What is a Kickback And How Can it Be a Case Under the False Claims Act?

We have all seen the movies in which some unscrupulous person hands an envelope filled with cash to somebody in exchange for steering business in a certain direction.

That in the crudest form is what a kickback is.  Still practices in many industries have gotten more and more complicated and what constitutes a kickback today may be a little, although not much more subtle than they used to be.  The government has taken pains to enact laws that create large penalties for kickbacks.  Especially in the medical industry, for which the government is paying a lot of the bills, the laws are pretty clear and tough.  Let’s take a look.

Under the law, commonly called the Anti-Kickback statute a kickback, does not have to take the form of cash.  42 U.S.C. 1320a-7b(b) entitled “criminal penalties for acts involving Federal health care programs”, is the statute used by whistleblowers trying to fight against these in practices.

Here’s a sample of the language in the law as to what can be punished as a felony including criminal fines and imprisonment under the law:

Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person

A)    to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or …

See, 42 U.S.C. §1320(b)(2)

Yes, there is more a lot more in this law, but the point to look at is the broad way what we think of as kickbacks can be punishable.  Here it is clear “cash” or “in kind” counts.

The language of the statute encompasses a lot of activity that really are kickbacks, but which are not as obvious as the cash in the envelope scenario. Liability is pretty clear and, under the Patient Affordable Care Act, which you may know as Obamacare Congress added a few sections which are very helpful.

Indeed, take a look at 42 U.S.C. §1320(g)this for just a second:

Liability under subchapter III of chapter 37 of title 31

In addition to the penalties provided for in this section or section 1320a–7a of this title, a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of title 31.

That means, in plain language that when someone violates the Anti-Kickback Statute they also are to be held directly liable under the False Claims Act which is formally within the citations listed at 31 USC §§ 3729-3733.

So the criminal law violations give rise to the civil fraud liability of the False Claims Act and its treble damages as well.   That is how a case Whistleblower case under the Federal and State False Claims Acts can be built to fight illegal practices in the health care industry.