company paid its salespeople commissions based on sales volume. The laboratories also paid physicians for drawing patients’ blood and processing the blood samples. The Fourth Circuit found that a reasonable jury could have concluded that the defendants willfully paid volume-based commissions to independent contractors and knowingly violated the AKS. The Fourth Circuit observed that in-house and outside counsel warned defendants such commission payments could violate the AKS. In rejecting the
Certain laboratory marketing services continued to generate enforcement activity under the AKS.
defendants’ argument that commissions to salespeople can never be kickbacks under the AKS, the Fourth Circuit explained that federal courts have frequently upheld AKS violations based on commission payments to third parties who are not employees. The Fourth Circuit also joined the other circuits in adopting the so-called “one-purpose test,” upholding the district court’s jury instruction. In U.S. ex rel. Lutz v. Lab. Corp. of Am. Holdings , the relators alleged that Laboratory Corporation of America Holdings (LabCorp) knowingly provided in-office phlebotomists to draw and process blood samples for doctors who received kickbacks for these services through processing and handling fees paid by the laboratory defendants in Mallory . 199 In denying LabCorp’s motion for summary judgment, the district court noted that evidence in the record reflected LabCorp may have provided or did provide in-office phlebotomists to three doctors who were receiving processing and handling fees from the other laboratories and those phlebotomists may or did draw blood for tests performed by the other laboratories in addition to LabCorp testing. The district court found there were material factual disputes as to whether and when LabCorp knew the other laboratories paid kickbacks to doctors who LabCorp knew used its phlebotomists and whether LabCorp assented to the other laboratories’ referral scheme by continuing to provide phlebotomists for blood draws tested by the other laboratories in exchange for LabCorp’s own testing referrals. FILE ACCESS THEORY OF REFERRALS UNDER THE AKS The “file access theory” of referrals and related remuneration received continued scrutiny as a basis for AKS violations. In the latest development in Stop Illinois Health Care Fraud, LLC v. Sayeed on remand from the Seventh Circuit, the district court reviewed whether a management services arrangement between Healthcare Consortium of Illinois (HCI) and a management company generated prohibited referrals in violation of the AKS after HCI granted the management company access to its patient The “file access theory” of referrals and related remuneration received continued scrutiny as a basis for AKS violations.
STARK LAW/ ANTI-KICKBACK STATUTE
Relationships between potential referral sources proved again to be fertile ground for enforcement activities. The government and relators remained focused on AKS and Stark Law violations in multiple FCA cases across various sectors of the healthcare industry.
LAB AND MARKETING PRACTICES
Certain laboratory marketing services continued to generate enforcement activity under the AKS. In United States v. Mallory , the Fourth Circuit affirmed a $114 million judgment in an FCA case in which the government alleged two laboratories, a contracted marketing company and related executives engaged in a scheme to pay kickbacks to physicians in exchange for referrals for medically unnecessary tests reimbursed by federal healthcare programs in violation of the AKS. 198 The laboratory defendants paid the marketing company a percentage of their revenue based on the number of ordered blood tests and the marketing
198 988 F.3d 730 (4th Cir. 2021).
199 2021 WL 2457693 (D.S.C. Jun. 16, 2021).
HEALTHCARE FRAUD & ABUSE REVIEW 2021 BASS, BERRY & SIMS | 33
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