The Anti-Kickback Statute (AKS) is a federal law that, at its core, prohibits offering, paying, soliciting, or receiving any sort of remuneration in exchange for federal healthcare program referrals. AKS violations carry with them potential criminal penalties, including up to ten years in federal prison, as well as civil and administrative consequences, including monetary penalties and possible exclusion from federal healthcare programs. Submitting claims that are “tainted” by violations of AKS could also amount to violations of the False Claims Act (FCA). In fact, some of the largest FCA resolutions in its history have been cases predicated on alleged AKS violations. See, e.g.,

Thankfully for healthcare providers, the AKS includes various “safe harbors” that protect arrangements that otherwise implicated by AKS. Several of those safe harbors (including, but not limited to, safe harbors related to space and equipment rental, and personal services and management contracts) require that the compensation paid be consistent with fair market value. Because of this, whether certain payments are consistent with fair market value is a question that often comes up when arguing about the applicability of AKS safe harbors.

However, a recent decision by the Eleventh Circuit Court of Appeals clarifies that not only is FMV relevant to various safe harbors, but that a whistleblower pursuing an FCA case predicated on alleged AKS violations must provide lack of FMV as an essential element of such a claim. In Bingham v. HCA, Inc. (Case No. 16-17059), the Eleventh Circuit held that an FCA relator bringing an FCA claim premised upon an AKS violation must show that the financial arrangements in question were not at fair market value. This holding is significant and brings the Eleventh Circuit in line with other circuits that have held that FCA relators must prove lack of fair market value in order to prevail.

While it is too early to tell the broader significance of the Bingham decision on FCA cases within the Eleventh Circuit (Georgia, Florida, and Alabama), if any, hopefully this decision will impose yet another hurdle on FCA whistleblowers in cases predicated on alleged violations of the AKS.

The Cisco settlement demonstrates that theories of FCA liability continue to grow and expand to new areas and industries. Companies offering services and products must ensure they comply with any remedial provisions contained in a contract with the government. As seen in the Cisco matter, failure to correct a known defective product or service may create a viable FCA claim.