the proposition that causation cannot “be overlooked or modified in the early stages of the case,” the First Circuit noted that the relator offered no allegations that the doctor “would not have made these referrals had he not been given the medical director position.” “At a minimum,” the court held, the relator “was required to plead some information that would have allowed” the court “to reasonably infer in his favor that causation exists.” In so holding, the court quoted the Sixth Circuit’s opinion adopting the “but for” standard: “[t]here’s not one claim for reimbursement identified with particularity in this case that would not have occurred anyway.”
The First Circuit also evaluated the relator’s separate claim for submission of false records in violation of the FCA, which the district court also dismissed under Rule 9(b). Unlike the relator’s “resulting from” theory, the First Circuit noted, false record claims do not require proof of causation. The relator alleged that the defendant made false records by falsely certifying compliance with the AKS annually and by falsely certifying cost reports that listed the number of hours that its medical directors worked. According to the First Circuit, the relator did not offer the requisite specificity. No allegations addressed what the defendant “actually submitted in those reports, either as to certifications or as to hours worked by medical directors.” Nor did the relator allege with specificity the defendant’s intent that the government rely on the false record as a condition of payment. “Broadly stating” that the defendant “intended to have all claims paid, whether or not tainted by the kickback scheme, is not sufficient to satisfy” 9(b).
The First Circuit’s opinion is available here.
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