On March 28, 2023, the Sixth Circuit issued a notable decision in United States ex rel. Shannon Martin v. Darren Hathaway, a case involving alleged “remuneration” from a hospital to a local ophthalmologist in violation of the Anti-Kickback Statute (AKS). In its opinion, the Sixth circuit rejected broad theories about 1) the definition of remuneration under the AKS and 2) the causation requirement for AKS violations that trigger False Claims Act (FCA) liability.

The case in question concerned potential eye doctor referrals in Marshall, Michigan. Because Marshall is a small town, service options for ophthalmology patients were limited to one hospital and one local eye practice who regularly referred patients to one another. One of the relators (an ophthalmologist) attempted to negotiate a contract with the hospital for a role as an on-site physician. Relators alleged the hospital’s hiring of a new ophthalmologist would have impaired the local eye center’s business, emphasizing the fact that the hospital would no longer need to refer patients to the eye center, because, if hired, the relator would have managed those patients on-site at the hospital, instead. 

Relators allege that after the eye center’s owner spoke with the hospital and said that hiring the relator would be a “lose-lose” situation, employment negotiations fell through. Their theory was that the hiring decision was based on the desire to keep the referrals going, and as such, refusal to hire the ophthalmologist constituted remuneration for continued referrals to the hospital. The United States declined to intervene, and the district court granted defendants’ motion to dismiss. The Sixth Circuit affirmed.

The court held that “remuneration” under the AKS “covers just payments and other transfers of value,” and not “any act that may be valuable to another.” The panel consulted dictionary definitions and Congress’s analogous uses of “remuneration,” all of which described remuneration as something paid or transferred. The court rejected the argument that “remuneration” should be construed expansively because the AKS prohibits “any” remuneration and thus “anything of value in any form.” “[T]hat reality,” the panel refuted, “proves only that the statute covers remuneration of any type (cash, services, goods),” and not that Congress intended the term to encompass more than payments and transfers of value. The hospital’s decision not to hire relator entailed no payment or transfer of value, and therefore the Court found that relators failed to allege remuneration.

The court further found the complaint failed to allege causation. FCA liability premised on AKS violations attaches only to claims “resulting from” those AKS violations. In other words, FCA liability attaches only if the claim would not have been submitted “but for” the AKS violation. This decision deepened the divide between courts regarding the correct standard of causation that applies to claims; in so doing, it joined the Eighth Circuit and rejected the Third Circuit’s broader interpretation of causation. In aligning with the Eighth Circuit, the Sixth Circuit held that “[t]he ordinary meaning of resulting from is but-for causation.”  In declining to adopt the Third Circuit’s conclusion, the Court noted the unfairness of interpreting a criminal statute through language that was never passed by Congress or signed by the President. This Sixth Circuit decision will likely trigger a cert petition to the United States Supreme Court and increases the likelihood of it getting a close look from the Justices.

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with white-collar criminal investigations and False Claims Act investigations and litigation.  If you need assistance with such a matter, please contact us today.