The False Claims Act (FCA) serves as a significant mechanism for addressing fraud against the government. However, establishing causation in FCA cases can present considerable challenges. The recent case involving Omni Healthcare and MD Labs underscores the intricacies involved in proving causation under the FCA, especially when the claims include alleged violations of the Anti-Kickback Statute (AKS). Medical professionals should be particularly vigilant in understanding these complexities to avoid potential allegations of violations.
Causation standards: ‘but-for’ vs. ‘causal connection’
In FCA cases, courts often grapple with determining the appropriate causation standard. The “but-for” causation standard requires proof that the alleged misconduct directly caused the submission of false claims. In contrast, the “causal connection” standard is less stringent, requiring only a sufficient link between the misconduct and the false claims.
· But-for causation: This standard demands clear evidence that the alleged kickbacks were the direct reason for the submission of false claims. In the Omni Healthcare case, the court ruled that the relator failed to demonstrate that MD Labs’ commission payments to independent contractors were the but-for cause of the false claims.
· Causal connection: Some courts adopt this standard, which allows for a broader interpretation of causation. It requires showing that the misconduct contributed to the false claims, even if it was not the sole cause.
It is important that those who face allegations of a violation are aware of this split and plan their defense strategy accordingly.
Safe harbors and challenges in compliance
The AKS includes safe harbors that protect certain payment arrangements from being considered illegal kickbacks. When it comes to commissions, as discussed in the Omni Healthcare case, the AKS safe harbor generally allows for commissions paid to employees, which can be a legitimate business practice. This protection does not specifically include independent contractors, complicating compliance for businesses using such arrangements. Without a safe harbor, payments to independent contractors can fall into the realm of illegal kickbacks, making it challenging for businesses to structure their compensation models without violating the AKS.
The Omni Healthcare case highlights the importance of understanding the causation standards in FCA cases and the challenges of navigating AKS safe harbors. Courts continue to refine these boundaries, impacting how whistleblowers and those accused of a violation approach FCA litigation. As the legal landscape evolves, businesses must remain vigilant in structuring their payment arrangements to avoid potential FCA liability.
Attorney John Rivas is responsible for this communication.
