In a recent decision, Omni Healthcare, Inc. v. MD Spine Solutions LLC (D. Mass. Jan. 6, 2025), the court held that the relator needed to show but-for causation in a False Claims Act case predicated on alleged violations of the anti-kickback statute. The anti-kickback statute provides that “a claim that includes items or services resulting from a violation of [the anti-kickback statute] constitutes a false or fraudulent claim for purposes of [the False Claims Act].” 42 U.S.C. § 1320a-7b(g) (emphasis added). It was not surprising that the Omni court construed “resulting from” to require but-for causation; courts have split on the appropriate causation standard to apply in these types of cases, and the First Circuit soon will add its own voice to that debate. See United States v. Regeneron Pharmaceuticals, Inc.,Civ. A. No. 20-11217-FDS, 2023 U.S. Dist. LEXIS 172618 (D. Mass. Sept. 27, 2023) (appeal argued July 22, 2024). It was surprising, however, to see the Omni court seem to misapply the but-for causation standard.
The relator in Omni alleged that the defendant, MD Labs, violated the anti-kickback statute by paying its independent sales representatives volume-based commissions to recommend MD Labs’ products and services. See Omni, slip. op. at 18. As I’ve written before, HHS-OIG and other courts have made clear that, if a health care company pays volume-based commissions to 1099 sales representatives, that remuneration likely violates the anti-kickback statute, provided there is evidence of the requisite scienter. So, assuming but-for causation was the appropriate causation standard, what should application of that standard have meant in Omni? Because people generally are not willing to work for free, it seems highly unlikely that the independent sales representatives would have sold anything at all if the lab hadn’t promised them commissions. One would think that minimal evidence consistent with that common-sense notion would have been enough to show but-for causation.
In finding a lack of causation, the Omni court asserted that “Relator has offered no evidence that the independent-contractor status of some of its sales representatives unduly influenced any provider’s decision to order PCR UTI testing from MD Labs.” Slip op. at 24. But whether a provider was influenced is not the right question in a case alleging kickbacks from a lab to independent sales representatives. Rather, because the remuneration at issue was from the lab to independent sales representatives, the question under the anti-kickback statute is whether that remuneration induced the sales representatives (not providers) to recommend or arrange for the purchase of lab tests.
If the lab paid a kickback to an independent sale representative, that representative recommended the lab to a provider, and the provider ordered tests from the lab, which then submitted a claim to a Federal healthcare program for the tests, then that should have satisfied the “resulting from” requirement under any causation standard. Because Omni was about kickbacks from a lab to sales representatives, and was not about kickbacks from a lab or sales representatives to providers, there should have been no need to show that a sales representative “unduly influenced” a provider.
Nor should it have mattered for causation purposes that, as the court also held, “there is no evidence that MD Labs’ independent-contractor sales representatives acted any differently than the employees receiving commission-based payments from MD Lab[s].” Id. If the independent sales representatives were functionally employees, then perhaps one could argue that the anti-kickback statute exception for payments to employees should have applied. See 42 U.S.C. § 1320a-7b(b)(3)(B). If that exception applied, that should have been the end of the case, and there would not have been any need to address causation at all. In any event, it doesn’t appear that the anti-kickback statute exception for employees could have applied, because there does not seem to have been any dispute that MD Labs’ independent sales representatives were not employees. See slip. op. at 4 (“MD Labs used both employees and independent contractors to promote its PCR UTI testing to providers.”).
So, overall, the Omni decision is disappointing not so much because the court applied the wrong causation standard, but because the court seems to have misapplied the standard it chose. Even if but-for causation becomes the predominant standard, it should not be difficult to use direct or circumstantial evidence to satisfy that standard in many cases. In Omni, for example, it should not have been difficult to show that claims resulted from the kickbacks, because sales representatives presumably would have testified that they recommended MD Labs’ products and services to providers only because MD Labs paid them volume-based commissions to do so. In other cases, circumstantial evidence may show that, after a kickback was paid, there was a clear change in behavior, or that the associated pattern of claims submissions diverged from national or regional averages. But presentation of such evidence will be effective only if the court asks the right questions about what behavior the kickback caused.