Referral Arrangement Violates Kickback Laws Even If Only Purpose Is to Generate Illegal Referrals

Case: The U.S. Attorney accused a Kentucky physician of taking a $105 per beneficiary payment from a lab company in exchange for ordering its pharmacogenetic tests in violation of the Anti-Kickback Statute (AKS). And since the company billed Medicare for the tests, the physician “caused” a fraudulent claim to be submitted in violation of the False Claims Act (FCA). The physician asked the court to dismiss the charge because the government didn’t allege that he entered into the fee arrangement for the “sole purpose” of generating illegal referrals. And if the underlying AKS violation wasn’t an actual violation, the subsequent billing by the lab for the tests wasn’t an FCA violation either, he reasoned. But the Kentucky federal district court disagreed and allowed the FCA claim to go forward.

Significance: The physician claimed that his motives were mixed at best since he ordered the tests before entering into the fee referral agreement with the lab company. But the volume of referrals increased dramatically once the arrangement was in place and then decreased when the lab company cut the referral fee. More importantly, the court reasoned that an arrangement runs afoul of the AKS if even one of its purposes is to generate illegal referrals even if it’s not the sole motivation [United States v. Vora, 2020 U.S. Dist. LEXIS 173000].