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A brand new principle of legal responsibility below the Anti-Kickback Statute: “File entry principle”


In June, the U.S. District Courtroom for the Northern District of Illinois held {that a} medical administration firm (MPI) violated the Anti-Kickback Statute (AKS), False Claims Act, and Illinois False Claims Act by paying a neighborhood care group (HCI) for entry to the non-public data of HCI purchasers with a view to market Medicare-reimbursed healthcare companies to these purchasers. The courtroom held that below a “file entry principle” of referral, the defendants had violated the AKS, which makes it a criminal offense to knowingly and willfully pay any remuneration in trade for referrals of things or companies reimbursable below a federal healthcare program. The case is Cease Illinois Well being Care Fraud, LLC v. Asif Sayeed, Doctor Care Providers, S.C., Administration Ideas, Inc., & Very important Dwelling & Healthcare, Inc., No. 12-CV-09306, 2021 WL 2331338 (N.D. Ailing. June 8, 2021).

HCI is a non-governmental group that contracted with the Illinois Division of Ageing to coordinate healthcare and non-healthcare companies for low-income seniors (equivalent to “Meals on Wheels”  and medical companies). MPI arranges medical referrals to a wide range of healthcare firms, together with to 2 of the defendants, house well being firms below the administration of MPI. HCI and MPI had entered right into a administration companies settlement (MSA) pursuant to which MPI paid $5,000 month-to-month to HCI over 18 months, ostensibly in trade for sure administration companies from HCI’s personnel, equivalent to written knowledge reviews. Nevertheless, MPI’s proprietor testified that HCI by no means offered these companies and that the aim of the association was as an alternative to acquire direct entry to HCI’s recordsdata for functions of knowledge mining. Based on a former MPI worker, HCI granted MPI entry to its purchasers’ private data, together with prognosis, insurance coverage standing, and phone data. The info was then utilized by MPI to solicit HCI purchasers by cellphone for Medicare-reimbursed healthcare companies. If the HCI shopper didn’t have a health care provider, was unable to journey, or wanted in-home nursing, MPI despatched a supplier from its sister group. The MSA didn’t point out both MPI’s entry to HCI’s uncooked knowledge or MPI’s proper to solicit HCI’s purchasers. HCI continued to grant MPI entry to HCI shopper data even after MPI terminated the MSA. Though witnesses have been unaware of something of worth being paid instantly for a referral, the courtroom discovered the defendants liable below the AKS on a “file entry principle” of referral—a principle which broadens the definition of “referral” past recommending or authorizing the supply of healthcare companies. 

On July 26, 2019, the courtroom granted the defendants’ movement for a directed verdict, discovering the plaintiff had did not state a prima facie case of AKS violation in failing to attract a connection between funds from MPI and any referrals from HCI. Nevertheless, on April 29, 2020, the Seventh Circuit reversed and remanded to find out whether or not the plaintiff’s “file entry principle” constituted a referral below the AKS. The Seventh Circuit questioned whether or not the decrease courtroom had utilized an “inclusive understanding” of what constitutes a referral and famous that, for AKS functions, the definition of a “referral” is far broader than mere approval of healthcare companies, as an alternative “encapsulating each direct and oblique technique of connecting a affected person with a supplier.” Based on the Seventh Circuit, the definition of “referral” goes “past specific suggestions to incorporate extra delicate preparations[,]” and the inquiry for figuring out what constitutes a referral “is a sensible one which focuses on substance, not kind.” Cease Illinois Well being Care Fraud, LLC v. Sayeed, 957 F.3d 743 (seventh Cir. 2020). On remand, the Northern District of Illinois discovered that HCI granting MPI entry to shopper contact data with a view to solicit Medicare-funded companies was substantively the identical as if HCI had instantly referred its purchasers to MPI for these companies. Consequently, the courtroom endorsed the “file entry principle” of referral below the AKS in its November 24, 2020 opinion. 

The June 2021 determination centered on whether or not the charges paid by MPI constituted unlawful remuneration below the AKS and whether or not any AKS secure harbor utilized. Because the courtroom’s earlier opinion established the “file entry principle” of referral below the AKS, the testimony of MPI’s proprietor in regards to the goal of the month-to-month price was ample to indicate that he “knowingly and willfully induced HCI to supply referrals (i.e. entry to knowledge)” in trade for the month-to-month price in violation of the AKS. The defendants had claimed as an affirmative protection that their actions have been protected below the “private companies and administration contracts” secure harbor to the AKS at 42 C.F.R. § 1001.952(d). One of many seven components of this secure harbor is that the settlement cowl the entire companies that an agent gives to the principal and specify the companies to be offered by the agent. Nevertheless, earlier testimony had established the MSA didn’t explicitly cowl MPI’s entry to HCI’s uncooked shopper knowledge or MPI’s solicitation of HCI purchasers. Consequently, the defendants’ actions weren’t protected by the relevant AKS secure harbor. 

This opinion is the most recent in an almost 9-year previous case initially filed on November 20, 2012. The defendants requested the courtroom in July to rethink the choice or grant a brand new trial, however the events finally agreed that the defendants’ now-withdrawn post-trial motions could be filed as soon as the courtroom decides on damages. Whereas the difficulty has been extensively briefed and argued over the previous few months, the courtroom has not but dominated on damages. Nevertheless, given the Seventh Circuit’s obvious openness to growth of the idea of “referral” below the AKS and the endorsement of the “file entry principle” by the Northern District of Illinois, any administration firm, care administration firm, commerce affiliation, or different group with paid entry to shopper lists ought to attain out to an skilled well being care lawyer to make sure such association isn’t suspect below the AKS.  

Kevin Kifer is an affiliate in Thompson Coburn’s Well being Regulation Follow Group.
Nicole Jobe is a companion in Thompson Coburn’s Well being Regulation Follow Group.




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