In a recent unpublished decision, the U.S. Court of Appeals for the Fifth Circuit provided useful guidance as to the scope of the Anti-Kickback Statute (“AKS”) “one purpose test” as applied in False Claims Act cases. See United States ex rel. Ruscher v. Omnicare, Inc., 2016 WL 6407128 (5th Cir. Oct. 28, 2016).
Defendant Omnicare is the largest U.S. pharmacy for nursing and other long-term care facilities. Relator Ruscher was a whistleblower who had worked in Omnicare’s collections department from 2005 through 2008.
In her qui tam complaint, Ruscher alleged that Omnicare made false claims for Medicare/Medicaid reimbursement because Omnicare was paying kickbacks to long-term care facilities. She alleged that Omnicare offered the facilities prompt-payment discounts and, when billing disputes arose with the facilities, Omnicare failed to collect all of the debt it was owed. The district court granted summary judgment to Omnicare on Ruscher’s claims.
The Fifth Circuit reviewed the AKS’s prohibition against the payment of funds or benefits designed to encourage referrals for services to be paid for by Medicare/Medicaid. The court reiterated the “one purpose” test: To prove a defendant has violated the AKS, a “[r]elator need only show that one purpose of the remuneration was to induce such referrals.” In other words, if the defendant had multiple reasons for providing a benefit, one of which was to induce or reward referrals, that one purpose would render the benefit an illegal kickback and the subsequent Medicare/Medicaid claim would be “false.”
The court noted, however, that “[t]here is no AKS violation [ ] where the defendant merely hopes or expects referrals from benefits that were designed wholly for other purposes.” In affirming summary judgment for Omnicare, the Fifth Circuit agreed with the district court that Omnicare’s prompt-pay discounts were, “by definition,” to induce prompt payment, not referrals. Although the long-term care facilities may have sent more prescriptions to Omnicare as a result of the discounts, that fact was irrelevant because Omnicare’s discounts were not intended to trigger such referrals.
The court also determined that Omnicare’s practices regarding collection of the facilities’ debts were merely business decisions. Omnicare sought not to “unnecessarily aggrev[ate]” business partners while negotiating future contracts, and to “avoid confrontational collection practices that might discourage [the long term care facilities] from continuing to do business with Omnicare.” “Although Omnicare may have hoped for Medicare and Medicaid referrals,” the court concluded, “absent any evidence that Omnicare designed its settlement negotiations and debt collection practices to induce such referrals, Relator cannot show an AKS violation.”
The Fifth Circuit’s conclusion helps further define the space for appropriate conduct under the AKS and False Claims Act. The decision reinforces that legitimate business practices that only incidentally provide a benefit to healthcare providers should not fall within the “one purpose” test, and thus should be permissible.