Home Health & Hospice Week

A recent decision in a DME case serves as a warning for providers.

Should your durable medical equipment company land in trouble over criminal kickbacks, that's bad enough. But if prosecutors turn those kickbacks into civil false claims charges, it could end up costing you even more dearly.

That's exactly what happened in McNutt v. Haleyville Medical Supplies, recently decided by the U.S. 11th Circuit Court of Appeals.

"The government has clarified that if a provider gets referrals from kickbacks, claims submitted as a result of those referrals are false claims," says Burtonsville, MD-based health care attorney Elizabeth Hogue.

Though other circuits have made similar findings, this is the first such ruling for the 11th Circuit, which covers Alabama, Georgia and Florida.

Claims Solicited Illegally Are Thereby False

The case began when a former employee sued Gerald and Frances Burleson under the False Claims Act in Alabama federal district court. Brent McNutt charged that the couple's supply businesses submitted Medicare claims that were ineligible for reimbursement because they violated the anti-kickback statute.

McNutt alleged that the Burlesons paid kickbacks thinly disguised as rental payments and commissions to pharmacists, respiratory therapists and a doctor's representative. The couple issued monthly checks that were a percentage of the payment received from Medicare for services provided to the referred patients.

The feds intervened in McNutt's lawsuit. The government identified specific claims the Burlesons submitted to Medicare for services provided to patients referred by individuals receiving kickbacks. Prosecutors charged the couple with knowingly submitting fraudulent claims, thus violating the FCA.

The defendants argued that the anti-kickback statute doesn't support a claim under the FCA. The government answered that complying with the law is a condition of payment under federal programs, so someone seeking Medicare payment for claims that violate the statute is also liable under the FCA. Noting that neither the U.S. Supreme Court nor the 11th Circuit had addressed the issue, the district court certified the question to the appeals court, which sided with the government.

FCA Brings Fat Penalties, Flimsier Proof Standard

The problem for the Burlesons is that the FCA means big financial penalties--treble damages plus a fine of $11,000 per claim filed.

"The multiplier effect of the False Claims Act is potentially enormous," says attorney Robert Falk with the Washington office of Powell Goldstein.

Cases brought under the FCA also have a lower standard of proof. Whereas criminal charges under the anti-kickback statute require proof "beyond a reasonable doubt," civil charges under the FCA require only a "preponderance of evidence," Falk notes.

In addition, the qui tam provision of the FCA law gives persons like McNutt with knowledge of wrongdoing the incentive to blow the whistle by giving them 15 to 20 percent of the amount the government recovers. Falk refers to it as "the disgruntled employees' retirement program."

Take action: If you have current or former employees who've raised concerns about your company's practices, make sure you've responded to them.

"They have every reason to file a whistleblower suit," Falk says. "Even if you haven't done anything wrong, defending these cases is costly." 

Note: The appeal court's decision is at www.ca11.uscourts.gov/opinions.