Josh J. Leopold1Josh J. Leopold is a J.D. Candidate at the University of Chicago Law School, Class of 2024. He thanks Matthew Makowski, Abigail Barney, Virginia Robinson, and the entire University of Chicago Law Review Online staff for their insightful comments.
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You are getting wheeled into invasive spine surgery to treat severe back pain. Prior to the surgery, you and your family met with the doctor to discuss options; it was a high-level discussion involving things like chances of success and recovery time. Your doctor mentioned that you needed a spinal implant. Of course, your doctor did not consult you on precisely which brand of implant he planned to use. You—like most people—had no medical expertise and thus relied on your doctor to insert the best spinal implant for your situation.
Your doctor selected a spinal implant manufactured and sold by Company Z. Company Z happened to have treated your doctor to an all-expenses-paid trip to the Bahamas one month before your operation. How do you feel about this? Would you feel better if the doctor told you that he would have selected the spinal implant regardless of whether he received the trip? What if your doctor’s trip to the Bahamas was for the purpose of attending an informational event, where your doctor learned about the advantages of Company Z’s spinal implant?
Congress has decided that awarding kickbacks to doctors to influence medical decisions is unacceptable, at least when the underlying medical care is reimbursed at the government’s expense. To ferret out violations, the statutory regime allows private citizens to bring suit on behalf of the government and receive a portion of the damage award. But there is a lack of clarity over what a plaintiff must prove in these cases to successfully bring suit under the civil False Claims Act (FCA), a statute designed to redress false claims for federal funds.
Some courts have said that FCA suits can be brought whenever a medical provider receives kickbacks connected to federally funded medical care, regardless of whether the kickbacks influenced decisions to provide items or services. Other courts only attach FCA liability where plaintiffs show that but-for the kickback, the medical provider would not have provided the items or services underlying federally funded care.
This Essay explores the current state of the law and argues that the but-for causation standard should be disfavored by courts in these cases. Part I describes the interplay between the FCA and the Anti-Kickback Statute (AKS), before elucidating the causation standards embraced by two different circuit courts. Part II discusses the implications of a but-for causation standard in FCA cases predicated on AKS violations. Such a strict causation requirement results in considerable evidentiary concerns, fails to protect the government from overpayment, and could lead to an increase in kickback activity. Finally, this Essay closes by highlighting an important counterargument: a but-for causation standard may have the surprising effect of making healthcare more accessible to some consumers.
I. False Claims Act Liability for Violations of the Anti-Kickback Statute
The Anti-Kickback Statute (AKS) is a federal criminal statute that aims to minimize conflicts of interest like the one described in the introductory hypothetical. The AKS criminalizes both giving and receiving something of value to generate health care business involving any item or service payable by federal health care programs, like Medicare and Medicaid. The statute was enacted to ensure that clinical decisions are based on patients’ true medical needs rather than improper financial considerations.
AKS violations can give rise to civil liability under the False Claims Act (FCA), a statute designed to combat fraud against the government. The FCA provides in relevant part, “any person who . . . knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval . . . is liable to the United States Government for a civil penalty . . . plus 3 times the amount of damages which the Government sustains because of the act of that person.” AKS-based FCA claims have long been brought under the premise that AKS violations render subsequent reimbursement claims false or fraudulent and are thus violations of the FCA. While the AKS does not create a private cause of action (and so allows only federal prosecutors to bring an action), the FCA allows individuals known as “qui tam relators” to bring actions on behalf of the government for violations of the AKS.
To bring an FCA action predicated on an AKS violation, it is generally accepted that relators only need to prove the AKS violation by a preponderance of the evidence. Relators can bring an FCA action independent of the government, after which the government can choose to join the action, decline to intervene, or move to dismiss the action. A relator who successfully brings an FCA qui tam action can receive up to 30% of the government’s recovery. This financial reward incentivizes individuals with inside information to come forward and reveal a scheme. Relators are sometimes “current or ex-business partners, hospital or office staff, patients, or competitors.” These claims are an important tool used to uncover and curb healthcare fraud, which costs the government billions of dollars per year.
As part of the Affordable Care Act passed in 2010, Congress amended the AKS to codify the statute’s interplay with the FCA. The amended AKS notes 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). The amendment did not define “resulting from.” This lack of definition led to questions about what causal relationship between provided items or services and the associated AKS violation is required to constitute a false or fraudulent claim for the purposes of the FCA.
It is crucial to determine what sorts of AKS violations can form the basis of FCA claims because, as explained above, the FCA—and not the AKS—allows private parties (relators) to bring suit, and relators are instrumental to uncovering fraud against the government. The AKS alone, and the relatively small supply of federal prosecutors who enforce it, have limited resources compared to private parties with inside information. Thus, the government has the best chance of rooting out kickback schemes with the help of the FCA through its qui tam mechanism. While other circuits have ruled on the issue, this analysis focuses on the Third and Eighth Circuits’ divergent interpretations because of the recency of these circuits’ decisions and their varied approaches to the problem.
A. The Third Circuit
The Third Circuit adopted a lenient causation standard in United States ex rel. Greenfield v. Medco Health Solutions, Inc. (2018). The court held that FCA liability from an AKS violation requires some connection between a kickback scheme and subsequent medical care. That is, mere “temporal proximity”—a demonstration that federally funded medical care came after a kickback—is not alone enough to prove that those items or services “resulted from” a violation of the AKS and thus is not enough to form the basis of an FCA claim. The court explained that “[a] kickback does not morph into a false claim unless a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.”
Importantly, however, the Third Circuit maintained that a plaintiff need not prove that a kickback influenced a provider’s medical decision for that kickback to give rise to FCA liability. A demanding but-for causation requirement, the court explained, would run afoul of the legislative intentions underlying both the FCA and AKS because the two statutes aim to combat fraud in the medical industry. It would be incredibly difficult, the court noted, for any plaintiff to prove that a doctor would not have referred a patient or provided certain items or services if not for a kickback.
B. The Eighth Circuit
The Eighth Circuit explicitly disagreed with the Third Circuit in United States ex rel. Cairns v. D.S. Med. (2022). The court held that a but-for causation standard is required to prove FCA cases rooted in AKS violations. The court relied largely on Burrage v. United States (2014), a Supreme Court case that understood “resulting from” in the Controlled Substances Act to impose a but-for causation requirement.
Put simply, the Eighth Circuit held that for a violation of the AKS to give rise to FCA liability, plaintiffs must prove that the items or services at issue would not have been provided without the kickback. That is, the kickback must have induced the decision to provide the underlying items or services. A plaintiff could not establish an AKS-based FCA claim in the Eighth Circuit by showing only an association between a false claim and subsequent medical care.
II. Implications of a Stricter Causation Standard
From a statutory interpretation perspective, it is not clear whether the Eighth Circuit has properly understood the plain text of the 2010 amendment that codified the connection between the AKS and FCA. Indeed, the Eighth Circuit’s decision reawakens a familiar debate among scholars and practitioners: whether “results from” should be associated with but-for causation. Some empirical research suggests that most lay people do not understand “results from” to indicate but-for causation. However, irrespective of whether Burrage and its progeny are correct in their understanding that “results from” demands a but-for causation standard, Cairns promises to complicate an already dizzying area of law.
This Part discusses the implications of a but-for causation standard in FCA cases predicated on AKS violations. Section A explains that adoption of a but-for causation standard will result in considerable evidentiary concerns. Section B illustrates that a but-for causation standard is inconsistent with the FCA’s aim to protect the government from overpaying for reimbursements. Section C points out that a but-for causation standard could lead to an increase in kickback activity. Finally, Section D acknowledges that a but-for causation standard could have the surprising effect of making healthcare more accessible for some consumers.
A. Evidentiary Concerns
In AKS-based FCA cases, courts and plaintiffs in the Eighth Circuit must expend considerable resources to determine why a decisionmaker—often a physician—recommended a certain type of medical care.
Under Cairns, the plaintiff must prove that a physician would not have sought reimbursement for an item or service if not for the related kickback. It is difficult to imagine how this could be done. Such an inquiry is arguably more demanding than that required by Burrage, which read the Controlled Substances Act to require a determination of whether a certain drug was the but-for cause of someone’s death. While the Burrage standard could be met using something like an autopsy, the Cairns standard is more elusive. Absent a written or verbal admission from the defendant, it is not clear how a plaintiff might show that certain care would not have been provided if not for a kickback. The problem is exacerbated by the ubiquity of various types of remuneration paid to physicians and other medical providers in the United States. Of course, many of the benefits provided to medical providers are legitimate and legal; however, it may be particularly challenging to prove but-for causation in the context of medical decisions because payments to medical providers are par for the course in the industry.
One response to the above concern might be that the plaintiff could show some unusual behavior or recommendations by the defendant to prove but-for causation. That is, perhaps but-for causation could be shown through a provider’s use of certain items or services and accompanying kickbacks in cases where those items or services are clearly not medically necessary. In such cases, it could seem obvious that the provider would not have recommended the item or service if not for the kickback. Alternatively, plaintiffs might show but-for causation through a kickback and corresponding recommendation of a relatively ineffective yet expensive medication, treatment, or service when superior and cheaper alternatives were available.
The above response to the evidentiary concern may be unsatisfying because it is unlikely that providers will engage in such blatant abuse. Cairns was decided recently, so there are currently no Eighth Circuit cases that have successfully proved but-for causation.
B. Protecting the Government
While the aim of the AKS is generally understood to focus on insulating patient care from improper financial considerations, the aim of the FCA is more about combatting fraud against the government. That is, the FCA represents the government’s desire to recuperate reimbursements paid out for unnecessary medical care. As the Eighth Circuit remarked, “The FCA attaches liability, not to the underlying fraudulent activity, but to the claim for payment.”
The but-for standard embraced by the Eighth Circuit may be inconsistent with the FCA’s broader aim to recuperate overpayments. The government might indirectly pay the cost of the kickbacks that underlie AKS violations irrespective of whether the kickbacks actually worked to induce the provider of care. The costs of the kickback have to come from somewhere. And presumably, the costs of the kickback are baked-in to the items or services sold by the payer of the kickback. If the cost of kickbacks is passed on to the government regardless of the kickback’s effect on the provider of medical care, perhaps the underlying purpose of the FCA favors the looser standard adopted by the Third Circuit.
C. Potential Adverse Consequences of Evidentiary Demands and Overpayment
A stricter causation standard for AKS-based FCA claims could lead to an increase in kickback activity, at least partly because of the increased evidentiary demands described above. The success of the statutory regime relies on incentivizing private relators with inside information to bring suit. If relators realize that these claims are too difficult to prove, they may shy away from them completely. And kickback activity already appears to have a pernicious effect on healthcare costs for the government and consumers. One study found that doctors who receive payments from drug companies related to a specific drug tend to write more prescriptions for that drug when compared to doctors who do not receive payments. While the study does not clearly establish a causal link between payments and an increase in prescriptions, a mountain of other empirical evidence reveals that payments skew doctor behavior and lead to an increase in pharmaceutical costs.
In sum, a but-for causation standard will not always ameliorate government overpayment—at least where relators cannot show that the overpayment induced providers to make certain medical decisions. The but-for standard risks burdening government programs by allowing overpayment to slip through the cracks.
D. Marginal Benefits of the But-for Causation Standard
One advantage of the Eighth Circuit’s standard is that it is somewhat clear. A more lenient but fuzzy standard—like that embraced by the Third Circuit—could arguably over-deter medical providers from activity that might be perceived as receiving a kickback. For example, providers might not attend important informational events because they worry that event attendance could be considered remuneration.
Of course—setting aside FCA liability—the AKS might deter providers from borderline activity anyway. While prosecutors might prioritize more obvious AKS violations, relators might still bring borderline FCA cases. Relators might be incentivized to pursue even borderline violations because of the chance for a cut of the fine and because, in at least some cases (such as in Cairns itself), relators are competitors of defendants in the marketplace.
Nevertheless, surely relators will be more incentivized to bring claims under the looser standard adopted by the Third Circuit because of an ostensibly higher chance of victory. Facilitating AKS-based FCA claims with a more lenient standard could be good for the market, as intimated above, because companies will police each other. Insofar as looser standards encourage gratuitous lawsuits between competitors, though, they could promote inefficiencies.
Additionally, by discouraging lawsuits from relators, the Eighth Circuit’s standard might have the surprising effect of making healthcare more accessible for some consumers. Tino Illiparambil argues that patient assistance programs (PAPs)—through which the government pays for low-income patients’ prescriptions during coverage gaps—are vulnerable to both AKS and FCA liability. Moreover, Andrew Hyer argues that AKS-based FCA claims against rural healthcare providers, which tend to have tight operating budgets, are expensive to defend and thus could decrease certain communities’ access to care. If the universe of AKS-based FCA claims is narrowed, as it would be under an embrace of the Eighth Circuit’s standard, perhaps PAPs and rural providers could operate more readily and cheaply.
This Essay illuminates two divergent causation standards endorsed by courts in FCA claims predicated on AKS violations. It argues that, while a but-for causation standard has some marginal advantages, such a strict standard promises to result in evidentiary concerns, fails to protect the government from overpayment, and could lead to an increase in kickback activity.
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Josh J. Leopold is a J.D. Candidate at the University of Chicago Law School, Class of 2024. He thanks Matthew Makowski, Abigail Barney, Virginia Robinson, and the entire University of Chicago Law Review Online staff for their insightful comments.