Recent False Claims Act cases underscore DOJ focus on Anti-Kickback Statute violations

The U.S. Department of Justice’s intervention in multiple False Claims Act cases for underlying violations of the Anti-Kickback Statute should serve as a reminder for healthcare industry participants. 

For years, medical device and pharmaceutical companies have made headlines for providing improper remuneration, also known as a “kickback” to providers (typically physicians) to induce them to use a certain product or service. The trend continues as the Department of Justice (“DOJ”) and the U.S. Attorney’s Office for the District of Massachusetts intervened in two qui tam cases, which were brought by individual whistleblowers, which are referred to as Relators, against SpineFrontier, Inc. 

Violations of the Anti-Kickback Statute (“AKS”) are considered “per se” violations due to a change in the language as part of the Affordable Care Acct (“ACA”). ACA’s language states that “a claim that includes items or services resulting from a violation of [the Anti-Kickback Statute] constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of Title 31 [the False Claims Act].” 42 U.S.C. § 1320a-7b(g). This means that claims submitted to federal government programs, such as Medicare, Medicaid and TRICARE, in violation of the AKS automatically constitute false claims under the False Claims Act (“FCA”).

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In its Complaint in intervention, the Government “alleges that SpineFrontier and IME paid more than $8 million in kickbacks to surgeons, which generated more than $100 million in revenue, with the vast majority of SpineFrontier's total domestic sales revenues coming from kickback-tainted surgeries.” In addition, the U.S. Attorney’s Office settled civil claims against the following five surgeons for obtaining kickbacks from SpineFrontier through the sham third-party, IME. 

Each physician also admitted that one or more persons specifically instructed him to bill “consulting” hours to SpineFrontier for each and every surgery in which he used a SpineFrontier device, regardless of whether he spent any time actually consulting. The physicians are as follows: 

• Dr. F. Paul DeGenova, an orthopedic spine surgeon in Ohio, admitted to accepting payments from SpineFrontier via IME for consulting hours he did not work, and agreed to settle the government’s claims for $486,985;

• Dr. Michael Murray, an orthopedic spine surgeon in New York employed by the Department of Veteran Affairs, admitted to accepting payments from SpineFrontier via IME for consulting hours he did not work, and agreed to settle the government’s claims for $330,668;

• Dr. Joseph Shehadi, a neurosurgeon in Ohio, admitted to accepting payments from SpineFrontier via IME for consulting hours he did not work, and agreed to settle the government’s claims for $323,419;

• Dr. Agha Khan, a neurosurgeon in Maryland, admitted to accepting payments from SpineFrontier via IME for consulting hours he did not work, and agreed to settle the government’s claims for $310,843; and

• Dr. John Atwater, an orthopedic surgeon who has worked in in Florida and Illinois, admitted to accepting payments from SpineFrontier via IME for consulting hours he did not work, and agreed to settle the government’s claims for $105,149.

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In sum, medical professionals and companies should appreciate that this type of AKS violation is vigorously pursued by the DOJ. Additionally, this situation underscores the notion that the Government and Relators consider the substance of the form and will go after third parties that are used as conduits to perpetuate a crime or a fraud. 

Rachel V. Rose, JD, MBA, advises clients on compliance and transactions in healthcare, cybersecurity, corporate and securities law, while representing plaintiffs in False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website, www.rvrose.com.