In ShortThe Situation: Under 42 U.S.C. § 1320a-7b(g), a claim that "includes items or services resulting from a violation" of the Anti-Kickback Statute ("AKS") is a false claim for purposes of the False Claims Act ("FCA"). This provision is typically central to FCA suits that allege AKS violations—a theory of liability that health care providers know all too well.

We also provide examples of cases, like the Markovich case, where these tools have been successfully used by federal prosecutors. As a conclusion, we describe steps companies and executives in this sector can take now to avoid a face-to-face encounter with these statutes as a criminal defendant.A. The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b))Section 1320a-7b(b) of Title 42, also known as the Anti-Kickback Statute or “AKS”, which became law in 1972, prohibits the payment or receipt of “any remuneration” in exchange for the referral of a patient to a health care provider or for the purchase of a health care good or service.3 Each criminal charge under the statute carries a potential penalty of 10 years’ imprisonment, and a potential fine of $250,000 for an individual defendant and $500,000 for a corporate one.4 However, as noted above, the scope of the Anti-Kickback Statute is limited to health care that is paid for by a “Federal health care program.”

Despite its central importance to the application of the federal anti-kickback statute, 42 U.S.C. § 1320a-7b(b) (AKS), the term “refer” is not defined by statute or regulation, and it has seldom been interpreted by the courts or regulatory agencies. Following the lead of the U.S. Court of Appeals for the Seventh Circuit, a recent federal district court decision suggests that the term may reach further than many expect.

In United States ex rel. Lutz v. Mallory, et al., 988 F.3d 730 (4th Cir. 2021), the court upheld the FCA judgment entered in the trial court, which was predicated upon illegal kickback payments made by the laboratory to independent sales contractors and physicians. The decision is notable both for holding that commission-based payments to independent sales contractors violate the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) (AKS), and for affirming a jury verdict that, once treble damages and penalties were added, resulted in a judgment equal to seven times the amount of damages assessed by the jury.Case backgroundThe defendants in the case are LaTonya Mallory, who founded Health Diagnostics Laboratory (HDL) in 2008 to provide specialized testing for cardiovascular disease and diabetes, and Floyd Calhoun Dent III, and Robert Bradford Johnson, who founded BlueWave Health Care Consultants, Inc. (BlueWave). In 2009, BlueWave entered into a contract with HDL and another laboratory called Singulex to provide marketing and sales services.

Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen (July 24, 2020). 42 U.S.C. § 1320a-7b(b).See, e.g., United States v. Greber, 760 F.2d 68 (3d Cir.), cert. denied, 474 U.S. 988 (1985). 42 U.S.C. § 1320a-7b(b)(1), (2); 42 U.S.C. § 1320a-7(a)(3).

ct to criminal prosecution or other enforcement measures.Compliance with the Federal AKS is something of an industry unto itself, but the federal statute represents only part of the risk for health care companies, providers, and individuals. All but one of the 50 states, as well as the District of Columbia, have analogous commercial bribery laws on the books that target corruption in the health care industry.And of these 51 jurisdictions, 35 proscribe kickbacks and the like in the health care industry even if the goods or services are reimbursable only by private health insurance and involve no public money at all. These additional state laws and regulations thus often reach far beyond their federal counterpart. Accordingly, any complete and fulsome analysis of an individual’s or entity’s anti-kickback exposure necessarily requires separate consideration of these state law analogues.Access the State Health Care Anti-Kickback Analogues survey.*Chart reflects updates as of June 12, 2023.42 U.S.C. § 1320a-7b(b)(1). 42 U.S.C. § 1320a-7b(b)(2).E.g.,United States v. Narco Freedom, Inc., 95 F. Supp. 3d 747, 756 (S.D.N.Y. 2015) (citingKlaczak v. Consol. Med. Transp., 458 F. Supp. 2d 622, 678 (N.D. Ill. 2006)).SeeMedicare and State Health Care Programs: Fraud and Abuse; Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements, 81 Fed. Reg. 88368, 88379 (Dec. 7, 2016) (“[T]he anti-kickback statute does not have any exceptions for items or services of nominal value.”); Medicare and State Health Care Programs: Fraud and Abuse; OIG Anti-Kickback Provisions, 56 Fed. Reg. 35952, 35954 (July 29, 1991) (rejecting commentators’ call forde minimissafe harbor).See, e.g.,United States v. Nagelvoort, 856 F.3d 1117, 1130 (7th Cir. 2017);United States v. Borrasi, 639 F.3d 774, 781-82 (7th Cir. 2011);United States v. Kats, 871 F.2d 105, 108 n.1 (9th Cir. 1989);United States v. Greber, 760 F.2d 68, 71-72 (3d Cir. 1985);Polk County v. Peters, 800

*Chart reflects updates as of December 11, 2021.[1] 42 U.S.C. § 1320a-7b(b)(1).[2] 42 U.S.C. § 1320a-7b(b)(2).[3]E.g., United States v. Narco Freedom, Inc., 95 F. Supp. 3d 747, 756 (S.D.N.Y. 2015) (citing Klaczak v. Consol. Med. Transp., 458 F. Supp. 2d 622, 678 (N.D. Ill. 2006)).

To avoid regulatory scrutiny, those seeking to employ healthcare initiatives in New Jersey should consider the following State and Federal laws in structuring such programs or arrangements[1].I. Federal LawAnti-Kick Back StatuteThe Federal Anti-Kickback Statute (“AKS”) (also referred to as section 1128B of the Social Security Act), 42 U.S.C. 1320a-7b is a criminal statute that prohibits the exchange of (or offer to exchange) anything of value, directly or indirectly, overtly or covertly, in an effort to induce or reward the referral of business reimbursable by federal health care programs. 42 U.S.C. 1320a-7b(b)(1),(2).

In a July 2020 decision, the district court held that “Relator has articulated a viable implied-false-certification argument based on his allegations that Defendants violated section 1320a-7b(a) during a time they were submitting false Medicaid and Medicare reimbursement claims.”42 U.S.C. § 1320a-7b(a)(4) is a criminal statute providing that “[w]hoever … having made application to receive any [benefit or payment under a Federal health care program] for the use and benefit of another and having received it, knowingly and willfully converts such benefit or payment or any part thereof to a use other than for the use and benefit of such other person” shall be guilty of a felony or misdemeanor.The district court held that section 1320a-7b(a)(4) could serve as the basis for Relator’s FCA misappropriation claims. Defendants argued that that criminal statutory provision could not, as a matter of law, serve as the basis for an FCA claim, and sought an interlocutory appeal.

Accordingly, any complete and fulsome analysis of an individual’s or entity’s anti-kickback exposure necessarily requires separate consideration of these state law analogues.Access the State Health Care Anti-Kickback Analogues survey. 42 U.S.C. § 1320a-7b(b)(1). 42 U.S.C. § 1320a-7b(b)(2).E.g., United States v. Narco Freedom, Inc., 95 F. Supp. 3d 747, 756 (S.D.N.Y. 2015) (citing Klaczak v. Consol. Med. Transp., 458 F. Supp. 2d 622, 678 (N.D. Ill. 2006)).See Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements, 81 Fed. Reg. 88368, 88379 (Dec. 7, 2016) (“[T]he anti-kickback statute does not have any exceptions for items or services of nominal value.”); Medicare and State Health Care Programs: Fraud and Abuse; OIG Anti-Kickback Provisions, 56 Fed. Reg. 35952, 35954 (July 29, 1991) (rejecting commentators’ call for de minimis safe harbor).