In June 2022, the Fifth Circuit issued two decisions regarding the federal Anti-Kickback Statute (AKS), 42 U.S.C. 1320a-7b(b). The AKS criminalizes the knowing and willful payment of remunerations to induce referrals paid by federal healthcare programs. Remunerations is broadly defined to include anything of value. One opinion (Cooper) addressed self-referrals under subsection (2)(A) of the AKS and the other (Hamilton) addressed when copays may be remuneration under the AKS.
In United States v. Cooper, No. 20-10821 (5th Cir. June 22, 2022), defendant prevailed on appeal. In Cooper, defendants were charged with conspiracy to commit health care fraud and numerous counts of paying or receiving kickbacks under the anti-kickback statute, in the Northern District of Texas. The indictment alleged that for approximately two years, defendants paid and/or received kickbacks in the form of payments to prescribing physicians, pharmacy owners, and Tricare beneficiaries. More specifically, according to the superseding indictment, defendants paid Tricare beneficiary patients for obtaining and filling prescriptions for compounded drugs. They disguised these payments to patients as “grants” for participating in a medical study they referred to as Patient Safety Initiative (“PSI Study”) to evaluate the safety and efficacy of compounded drugs. However, according to the government, the PSI Study was not approved by Tricare, was not overseen by a qualified physician or medical professional, had no control group, and was not designed to gather any useful scientific data relating to the safety and efficacy of any drug, and its real purpose was to compile a list of Tricare beneficiaries who had filled prescriptions so that certain defendants could calculate how much to pay the beneficiaries. To further disguise the source of those payments to the patients, defendants Cesario and Cooper directed the creation of a charity, the Freedom from Pain Foundation, through which payments were made. Cooper plead guilty and Cesario was convicted at trial. (This case is discussed in more detail at https://wirskyelawfirm.com/mixed-verdict-in-compounding-pharmacy-case/).
On appeal, defendant successfully challenged his convictions for paying beneficiaries because he had not paid to induce referrals because the beneficiaries only had prescriptions for themselves. Defendant argued that without referral of a third party, he did not violate AKS subsection (2)(A). In response, the government argued that defendant’s payments induced self-referrals by the beneficiaries. The Fifth Circuit found that the statutory text of subsection(2)(A) did not include self-referrals because it distinguished between the person paid and the individual referred. Thus, defendant may have violated AKS subsection (2)(B) by paying beneficiaries to order drugs for themselves but did not violate (2)(A).
The defendant in United States v. Hamilton, 20-20645 (5th Cir. June 15, 2022), was not so fortunate. The doctor defendant required home health agencies to pay her a $60 fee in exchange for certification of patients for services. She was convicted of conspiracy to solicit kickbacks, conspiracy to commit healthcare fraud, and two counts of false statement relating to healthcare matters in the Southern District of Texas.
On appeal, defendant argued the $60 fee was a legitimate copay under Medicare regulations. The government responded by arguing that the fee was a kickback disguised as a copay to receive the doctor’s certification. In affirming defendant’s conviction, the Fifth Circuit noted that the jury reasonably concluded the fee was a kickback because (a) Hamilton had discussed the fee with the home health agency owners, (b) patients rarely paid the fee, (c) home health agencies generally paid the fee, and (d) the fee was the same regardless of the services rendered.
Takeaways
Both cases may affect the government’s charging decisions in the future. First, in cases involving payments to beneficiaries, it is likely that the government will allege both subsections (2)(A) and (2)(B) so that the conduct will more likely be covered under the AKS. Second, Hamilton may result in the government bringing more cases where co-pays are alleged to be remuneration under the AKS. While there is no one-size-fits-all solution for healthcare providers, two of the factors that the Fifth Circuit noted are important in many cases involving co-pay allegations – did patients generally pay the copay and is it being paid by some other party. Thus, it is important that providers have a policy addressing copays that is likely to withstand scrutiny under federal and state healthcare statutes.