Courts continue to reject aggressive Anti-Kickback Statute ("AKS") allegations. Most recently, on January 6, 2025, Judge Patti Saris of the U.S. District Court for the District of Massachusetts dismissed a qui tam action against clinical laboratory MD Spine Solutions LLC ("MD Labs") and its owners, Denis Grizelj and Matthew Rutledge, based in part on lack of causation. Omni Healthcare, Inc. v. MD Spine Solutions LLC, No. 18-cv-12558-PBS, 2025 U.S. Dist. LEXIS 1680 (D. Mass. Jan. 6, 2025).
Between 2017 and 2019, OMNI ordered hundreds of urinary tract infection tests from MD Labs, some of which were billed to government health programs. The relator, Florida-based medical practice OMNI Healthcare, Inc. ("OMNI"), sued the defendants under the False Claims Act ("FCA") in 2018 based on allegations that they submitted fraudulent claims for UTI tests by MD Labs. A few years later, the defendants entered into a settlement agreement with the United States and OMNI to resolve certain claims related to MD Labs performing unnecessary presumptive urine drug tests when confirmatory tests results were available at the same time.
OMNI pressed on against the defendants on other claims but lost the case at summary judgment, where Judge Saris rejected all three of OMNI's theories of FCA liability against the defendants. Most noteworthy was the court's adoption of the but-for causation standard for FCA claims premised on AKS violations. Applying that standard, Judge Saris rejected OMNI's claim that the defendants violated the AKS by making commission-based payments to sales representatives who worked as independent contractors, which were not protected by the safe harbor that covers sales commissions for employees.
There is currently a circuit split, and a split within the District of Massachusetts, regarding the type of causation that applies to AKS violations used as the basis for FCA liability. See 42 U.S.C. § 1320a-7b(g) (providing 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) (emphasis added). As Judge Saris explained, "[t]he First Circuit has interpreted the "resulting from" language in this provision as requiring "a sufficient causal connection between an AKS violation and a claim submitted to the federal government," though the First Circuit has not yet decided whether that causal connection must be but-for causation or some less demanding standard. Omni Healthcare, No. 18-cv-12558-PBS, 2025 U.S. Dist. LEXIS 1680, at *19 (citing Guilfoile v. Shields, 913 F.3d 178, 190 (1st Cir. 2019)). The Sixth and Eighth Circuits have held that a "sufficient causal connection" requires "but-for" causation; the Third Circuit, on the other hand, requires that at least one of the claims submitted for reimbursement was for medical care provided in violation of the AKS. Mere temporal proximity is not enough, even in the Third Circuit. Courts within the District of Massachusetts have followed both approaches, and this issue is currently on appeal at the First Circuit. See United States v. Regeneron Pharm., Inc., No. 23-8036, 2023 U.S. App. LEXIS 33107 (1st Cir. Dec. 11, 2023).
In holding that the but-for causation standard applies to FCA claims premised on an AKS violation, Judge Saris determined that the First Circuit's Guilfoile decision did not answer this question and that requiring but-for causation in this context "is consistent with basic principles of statutory interpretation." Omni Healthcare, No. 18-cv-12558-PBS, 2025 U.S. Dist. LEXIS 1680, at *22. Judge Saris concluded that "no reasonable jury could find on this record that the submission of claims for [polymerase chain reaction] UTI testing resulted from the alleged AKS violation, i.e., Defendants' commission-based payments to independent-contractor sales representatives." Id. at *23 (finding no evidence that the status of these sales representatives as independent contractors – as opposed to employees, who are covered by the safe harbor – unduly influenced the decision of any provider to order PCR UTI testing from MD Labs).
In cases where the relator or the government can establish a causal connection between an AKS violation and at least one claim submitted for government payment, the causation standard applied will impact the number of allegedly false claims and the damages a defendant may face. Requiring real proof – using the but-for causation standard – is especially important because of the massive penalties authorized by the FCA. The tougher but-for standard, if adopted by the First Circuit, will mean that relators and the government can no longer count on (and cash in on) reimbursement claims that lack a direct causal connection to an AKS violation.
The court rejected OMNI's other two FCA theories as well. As to OMNI's claims that the defendants performed medically unnecessary UTI testing using PCR technology, a more costly alternative to the bacterial urine culture (BUC) tests, the court found that no reasonable jury could conclude that the defendants had the requisite scienter for FCA liability (i.e., that MD Labs knowingly ran unnecessary PCR tests). And as to OMNI's claims that MD Labs violated the AKS by failure to balance bill patients and capping their out-of-pocket costs, the court found that OMNI had not put forth evidence that the defendants submitted a claim for government payment for any patient that had received either of these benefits.
Also of note, Judge Saris acknowledged, but did not reach, the defendants' argument challenging the constitutionality of the FCA's qui tam provision, a defense raised successfully United States ex rel. Zafirov v. Florida Med. Assocs., LLC, No. 8:19-cv-01236-KKM-SPF, 2024 U.S. Dist. LEXIS 176626, at *4 (M.D. Fla. Sep. 30, 2024).
We will continue watching developments on these and other FCA and AKS issues. In the meantime, stay tuned for our look ahead at government enforcement this year as we roll out our Foley Hoag 2025 White-Collar Year in Preview Series.
Originally published 08 January 2025
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