d Physician Care, which in turn, billed Medicare for that business and then split the fee with MPI.Pursuant to the arrangement, in the first 18 months, MPI paid the Consortium $90,000. The monthly payments from MPI stopped around May 2012, but MPI continued data mining the Consortium’s records, and between December 2010 and June 2015, Vital and Physician Care billed the federal government over $700,000 for services provided to the Consortium’s clients. The extent to which those payments related to services that resulted from the Consortium’s rotational referral system (which was not challenged), rather than from MPI’s data mining of the records it purchased from the Consortium, is unclear.Records That Can Be Data-Mined to Find Medicare Patients May Constitute “Referrals”The Anti-Kickback Statute prohibits “knowingly and willfully offer[ing] or pay[ing] any remuneration . . . to any person to induce such person [] to refer an individual” for a federally reimbursable healthcare service. 42 U.S.C. § 1320a-7b(b)(2). In the district court’s first bench trial, in July 2019, the court found for the defendants on the grounds that the patient records that MPI purchased were not “referrals.” Recounting its prior opinion reversing that determination, the Seventh Circuit noted:The plaintiff appealed, challenging the district court’s interpretation of a “referral” as unduly narrow. We agreed, concluding that Congress’s “definition of a referral under the Anti-Kickback Statute is broad, encapsulating both direct and indirect means of connecting a patient with a provider.” [Stop Illinois Health Care Fraud, LLC v. Sayeed, 957 F.3d 743, 750 (7th Cir. 2020).] We also observed that the defendants’ conduct— paying to access medical records that it used to solicit new clients—qualified as a form of indirect referral giving rise to an unlawful kickback scheme.Whether Defendants “Knowingly and Willfully” Violate the AKS Depends on Their Subjective IntentSayeed and his companies complained that the “district court

result, the Second Circuit ruled that the district court did not err in dismissing plaintiff’s federal FCA claim for failure to state a claim.The McKesson decision reinforces the notion that a relatively high standard is necessary to meet the intent requirements of the AKS, and also suggests that good faith attempts to comply with the law will likely help avoid liability. At the same time, however, the court emphasized the importance of the HHS-created safe harbors and advisory opinions for demonstrating efforts to comply with the AKS. A strong understanding of both the safe harbors and advisory opinions is key in developing a strong AKS-compliance program. Proper trainings are equally important; these trainings should explain the legitimate and appropriate motivations for various business decisions and programs such that employees understand the company is not acting with a “bad purpose” that would give rise to AKS violations.Footnotes96 F.4th 145 (2d Cir. 2024).Id. at 159.Id. at 157.42 U.S.C. § 1320a-7b(b)(2)(B).Id. at 152, n.3. (citing 42 U.S.C. § 1320a-7b(g)).Id. at 151-52.Id. at 152.United States ex rel. Hart v. McKesson Corp., No. 15-CV-0903 (RA), 2023 WL 2663528, at *13 (S.D.N.Y. Mar. 28, 2023), aff’d in part on relevant grounds, vacated in part, 96 F.4th 145 (2d Cir. 2024).McKesson, 96 F.4th at 162.Id. Id. Id. at 157.Id. Id. at 158.Id.Id.United States v. Montgomery, No. 20-5891, 2022 WL 2284387, at *12 (6th Cir. June 23, 2022); United States v. Nora, 988 F.3d 823, 830 (5th Cir. 2021), cert. denied, 143 S. Ct. 2581 (2023); United States v. Hill, 745 F. App’x 806, 815–16 (11th Cir. 2018); United States v. Nagelvoort, 856 F.3d 1117, 1126 (7th Cir. 2017); United States v. Goldman, 607 F. App’x 171, 174–75 (3d Cir. 2015); United States v. Yielding, 657 F.3d 688, 708 (8th Cir. 2011).McKesson, 96 F.4th at 155.Id. 156.Id. at 160.Id.McKesson, 96 F.4th at 160, n.10.McKesson, 96 F.4th at 161.McKesson, 96 F.4th at 161-62.

nnual out-of-pocket cost caps for Medicare Part D enrollees, thus pushing demand away from purely copay assistance to a more wraparound support that includes other aspects of care. The changes to categories of assistance provided by PAPs due to the new out-of-pocket cost caps may alter the risk-benefit evaluation by OIG of charity PAPs it has historically been wary of.One final observation is OIG’s recognition that the arrangement does not implicate the Beneficiary Inducements CMP because a patient’s eligibility is not contingent on the selection of a particular physician or pharmacy, and therefore the arrangement does not influence an enrollee’s selection of a particular provider.This callout reaffirms that any manufacturer arrangement with a charity—vis a vis its patient support hub and/or specialty pharmacy, in the case of specialty drugs—should in no way include a transfer of information that could in any way indicate what medication(s) an enrollee is currently taking.FOOTNOTES[i] 42 U.S.C. § 1320a–7b(b).[ii] 42 U.S.C. § 1320a–7a(a)(5).

Americans spend more than $3 trillion per-year on healthcare-related expenses. Of that, the National Health Care Anti-Fraud Association estimates that between $60-250 billion is lost to fraud every year.[1] Not all of those losses, however, relate to taxpayer-funded health insurance programs—such as state and federal Medicaid/Medicare—but involve losses to private payers and other non-traditional funding sources.To combat fraud occurring beyond the scope of taxpayer-funded healthcare plans—where laws such as the Anti-Kickback Statute and the Stark Law don’t reach—the Department of Justice (“DOJ”) has become increasingly creative. One of DOJ’s most creative avenues is the utilization of honest services fraud (18 U.S.C. § 1346) to prosecute bribes, kickbacks, and other improper payments in the health care industry.Traditionally, the Anti-Kickback Statute (42 U.S.C. § 1320a-7b)—alone or in conjunction with the Federal False Claims Act (31 U.S.C. § 3729 et seq.)—has been the primary mechanism for prosecuting healthcare bribes and kickbacks. The Anti-Kickback Statute works to ensure that decisions regarding purchasing, delivering, or providing healthcare-related services are not driven by improper financial arrangements. As written, the Anti-Kickback Statute does well to prohibit those arrangements, but it only applies to federally funded healthcare programs; meaning, it has very limited application, if any, to private payers or other non-traditional payment platforms.Honest Services Fraud—a Novel ApproachCodified as 18 U.S.C. § 1346, honest services fraud prohibits “schemes to defraud” that “deprive another of the intangible right of honest services.” In plain English, a person commits honest services fraud when, in violation of a fiduciary duty, that person participates in a bribery or kickback scheme. See Skilling v. United States, 561 U.S. 358, 407 (2010)

-07105.pdf[ix]Id.[x]Id.[xi]Id.[xii]Id.[xiii]Id.[xiv]Id.; see also Levinson, Daniel R., Beneficiaries Remain Vulnerable to Sales Agents’ Marketing of Medicare Advantage Plans, Dept. of Health & Human Servs., March 2010, available here.[xv]Id.[xvi]Id.[xvii]https://www.regulations.gov/document/CMS-2023-0187-0376/comment[xviii]https://mobile.reginfo.gov/public/do/eoDetails?rrid=416811[xix]https://www.federalregister.gov/d/E8-21686[xx]https://www.finance.senate.gov/imo/media/doc/Deceptive%20Marketing%20Practices%20Flourish%20in%20Medicare%20Advantage.pdf[xxi]https://www.ecfr.gov/current/title-42/part-422/subpart-V[xxii]https://www.finance.senate.gov/hearings/medicare-advantage-annual-enrollment-cracking-down-on-deceptive-practices-and-improving-senior-experiences[xxiii]https://www.finance.senate.gov/chairmans-news/wyden-questions-medicare-marketers-business-tactics[xxiv]https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-brian-m-boynton-delivers-remarks-2024[xxv] 42 U.S. Code § 1320a–7b[xxvi]Id.

“many of the state anti-kickback laws have no scienter requirement or a lesser requirement than willfulness,” such that “even though his complaint is insufficient to state a federal FCA claim based on the federal AKS, it may be sufficient to state a state-law claim under one or more of the state anti-kickback laws cited in his complaint.”CONCLUSIONMcKesson will surely be cited frequently by FCA and AKS defense counsel in the Second Circuit and elsewhere, as it firmly establishes the AKS’s standard for “willfulness” in a manner favorable to defendants and contrasts the approach with less stringent standards. The court’s discussion of statutory and regulatory safe harbors, and HHS-OIG publications, encourages defendants to present arguments that good faith compliance—even if imperfect—with such safe harbors and publications, defeats scienter under the AKS and in turn any resulting FCA claims. No. 23-726-CV, 2024 WL 1056936 (2d Cir. Mar. 12, 2024). 2024 WL 1056936, at *2. Id. Id. at *3. 42 U.S.C. § 1320a-7b(b)(2)(B). 2024 WL 1056936, at *3. Id.at *6 (quoting Bryan v. United States, 524 U.S. 184, 191 (1998), and United States v. Kukushkin, 61 F.4th 327, 332 (2d Cir. 2023)). Id. Id. Id. at *4. Id. at *4–6. Id. at *5. Id. at *7. Id. (alteration in original). Id. at *7–8. Id. at *7 (citations omitted). Id. at *8. Id. Id. at *5 n.6. Id. at *9 n.9. Id. at *9. Id. at *10. Id. Id. Id.at *11 (quoting United States ex rel. Hart v. McKesson Corp., No. 15-CV-0903 (RA), 2023 WL 2663528, at *8 (S.D.N.Y. Mar. 28, 2023)). Id. at *12.[View source.]

S.FOOTNOTEShttps://oig.hhs.gov/documents/advisory-opinions/1056/AO-22-19.pdfhttps://www.fdalawblog.com/2022/10/articles/prescription-and-otc-drugs/oig-limits-pharmaceutical-manufacturers-ability-to-offer-drug-cost-sharing-subsidies/Pharm. Coal. for Patient Access v. United States, No. 3:22-CV-714 (RCY), 2024 WL 187707, at *5 (E.D. Va. Jan. 17, 2024)Id. at 5-6 5 USC § 706(2)(A) and (B). The AKS provides, in relevant part, “Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person […] (B) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.” 42 USC § 1320a-7b(b)(2)Pharm. Coal. for Patient Access, at 5 599 U.S. 762 (2023).Id. at 41.Id. at 41-2Id. at 43Id. at 45Id.

patient is a federal program beneficiary. The government is concerned that offering or rewarding such inducements to patients may result in overutilization, biased decisions concerning care, and increased costs to the Medicare, Medicaid, or other government programs. Penalties for illegal inducements may include administrative, civil, and criminal penalties; repayment to government programs; and exclusion from federal programs. Increasingly, private payors are also challenging such inducements. It is imperative that healthcare providers and their staff understand the applicable laws and limits.I. Applicable Laws.Anti-Kickback Statute ("AKS"). The federal AKS prohibits anyone from knowingly and willfully soliciting, offering, receiving, or paying any form of remuneration to induce referrals for any items or services for which payment may be made by any federal healthcare program (e.g., Medicare, Medicaid, etc.) unless the transaction is structured to fit within a regulatory exception. (42 U.S.C. § 1320a-7b(b)). The statute has been interpreted to cover any arrangement in which “one purpose” of the remuneration is to induce referrals for or receipt of federal program business. (United States v. Kats, 871 F.2d 105 (9th Cir. 1989); United States v. Greber, 760 F.2d 68 (3d Cir. 1985)). An AKS violation is a felony punishable by up to 10 years in prison, a $100,000 criminal penalty, a $100,000+[i] civil penalty, treble damages, and exclusion from participating in the Medicare or Medicaid programs. (42 U.S.C. §§ 1320a-7 and 1320a-7b(b)(2)(B); 42 C.F.R. §§ 1003.300 and 1003.310; 45 C.F.R. § 102.3). An AKS violation is likely also a violation of the federal False Claims Act (42 U.S.C. § 1320a-7b(g); 31 U.S.C. § 3729), which exposes defendants to mandatory self-reports and repayments, additional civil penalties of $11,000+ to $22,000+ per claim, treble damages, private qui tam lawsuits, and costs of suit. (31 U.S.C. §§ 3729 and 3730; 42 U.S.C. §§ 1320a-7a and 1320a-7k(d); 28 C.F.R. §§ 85.5 and 1003

the federal government relies so heavily on whistleblowers to uncover evidence of committing Medicare fraud, and that is why, under the qui tam provisions, the federal legislation protects whistleblowers from retaliation and provides such a lucrative financial incentive to blow the whistle on suspected fraud within the healthcare system.2. Most Medicare Fraud Cases Use the False Claims ActThe federal legislation that most whistleblowers use to report Medicare fraud is the False Claims Act (31 U.S.C. §§ 3729 et seq.), which covers fraudulent claims for compensation that are made against government programs, like Medicare. This is good news for potential whistleblowers because the federal False Claims Act has some of the strongest protections from workplace retaliation, as well as some of the most generous whistleblower awards. However, if your healthcare fraud, waste, or abuse claim is based on physicians taking kickbacks for patient referrals, it may utilize the:Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b))Physician Self-Referral Law, also known as the Stark Law (42 U.S.C. § 1395nn)3. Retaliating Against a Whistleblower is ProhibitedThe anti-retaliation provision of the False Claims Act, 31 U.S.C. § 3730(h), is often regarded as more protective of whistleblowers than other statutes that provide an avenue for private citizens to report evidence of committing Medicare fraud or misconduct to law enforcement and file a qui tam lawsuit.First off, the False Claims Act prohibits a wide range of retaliatory conduct, not just termination. It also forbids:HarassmentDemotionSuspensionThreatening to retaliateAny other form of employment discriminationHowever, many employers that stand to lose business or a lucrative scheme of Medicare fraud may still retaliate against the whistleblower who reported the false claim. If you can show that the retaliation was connected to your lawful whistleblowing activities, though, you can file a wrongful termination or workplace retaliation claim and recover:The ba

ny makes a false statement to the government or engages in a fraudulent course of conduct. Each false submission allows the government to recover three times the actual damages suffered. For example, if a health care provider submits a $1,000 false Medicaid claim, the government can obtain $3,000 in damages (i.e., treble damages). Every year, a health care company may submit hundreds, or thousands, of Medicaid claims, meaning a final damages award for systemic fraudulent conduct can be massive.Similarly important is the fact that the FCA gives whistleblowers (called “relators”) significant financial incentives to file civil law suits (called “qui tam” actions) against health care providers, which can result in whistleblowers receiving 15 to 30 percent of the money recovered by the government. These whistleblower actions have played an ever-increasing role in health care fraud investigations.2. Anti-Kickback and the Health Care Fraud Statute (criminal)The Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320a-7b, is a federal criminal statute prohibiting any person from intentionally offering, paying, soliciting or receiving anything of value (called “remuneration”) to induce or reward health care referrals. AKS carries with it a maximum 10 year term of imprisonment and fines. The more general health care fraud statute, 18 U.S.C. § 1347, criminalizes any scheme to defraud the government or a private health care payer, and carries with it a maximum 10 year term of imprisonment and fines.Law Enforcement Tools to Collect Information and DocumentsThe government uses the following 7 tools to extract documents and information from health care providers:• Requests for Voluntary Cooperation/Letter Requests: These are informal inquires that allow for a broad scope of information to be collected.• Licensing Agency Audit/Inspection: State authorities can conduct periodic audits or inspections pursuant to state law, which can include on-site inspections and requests for documents.• Administrative Subpoen