Two Recent Federal Court Cases Tackle Three Critical Components of the Anti-Kickback Statute

Two recently decided federal court cases hone in on the proper interpretation and application of three critical components of the Anti-Kickback Statute (“AKS”), namely:

  • the requirement that a violation of the AKS must involve the payment of remuneration;
  • the requirement that an unlawful referral must result from a violation of the statute; and
  • the requirement that the payor of remuneration have knowledge that its conduct was unlawful.

As more fully discussed below, in each of these cases, the court ruled against the qui tam relators’ interpretation of these statutory requirements and dismissed the relators’ complaints.

In each case, the relator was seeking to prove an AKS violation in order to establish a violation of the False Claims Act (“FCA”), which creates liability for any person who knowingly presents a false or fraudulent claim for payment and which triggers a private right of action for the qui tam relator.

In U.S. ex. rel. Shannon Martin, M.D. v. Darren Hathaway, M.D. et al, a panel of the Sixth Circuit Court of Appeals considered (1) whether a hospital’s decision not to hire an ophthalmologist in return for a general commitment of continued surgery referrals from another ophthalmologist constituted remuneration covered by the AKS, and (2) whether claims from such continued referrals resulted from violations of the statute.

The court concluded that the qui tam relator’s complaint failed to establish a cognizable theory of remuneration, and failed to establish causation. Accordingly, the court affirmed the district court’s dismissal of the qui tam complaint.

Importantly, in reaching its conclusion regarding causation, the court, as more fully discussed below, furthered an already existing split among circuit courts on this issue.

In U.S. ex. rel. Adam Hart v. McKesson Corporation, the U.S. District Court for the Southern District of New York interpreted the requirement that a violation of the AKS must involve “knowingly and willfully” offering or paying remuneration to any person to induce such person to purchase or arrange for or recommend purchasing any good, facility, service, or item for which payment may be made under a federal health care program.

The case involved McKesson’s provision of certain business management tools to oncology practices that joined programs requiring them to purchase a substantial proportion of their drugs from McKesson. As discussed below, the Court dismissed the qui tam relator’s Second Amended Complaint concluding that the complaint did not allege that McKesson acted with knowledge that its conduct was unlawful. (The relator’s First Amended Complaint had previously been dismissed with leave to amend.)  

A Violation of the AKS Must Involve the Payment of Remuneration and an Unlawful Referral Must Result from a Violation of the Statute: The Hathaway Case

This case involved an ophthalmology group with two physicians, one of whom, Dr. Hathaway, was the owner of the group, the other physician being Dr. Martin. The group had historically referred patients requiring surgery to Oaklawn Hospital, the local hospital in Marshall, Michigan. Because of friction in the relationship, Dr. Hathaway was preparing to merge his practice with a larger one based in Lansing. Dr. Martin sought employment with Oaklawn.

According to the complaint, when Dr. Hathaway learned that Dr. Martin was about to be employed by Oaklawn he engaged in discussions with Oaklawn about how its employment of Dr. Martin would be a “lose-lose.” It would cost Oaklawn significant amounts to set up Dr. Martin in an ophthalmology practice and he would then be forced to take his cases elsewhere. Further, he allegedly told Oaklawn that with the merger, he would be relieved of a substantial part of his administrative duties and expected that he could increase business for Oaklawn.

Thereafter, according to the complaint, the Board of Directors of Oaklawn voted not to hire Dr. Martin.  The board chair called Dr. Hathaway to let him know about the decision while another board member texted Dr. Hathaway that Oaklawn appreciated all his support, wanted to continue their partnership, and looked forward to “increased surgical volume.”

Dr. Martin and her husband, who had been the Director of Finance at Oaklawn, then filed a qui tam suit against Dr. Hathaway and Oaklawn under the FCA alleging that Oaklawn’s rejection of Dr. Martin’s employment in return for Dr. Hathaway’s commitment to continue sending local surgery referrals to Oaklawn constituted “remuneration” covered by the AKS, and resulted in a violation of the AKS. Claims for Medicare and Medicaid reimbursement resulting from the kickbacks violated the FCA.

The district court granted the defendants’ motion to dismiss and the matter was appealed to the Sixth Circuit which affirmed the district court’s dismissal.


The Court first noted that the AKS does not define the term “remuneration.” The key question was therefore whether the term covers just payments and other transfers of value or any act that may be valuable to another. For various reasons, the court concluded that it covers just payments and other transfers of value. Among the reasons:

  • When Congress first penalized the offer of “remuneration” in return for patient referrals in 1977, dictionaries from around that time consistently described remuneration as a form of payment.
  • Other uses of remuneration by Congress around the same time treated remuneration as something paid or transferred, citing by way of example the Tax Treatment Extension Act of 1977 (applying a wage withholding amendment to “remuneration paid after the date of enactment”) and the Social Security Amendments of 1977 (determining contribution and benefit base “with respect to remuneration paid”).
  • Context points in the direction of defining remuneration as limited to payments or transfers of value as the relevant sentence in the AKS refers to “any remuneration … in cash or in kind,” words that suggest payments or transfers of some sort.
  • The statute offers three non-exhaustive examples of remuneration: kickbacks, bribes, and rebates. Kickbacks and bribes usually involve payments of money or transfers of specific items of value, and rebates customarily involve the return of amounts of money previously paid.
  • The statutory exemptions in the AKS and the AKS “safe harbors” have a payment quality involving a transfer of something of value from one party to another.
  • Various other laws referring to remuneration support its being interpreted as pertaining only to payments and other transfers of value. These include the civil penalties section of the Social Security Act and certain provisions in HIPAA and in the Railroad Retirement Tax Act.
  • The Office of Inspector General’s advisory opinions define “remuneration” as “the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind,” and the Office’s guidance describes the AKS as a “criminal prohibition against payments (in any form, whether the payments are direct or indirect) made purposefully to induce or reward the referral.”
  • The setting of the statute supports limiting the term “remuneration” to payments and other transfers of value. The same language creates civil and criminal liability.

“In the context of dual-application statutes like this one, the Court gives the same interpretation to the same words, whether applied in a civil or criminal setting. That means that, if ambiguity exists over the meaning of a provision, the rule of lenity favors the narrower definition.”

  • A broad definition of remuneration lacks a coherent endpoint.

“Consider the hospital that opens a new research center, purchases top of the line surgery equipment, or makes donations to charities in the hopes of attracting new doctors. Or consider the general practitioner who refuses to send patients for kidney dialysis treatment at a local health care facility until it obtains more state-of-the-art equipment. Are these all forms of remuneration? Unlikely at each turn.”

With specific application to the Martins’ qui tam complaint, the court stated that the Oaklawn board’s refusal to hire Dr. Martin in return for Dr. Hathaway’s general commitment to continue sending surgery referrals for his patients to Oaklawn did not entail a payment or transfer of value to Dr. Hathaway.

Even under an anything-of-value definition of remuneration, the court concluded that it was doubtful that the Martins allege a cognizable referrals-for-referrals scheme given how vague and non- concrete the alleged agreement was. It had no timeframe. It had no specific volume requirement. It applied only to patients from the same town in which the hospital was located and only if the hospital offered the surgery service. It had no condition on use of certain services at the hospital and it did not come with any other guarantees. As the court stated:

“While it is difficult to imagine a statute with criminal application applying to something as vague as ‘anything of value,’ we suspect that any such application would be ironed out with more specific requirements, conditions, and commitments. Any such refinements are not found in this complaint or the briefs of the parties. Nor for similar reasons, we suspect, have we found any cases treating a decision not to hire someone as remuneration covered by the Anti-Kickback Statute.”

Finally, the Court rejected the Martins’ argument that because the AKS and FCA use different terms, i.e., “remuneration” in the AKS and “payment” in the FCA, the term “remuneration” in the AKS must be broader scope. But according to the court, it is unclear whether the words capture any difference in meaning, especially given that the relevant dictionaries define “remuneration” as “payment.”


Having decided the remuneration question, the court next turned to the issue of causation. This issue arises because when Congress as part of the Affordable Care Act (“ACA”) amended the AKS with respect to its integration with the FCA, it provided that a claim that includes items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the FCA.

In the years that followed the ACA amendment and prior to the Sixth Circuit’s most recent decision in Hathaway, courts have grappled with the question whether the term “resulting from” means that there must be “but-for” causation, i.e., the claim for reimbursement would not have been submitted but-for the violation of the AKS, or whether a more expansive/lenient connection between the violation and the submission of the claim is all that is required. The courts have disagreed as to the correct answer.

In United States ex rel. Greenfield v. Medco Health Solutions, Inc., 880 F.3d 89, 95 (3d Cir. 2018), the Third Circuit rejected the “but-for” requirement while holding instead that there must be some linkage between the AKS violation and the filing of the claim. Relying in part on its interpretation of the legislative history and the purposes behind the amendments,[1] the court held that for an FCA violation to occur the plaintiff-whistleblower (or the government as applicable) must only prove that at least one of the claims for which reimbursement was sought was provided in violation of the AKS (as a kickback renders a subsequent claim ineligible for payment).

Last year, the Eighth Circuit in U.S. ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828, 835-836 (8th Cir. 2022) disagreed with the Greenfield court’s reasoning and adopted the more stringent “but-for” requirement. The court looked to the Supreme Court’s decision in Burrage v. United States, 571 U.S. 204 (2014), involving “results from” language in the Controlled Substances Act.

“Looking to dictionary definitions, the [Burrage] Court concluded that the ordinary meaning of “’results from’ imposes . . . a requirement of actual causality’: the use of drugs had to be a ‘but-for cause of the death.’”  

And according to the court in Cairns, “a but-for causal relationship” as articulated by the Court in Barrage requires proof that the harm would not have occurred in the absence of—that is, but for —the defendant’s conduct.

The court in this most recent Hathaway case sided with the Eighth Circuit, applying the “but for” test and concluding that neither Oaklawn nor Dr. Hathaway had in fact submitted claims for Medicare or Medicaid reimbursement for items or services resulting from the violation of the AKS (assuming there was in fact one).

The Hathaway court, citing Burrage and adopting what it described as the “ordinary meaning” approach, concluded that the ordinary meaning of “resulting from” is but-for causation. According to the court, that understanding applies unless strong textual or contextual indications indicate a contrary meaning, and in the present case none exists.

In support of its interpretation, the court went on to state that as in Burrage, Congress added the “resulting from” language in 2010 against the backdrop of a handful of cases that observed similar language as requiring but-for causation. See e.g., Gross v. FBL Fin. Servs., Inc., 557 U.S. 167, 176 (2009) (“because of”); Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 63 (2007) (“based on”); Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258, 265–68 (1992) (“by reason of”). The court also acknowledged the Eighth Circuit’s decision in Cairns as consistent with its decision.

In concluding that the “but-for” test applied, the court considered several arguments made by the government as amicus curiae.

The government argued that because Congress did not require but-for causation in the AKS, there was no reason why it would have done the same for a corresponding claim under the FCA. The court rejected this argument because according to the court, the “resulting from” language applies to all kinds of fraud claims without regard to whether the underlying claim has a causation component.

The government also argued that the legislative history indicates that the sponsors of the ACA bill hoped to overrule a then-recent district court decision that had dismissed an FCA action because the wrongdoer did not personally submit the resulting claim.

The court rejected this argument stating that “we generally do not consider legislative history in construing a statute with criminal applications, the idea being that no one should be imprisoned based on a document or statement that never received the full support of Congress and was presented to the President for signature.” Citing United States v. R.L.C., 503 U.S. 291, 307–10 (1992) (Scalia, J., concurring); United States v. Brock, 501 F.3d 762, 770–71 (6th Cir. 2007).

Having rejected the legislative history approach to statutory language interpretation, the court then explained its view that the Third Circuit’s contrary conclusion in the Greenfield case offered little assistance because it turned primarily on legislative history.

The court concluded by affirming the district court’s dismissal of the qui tam complaint.

Violation of the AKS Requires That the Payor of Remuneration Have Knowledge Its Conduct was Unlawful: The McKesson Case

The qui tam relator in McKesson, Adam Hart, had been a business development executive at McKesson. He alleged that McKesson violated the AKS by providing two business-management tools, the Margin Analyzer and the Regimen Profiler, to oncology practices who were committed high volume purchasers of drugs from McKesson. The two tools allowed the practices to increase their profit margins for prescribed medications.

One of the tools, the Margin Analyzer, enables a practice to compare the reimbursement rates of interchangeable drugs, which in turn allows the practice to determine the cost and profit margin on a per drug, per insurer basis and also give forward-looking recommendations. The other tool, the Regimen Profiler, works in much the same way, but instead of calculating the margins for an individual drug, it calculates costs for the whole treatment regimen.

At the outset, the court stated that for Hart to establish that McKesson in offering the business management tools violated the AKS, Hart was not only required to plead that McKesson offered these tools to its customers, but that it did so with a culpable—i.e., knowing and willful —mental state. Citing the Second Circuit’s prior opinion in Pfizer, Inc. v. United States Dept. of Health and Human Servs., 42 F.4th 67, 77 (2d Cir. 2022) and the U.S. Supreme Court’s  opinion in United States v. Bishop, 412 U.S. 346, 360 (1973), the court wrote:

“Where an FCA claim is based on a violation of the AKS, the AKS scienter requirement must also be satisfied. As this Court previously held, ‘to satisfy the AKS’s scienter requirement, Hart must plead facts that give rise to a plausible inference that McKesson knew its conduct was unlawful.’”

In thus describing the scienter requirement, the court rejected Hart’s argument that the required knowledge can be shown via a more easily established two-step set of allegations. Specifically, he asserted that where pleadings allege that a defendant (1) knows that the AKS prohibits the provision of anything of value as an inducement, yet (2) engages in intentional conduct to provide things of value as inducements anyway, such allegations state a claim under the AKS.

Of particular note, the court in dismissing the amended complaint considered various specific allegations made by Hart to establish the requisite scienter and concluded that none of them were sufficed to plausibly allege that McKesson acted with knowledge that providing the Margin Analyzer and Regimen Profiler free of charge to the oncology practices was unlawful.

These allegations included among others: (i) that Hart sent an instant message to a direct supervisor during a live web-training presentation on McKesson’s compliance policies which stated that McKesson’s current sales practices violated the very compliance policies that were presented in the training session, and that his supervisor dismissed Hart’s concerns instructing him to continue his sales work and not worry about the compliance policies; (ii) that he had conversations with fellow McKesson sales employees about how the use of the Margin Analyzer and Regimen Profiler was “unethical” and “wrongful;” and (iii) that McKesson destroyed documents. The court held that these allegations, even if accepted as true, did not establish the requisite scienter on McKesson’s part.

With respect to the instant message, the court stated that a general statement made to a regional manager that current sales practices violated compliance policies was not sufficient to allege that McKesson was knowingly violating the law.

With respect to the conversations with fellow sales employees, the court stated that beliefs about the “inappropriate” or “unethical” nature of providing the business tools was, without more, insufficient to adequately plead purported knowledge of unlawfulness—let alone an “intentional violation of a known legal duty …”

With respect to the allegation that McKesson destroyed documents, the court was of the view that even if documents were destroyed, given the inadequacy of specifics, the allegations as presented did not give rise to the plausible inference that McKesson destroyed documents in order to conceal conduct it knew was unlawful.

In dismissing the adequacy of all the allegations, the court noted that “the conduct complained of here was, based on the complaint’s own allegations and attached exhibits, openly advertised and even widely discussed. Such allegations “undermine any claim that McKesson was intentionally violating a known legal duty.”


These two cases are of obvious importance as they interpret critical requirements under the AKS.

Regarding the Hathaway case, the split in the circuit courts regarding the causation question makes it very likely that the question will ultimately be decided by the Supreme Court. In the interim of course, the meaning of the phrase and its application and impact will vary based on location.

As for the term “remuneration,” it has received surprisingly little interpretation for AKS purposes when it comes to arrangements which do not involve outright payments or items with tangible value as was the case in Hathaway. While Hathaway was a qui tam suit, the government did file an amicus brief in which it supported the qui tam relator’s expansive definition of remuneration. This may signal the government’s willingness to adopt a more expansive view of remuneration when the issue arises with at least some courts pushing back.

As for the court’s decision in McKesson, we are again provided with a very thorough example of how the scienter requirement under the AKS is being interpreted and applied.


On April 11, 2023, the plaintiffs filed a petition for the rehearing of the case en banc. As explained above, the case was decided by a panel of the Sixth Circuit. For reasons summarized below, the plaintiffs state that the panel’s decision was incorrect and contains a question of exceptional importance that should be reheard en banc.

In the petition, the plaintiffs argue that the panel erred in concluding that they cannot establish “but-for” causation because the “alleged scheme did not change anything” and there was a significant passage of time between Oaklawn’s decision to reverse course and not to hire Dr. Martin.

The plaintiffs state that the panel in its opinion thus critically misstates the “complaint’s key theory of remuneration.” According to the plaintiffs, the complaint’s theory of remuneration as applied by the panel is that the Oaklawn board refused to hire Dr. Martin in return for Dr. Hathaway’s general commitment to continue sending referrals for his patient’s to Oaklawn. According to the plaintiffs, the court thus misstates the plaintiffs’ theory as set forth in the complaint — “[t]his case is not about hiring, or not hiring; it is about Dr. Hathaway’s continued referrals (i.e. the offer) in exchange for Oaklawn’s continued referrals (i.e. the acceptance).” It is about “referrals for referrals” and the panel’s misstatement of the complaint’s key theory was improperly outcome determinative.

The plaintiffs assert that other courts have in fact held that any payments “tainted” by improper remuneration for referrals are false claims under the FCA.  Among others, they cite United States ex. rel. Wilkins v. United Health Group, Inc., 659 F.3d 295 (3rd Cir. 2011) in which according to the plaintiffs the Third Circuit rejected ‘’but-for” causation and adopted the government’s statement in its amicus curiae brief that “[t]he Government does not get what it bargained for when a defendant is paid by CMS for services tainted by a kickback[;]” plaintiffs who alleged that defendants violated the AKS while submitting claims for payment under a federal health insurance program have stated a plausible claim under the FCA.”

The plaintiffs go on to point out that the panel did not address the Wilkins case and they suggest that the panel improperly dismissed the Greenfield case (discussed above) and in so doing “intentionally heightened the causation standard to limit claims under the False Claims Act…”

With respect to the remuneration question, the plaintiffs assert that the panel incorrectly narrowed its scope. The plaintiffs state that the language in the AKS is broad prohibiting “any remuneration.” and courts in fact “routinely describe ‘any remuneration’ within the meaning of the AKS as ‘anything of value.’” Citing e.g., U.S. ex. rel. Fry v. The Health Alliance of Greater Cincinnati, 2008 U.S. Dist. LEXIS 102411, quoting OIG Anti-Kickback Provisions, 56 Fed. Reg. 35952, 35958 (July 29, 1991) (granting of staff privileges and scheduling of doctors to perform tests in the hospital’s heart station found to be remuneration).

The plaintiffs argue that this narrow definition would exclude all “referrals for referrals” schemes from the AKS and the FCA, and that the panel’s narrow construction is also not consistent with other language in the statute. The AKS is violated by the receipt of remuneration “directly or indirectly, overtly or covertly.” 42 U.S.C. § 1320a-7(b)(1).

“Requiring remuneration to be a cash payment or a transfer reads ‘indirectly’ and ‘covertly’ out of the statute. United States v. Liss, 265 F.3d 1220, 1231 (11th Cir. 2001) ‘Congress introduced the broad term ‘remuneration’ . . . to clarify the types of financial arrangements and conduct to be classified as illegal under Medicare and Medicaid. The phrase ‘any remuneration’ was intended to broaden the reach of the law which previously referred only to kickbacks, bribes, and rebates.’” Accordingly, courts broadly interpret remuneration to mean “anything of value.”

The plaintiff’s ultimate conclusion: the court should grant the petition for rehearing en banc.


[1] The court stated “Congress passed § 1320a-7b(g) in 2010 as an overall effort to strengthen[ ] whistleblower actions based on medical care kickbacks” and “to ensure that all claims resulting from illegal kickbacks are considered false claims for the purpose of civil action[s] under the False Claims Act, . . .”