The U.S. District Court for the Middle District of Georgia found Plaintiffs alleged sufficient facts to support a False Claims Act case based on a violation of the Anti-Kickback Statute. The Court denied Defendants’ motion to dismiss on June 24, 2014. U.S. ex rel. Williams v. Health Management Associates, Inc., No. 3:09-cv-130 (CDL) (M.D. Ga.)

Relator Ralph Williams, a former chief financial officer of HMA Monroe, a subsidiary hospital of Health Management Associates Inc. (“HMA”), initially brought the case. The Government intervened in this case and in seven other False Claims Act lawsuits against HMA, a company which operates 71 hospitals in 15 different states.

Plaintiffs alleged that Defendant hospitals paid illegal kickbacks to certain clinics in exchange for patient referrals. The clinics provide prenatal services to undocumented aliens. These patients are generally eligible for Medicaid emergency medical assistance when they deliver their babies, but are not eligible for regular Medicaid coverage. Relator Williams uncovered this alleged scheme when he started his employment at HMA Monroe in April 2009. Williams found a copy of an agreement between HMA Monroe and the clinics, which was allegedly approved by HMA. Under the agreement, HMA Monroe paid the clinics between $15,000 and $20,000 in exchange for the clinics’ Spanish translation and eligibility services. Williams investigated whether the clinics were actually providing interpreter services. Both the director of nursing services and human resources personnel allegedly told Williams they had no knowledge of the clinics rendering such services. Thus, Plaintiffs alleged that the agreement was a sham designed to conceal an underlying financial motive, which was the purchase of Clinic referrals by HMA Monroe.

The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), makes it a felony to offer to or pay “renumeration” to “any person to induce such person” to refer patients for services that will be paid “in whole or in part under a Federal health care program.” Plaintiffs alleged that when Defendants submitted their claims for Medicaid payment, they falsely certified that they complied with the Anti-Kickback Statute.

To establish an Anti-Kickback Statute violation, Plaintiffs must show that Defendants (1) knowingly and wilfully, (2) paid money, directly or indirectly to the clinics, (3) to induce the clinics to refer individuals to the hospitals for the furnishing of medical services, (4) paid for by Medicaid. According to the District Court, the Defendants and hospitals do not dispute that they actually paid money to the clinics or that the services rendered to the clinic patients were paid for by Medicaid, a federal health program. The Defendants argued that the when the hospitals contracted with the clinics to provide interpreters for Hispanic patients, the hospitals merely hoped that the clinics might refer patients to the hospitals. The Court rejected this argument. The Court further held that the complaint sufficiently alleged the Defendants paid for services that the clinics did not provide.

The Defendants did not dispute that under the Affordable Care Act, compliance with the Anti-Kickback Statute is a requirement for payment of a Medicaid claim, and thus can form the basis for a violation of the FCA. Rather, Defendants argued that for claims submitted before March 23, 2010 (the effective date of the Affordable Care Act), compliance with the Anti-Kickback Statute was a condition of participation in the Medicaid programs and not a condition of payment. Thus, any false certification of compliance with the Anti-Kickback Statute in connection with claims submitted before the passage of the act did not violate the False Claims Act. If compliance was a condition of participation, then the proper sanction would be restricted to penalties affecting their continued participation in the Medicaid programs, and they would not be exposed to False Claims Act penalties. The Court rejected Defendant’s argument.

The Georgia District Court held that a violation of the Anti-Kickback Statute can form the basis of a False Claims Act violation pre-Affordable Care Act.