According to the Court’s opinion, shortly after the
plaintiff had been hired, she was told by an ER Nurse that certain physicians
had received embroidered jackets from the ambulance company (which received 90%
of the Hospital’s ambulance requests even though it was located farther away
than a competitor). She notified the hospital president of a potential AKS
issue. She ultimately concluded that only one
physician had received a jacket, valued at less than $25. The plaintiff also learned that the ambulance
company supplied hotdogs and hamburgers at the hospital’s employee wellness
fairs. She then notified the CEO and HR that there was an AKS violation. She was instructed to not put any other
conclusions in writing before completing her investigation. Nonetheless, she continued to send emails
about an AKS violation and need to reimburse the federal government (although
she did not specify what needed to be reimbursed). There was some testimony that she wanted the
hospital to reimburse the government
for the food and jacket it received from
the ambulance company. She suspected
that the cost of the ambulance service might also need to be reimbursed, but
those services were never billed by the hospital. She was terminated following the conclusion
of her investigation.
The district court granted summary judgment on the lack of
direct evidence and lack of pretext for the hospital’s explanation about her unprofessionalism,
lack of interpersonal skills and insubordination. The Sixth Circuit refused to reach the issues
of causation or pretext because it found that she could not prove a prima facie
case in that she engaged in a protected activity because lacked an objectively
reasonable belief of an AKS violation.
The FCA has existed since the Civil War and “prohibits any
person from ‘knowingly present[ing], or caus[ing] to be presented, a false or
fraudulent claim for payment or approval.’ 31 U.S.C. § 3729(a)(1)(A). “AKS violations
can constitute FCA violations where a claim submitted to the government for reimbursement
includes items or services resulting from a violation of the AKS, 42 U.S.C. §
1320a-7b(g), or where cost reports submitted to the government for
reimbursement include an express certification that the underlying claims
comply with the AKS.” To protect
employees who expose fraud against the federal government, the FCA’s
anti-retaliation provision” at the time of the plaintiff’s discharge shielded “employees
from retaliation for “lawful acts done . . . in furtherance of other efforts to
stop one or more violations of this subchapter.” 31 U.S.C. § 3730(h).” Congress
subsequently amended the statute to preclude terminating employees “because of
lawful acts done . . . in furtherance of an action under this section or other
efforts to stop 1 or more violations of this subchapter.” 31 U.S.C. § 3730(h). The burden of proof for FCA retaliation is
the same for other employment retaliation statutes.
The plaintiff contended that she engaged in protected
activity by investigating and reporting on the potential AKS violations. Internal reports of statutory violations of
the AKS and/or FCA and fraud on the government can constitute protected
activities. Furthermore, there is a
lenient standard in evaluating whether investigating and reporting fraud
constitutes protected activity. The plaintiff
need “not complete an investigation into potential fraud or uncover an actual
FCA violation to undertake protected activity” because employees are still
protected “while they are collecting information about a possible fraud, before
they have put all the pieces of the fraud together.” Indeed, “a plaintiff
claiming retaliation under the FCA may engage in protected activity ‘even if
the target of an investigation or action to be filed was innocent.’” Thus, the
plaintiff did not automatically lose her case because she failed to “pinpoint”
any ambulance referrals induced by the hotdogs or jacket or any invoices
submitted to the government as a result of the alleged kickbacks. Nonetheless,
even though a plaintiff need not establish an actual violation of the FCA, “she
must show that her allegations of fraud grew out of a reasonable belief in such
fraud.” The majority found that even if
she genuinely believed it, the plaintiff did not have an objectively reasonable belief of fraud because she
could not identify anyone who was making referrals who also received any
anything beyond nominal value that could reasonably induce the person to make referrals.
The AKS prohibits “knowingly and willfully solicit[ing] or
receiv[ing] any remuneration (including any kickback, bribe, or rebate)
directly or indirectly, overtly or covertly, in cash or kind . . . in return
for referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part under a Federal health care program.” 42 U.S.C. § 1320a-7b(b)(1)(A). The
statute defines “remuneration” as “transfers of items or services for free or
for other than fair market value.” 42 U.S.C. § 1320a-7a(i)(6). The statute does
not, however, define the phrase “in return for.” Yet courts widely agree that
the “‘gravamen of Medicare fraud is inducement.’” . . . .
While not binding, the Office of the Inspector General
(“OIG”) for the Department of Health and Human Services (“HHS”) has offered
further guidance on the meaning of “remuneration” and “induce.” The OIG
indicated in its Program Guidance for Ambulance Suppliers that the term “remuneration”
means “virtually anything of value” including goods, meals, and gifts. OIG
Compliance Program Guidance for Ambulance Suppliers, 68 Fed. Reg. 14245, 14252
(Mar. 24, 2003). Several courts have affirmed this expansive understanding of remuneration
as “‘anything of value in any form whatsoever.’” . . . Based on the broad meaning
of remuneration, the OIG recommends that ambulance suppliers not offer gifts
“of greater than nominal value to referral sources,” but indicates that “token
gifts used on an occasional basis to demonstrate good will or appreciation
(e.g., logo key chains, mugs, or pens) will be considered nominal in value.”
OIG Compliance Program Guidance for Ambulance Suppliers, 68 Fed. Reg. at 14252.
The OIG explained the term “induce” as the necessary intent “to lead or move by influence or persuasion.”
OIG Anti-Kickback Provisions, 56 Fed. Reg. 35952, 35938 (July 29, 1991).
Although the term “induce” applies to the party offering or paying
remuneration, it sheds light on the meaning of the phrase “in return for,”
which applies to the recipient of remuneration, implying that the recipient
must be duly induced or “move[d].” See 42 U.S.C. § 1320a-7b(1), (2).
An important aspect of inducement is that the remuneration be
directed towards an individual or entity “in a position to generate Federal
health care program business.” See OIG Supplemental Compliance Program
Guidance for Hospitals, 70 Fed. Reg. 4858, 4864 (Jan. 31, 2005). In U.S. ex rel. Perales v.
St. Margaret’s Hospital, 243 F. Supp. 2d 843, 852-54 (C.D. Ill. 2003),
referrals to a hospital by a nurse working for a physician who entered into an
illegal referral agreement with the hospital did not violate the FCA because
the referring nurse received no remuneration for her referrals. Thus, any
claims submitted to the government as a result of the nurse’s referrals were
not tainted by an illegal inducement under the AKS. Id. at 854. As the court
explained, the AKS “contemplate[s] that the person receiving the inducement is
the one prohibited from making the referral to the entity that offered the
remuneration.” Id.
In short, a kickback violation entails 1) remuneration to a
person or entity in a position to refer Federal health care program patients 2)
that could reasonably induce the person or entity to refer such patients.
The Court
rejected the argument that the plaintiff’s subjective belief - that 90% of the
hospital’s ambulance referrals were being induced by a $25 jacket and hotdogs -- was reasonable
even though she was able to identify an OIG settlement with physicians who
illegally referred patients in return for football tickets and a free meal. “Indeed,
some cases have ruled that free food and drinks can operate as an inducement
for referrals, but in those cases the amount and quality of food provided far
exceeded Life’s annual provision of hotdogs and hamburgers to a miscellaneous
set of Holzer employees at a health fair.” It found the comparison between this case and
those cases to be implausible and ludicrous:
It cannot plausibly
be suggested that [those items] could induce a reasonable person to prefer one
provider over another. In fact, these items represent such a low
monetary value they can only be characterized as “token” gestures of good will
under OIG guidance. . . . .
Indeed, it is ludicrous to believe that a person would be
tempted to make illegal referrals in exchange for a couple hotdogs once a year.
The Court was even more influenced by the plaintiff’s
failure to connect any of the gifts (of hotdogs or a jacket) to any of the
ambulance referrals. A gift cannot
induce an illegal patient referral unless the gift “is directed towards a
person with the power to make referrals.”
However, the plaintiff’s final report and interim reports did not
identify a single employee with authority to make patient referrals who
actually attended the wellness fairs and consumed a hot dog. The only person who received a jacket denied
that he ever made any ambulance referrals and contended that ambulances were
generally called by a nurse or secretary. Nonetheless, the plaintiff had assumed that
physicians made the illegal referrals without ever confirming that fact during
her investigation or reports. Her
failure to confirm this important assumption made her belief unreasonable.
Further, her assumption that the statistic of 90% of
referrals was a reasonable basis to assume inducement is belied by a number of
factors, including the preferred provider agreement between the hospital and
the ambulance company to make “best efforts” to be available when called, “distance,
availability, weather, and willingness to come,” as well as “reliability,
quality of service, cost to the patient, proximity to Holzer’s other hospitals
and care centers, and whether the ambulance was needed for an emergency or non-emergency
transport.”
Finally, the majority dismissed the argument that the jury
should be permitted to evaluate whether the plaintiff’s belief of fraud was
objectively reasonable.
An objectively reasonable belief requires facts that exist
independently of the plaintiff’s personal, interior mentality. [The plaintiff] produces very few such independent facts to support
her belief of anti-kickback violations, and those she does produce do not make
her belief reasonable. A jury could not find [she] engaged in protected
activity when she based her allegations of illegal kickbacks solely on a high
referral rate to a contractually (and legally) preferred supplier who gave a
token jacket and hotdogs to unidentified [hospital] employees that may or may
not have had referral power.
Without being able to sustain her prima facie case that she
engaged in a protected activity, the majority did not address any arguments
about causation or pretext.
The dissent would have let the jury decide whether the
plaintiff’s belief was reasonable instead of merely incorrect because even
incorrect conclusions are protected if they are reasonable.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
