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The district court mostly denied the defendants’ motion to dismiss the government’s complaint it violated the Anti-Kickback Statute and False Claims Act. The government alleged the defendant and his companies violated the AKS by accepting payments for referrals of lab tests to a third party laboratory, and therefore all resulting claims were tainted by kickbacks. The government also argued the tests were medically unnecessary under Medicare rules, because the defendant ordered them without any corresponding indication and never used them for treatment purposes. The defendants argued the government could not pursue its kickback theory of liability because the complaint stated that the improper payments were “in part” why the physician referred tests to his co-conspirator. However, the court held that the government did not need to show that the alleged kickbacks were the only reason the physician increased his referrals, but could show that the kickbacks were at least one reason. The defendants also argued the tests were medically necessary, so it didn’t matter if they were tainted by kickbacks. However, the court explained that claims influenced by kickbacks are by definition false. The court also noted the government need not show the tests were not medically necessary, only that the physician did not follow Medicare guidelines when ordering them. The court found the government had shown that, legally, the tests were medically unnecessary, regardless of whether the patient actually needed them.

Defendants Kishor Vora M.D., Owensboro Medical Practice PLLC, and Owensboro Heart and Vascular moved to dismiss a qui tam complaint alleging healthcare fraud for failure to state a claim.

Vora is a private practice physician and sole member of Owensboro Medical Practice, which operates under the name Owensboro Heart and Vascular.

In 2012, Vora signed an agreement with Natural Molecular Testing Corporation under which he would refer more laboratory tests to NMTC, particularly pharmacogenomics tests. Under the agreement, Vora agreed to refer 150 pharmacogenomics tests to NMTC each month in exchange for $150 per referral. Prior to entering into this agreement, Vora had referred 47 such tests to NMTC in the previous eleven months. In the first full month after signing the agreement, Vora referred 537 tests for Medicare beneficiaries to NMTC. However, when he found out the program was not yet active, the number of referrals from Vora dropped significantly and did not increase again until the program officially began. Between May 2012 and March 2013, NMTC paid Vora $335,700 through the agreement.

In March 2013, NMTC reduced the per-test payment to $105, and Vora began referring fewer tests to the lab and eventually reduced his overall referrals of pharmacogenomics testing to any lab. After 2013, he never referred more than 32 total pharmacogenomics tests of Medicare beneficiaries in any year. In April 2020, the United States brought this suit alleging that the agreement amounted to an illegal kickback scheme between Vora and NMTC.

The United States alleged Vora referred tests to NMTC as a result of illegal kickbacks and that any resulting claims to Medicare were therefore by definition fraudulent. The government also alleged Vora ordered tests that were not medically necessary, and therefore the resulting claims were fraudulent under the FCA. Specifically, the government alleged Vora ordered tests without conducting an individual assessment of his patients, did not use the test results for treatment, and used pharmacogenomics testing to predict warfarin responsiveness in patients that did not meet Medicare testing criteria.

The government brought four causes of action, including three violations of the FCA and one common law unjust enrichment claim. All three FCA causes of action rely on two distinct theories of liability. First, the government argued Vora caused false claims to be submitted due to his participation in the kickback scheme. Second, the government alleged he caused false claims to be submitted because he referred medically unnecessary tests to NMTC.

First, the court considered Counts I – III under the Anti-Kickback theory of liability. In their motion to dismiss, the defendants argued the complaint failed to allege that Vora ordered the tests willfully for the purpose of receiving remuneration from NMTC. Rather, the complaint alleged Vora referred tests through NMTC “at least in part” because of the payments. The defendants argued that partial intent to receive remuneration does not violate the AKS. In support, the defendants noted that Vora referred tests to NMTC before the payment program began and after the alleged scheme ended.

In essence, the defendants presented a unique legal question—does a defendant violate the AKS when illegal kickbacks were “one purpose” for the referral, but not the sole purpose? The court found this salient, because the government did not contend the sole purpose was remuneration. However, the government argued that the AKS is violated whenever one purpose of remuneration is to obtain money for the referral of services.

The court sided with the government, finding the “one purpose” test more accurate. While the Sixth Circuit has not decided the issue, every circuit court to address the question has determined a defendant violates the AKS when “one purpose” of referral decisions is to receive renumeration. Further, the court found the “one purpose” test appeared to align best with the Sixth Circuit’s general approach to the scienter requirement under the AKS. The Sixth Circuit has stated that, under the AKS, renumeration is received “in return for” an order if the recipient is “duly induced or moved” by the renumeration. Further, guidance from the HHS Office of Inspector General defined “induce” as an intent to lead or influence by persuasion. Therefore, a person is “induced” if renumeration is persuasive enough to cause them to alter their behavior. A partial purpose is enough. OIG also endorsed the concept that a defendant violates the AKS if “one purpose” of the payment is to induce referrals.

The court also found the government had shown the defendant acted willfully, generally due to the evidence that the number of Vora’s referrals to NMTC increased dramatically after the alleged scheme was enacted, and dropped off after it ended. The court found this enough to allege Vora committed willful acts in violation of the AKS.

Next, the defendants argued the tests were medically necessary, so it didn’t matter whether there was an AKS violation. However, the court noted that medical necessity is irrelevant to AKS allegations. The question was not whether Vora ordered medically unnecessary tests for purposes of receiving renumeration. The question is whether he ordered any tests because of renumeration.

Next, the court considered whether the government alleged all the elements of the three FCA causes of action.

First, the defendants argued the government had not claimed either Vora or NMTC had certified compliance with the AKS, and therefore they could not be accused of causing false claims to be submitted. The court disagreed, citing to the changes in the AKS made by the Patient Protection and Affordable Care Act, which rendered any claim for services tainted by a kickback false by definition. Therefore, certification was not an element of the government’s claims. Further, no special certification is required. Submitting a claim for Medicare reimbursement always certifies AKS compliance. The defendants pointed to several cases they believed supported their argument, all of which the court rejected.

In Count II, the government alleged the defendants made or caused the submission of false records or statements material to a false claim. The AKS portion of the complaint alleged the defendants submitted false certifications on Medicare provider enrollment forms and false and misleading representations on claim forms that claims for pharmacogenomics testing submitted to Medicare by NMTC complied with the AKS, when in fact, they did not.

In the AKS portion of Count II, the government substantively alleged two types of false records. First, the government alleged the Defendants caused NMTC to submit false claim forms to Medicare. Second, the government alleged the defendants made false statements on Medicare provider enrollment forms. The defendants challenged both.

In its complaint, the government alleged that each claim submitted by NMTC for Vora’s orders of pharmacogenomics tests included a statement whereby NMTC certified that the information on the claim form was true, accurate and complete. The government alleged this statement is false, because the claims were tainted by kickbacks. The defendants argued the government failed to plead the underlying AKS claims with particularity, but the court noted it had already found the claims sufficient.

The government also alleged Vora himself made a false record or statement on the Medicare provider forms. The government argued that on his Medicare enrollment form, Vora certified his understanding that claims were dependent on compliance with relevant rules and laws, and on a provider or supplier being in compliance with any applicable conditions of participation. Vora also asserted he understood the penalties for falsely certifying AKS compliance, and stated he would not knowingly present or cause to be presented a false or fraudulent claim for payment by Medicare or other federal health care programs.

The defendants argued these statements could not possibly create liability for an alleged fraud that took place more than a decade later. However, the government noted that Vora recertified every five years, and that this revalidation form asserts that Vora had read and understood the requirements.

The court therefore considered whether the 2019 provider enrollment form is a sufficient representative example of a false or fraudulent claim, and concluded it did not. The court found the government failed to connect the 2019 generic revalidation to a request for funds nor showed that the revalidation was material to Medicare’s decision to reimburse false, kickback-tainted claims. The court found the revalidation forms were far too attenuated to form a basis for liability. Therefore, the court granted the motion to dismiss Count II in part, to the extent the complaint relied on the AKS theory and alleged that the defendants’ false statements on provider enrollment forms provided a basis for liability.

Next, the defendants challenged Count III, in which the government alleged conspiracy to violate the AKS and FCA. However, they challenged only the underlying allegations, not the conspiracy charge, which the court had already found sufficient.

Next, the court considered the government second theory of liability, that Vora ordered tests that were not medically necessary and therefore any resulting claims were false. Again, the government alleged that Vora (1) did not make individualized assessments of need before referring pharmacogenomics testing, (2) did not use the test results in treatment, (3) did not document patient need for pharmacogenomics testing in their medical records, and (4) ordered pharmacogenomics tests for patients receiving warfarin treatment who did not meet the Medicare coverage criteria. According to the government, these deficiencies meant the tests were not medically necessary.

The defendants argued the government failed to allege why pharmacogenomics testing for the patients was not medically necessary. However, while the defendants correctly argued that a theory of alleged lack of medical necessity is simply absent from the complaint, the court noted this was not the theory the government relied upon. Instead, the government alleged Vora knew Medicare required certain actions to make a claim reimbursable, knowingly did not take those actions, and he knowingly caused those claims to be submitted to Medicare anyway. The court found that the actual medical necessity of the tests was not relevant under this theory of liability. For example, the rules also state that lab tests are not reasonable and necessary if they are not ordered by the treating physician. Therefore, for the purpose of Medicare payments, it did not matter if the patient actually needed the test, because noncompliance renders the test unnecessary.

Nonetheless, the court was not convinced the government had pled all the necessary elements of materiality required under Escobar. However, because the defendants did not challenge the materiality of this count, it was not fully briefed, and the court declined to rule on it. Based on the arguments presented by the defendants, the court denied the motion to dismiss under the government’s second theory.