Kayla Leland Pragid is a Partner in Holland & Knight's New York office.

In United States ex rel. Simpson v. Bayer Corp., No. 05-3895, 2019 WL 1772560 (D.N.J. Ap. 23, 2019), the district court determined that any item in a bundled Medicare claim that is tainted by a kickback or violation of any Medicare laws, regulations or program instructions could trigger liability under the False Claims Act (FCA) even where the government did not pay more for the claim based on the patient's receipt of the particular item or service.

The relator brought a qui tam action under the FCA whistleblower provision, alleging: (1) Bayer pharmaceuticals caused hospitals to submit false claims by improperly marketing off-label uses of Trasylol (a drug that was sometimes used to reduce bleeding during surgery) for uses that were not reasonable and necessary under Medicare's guidelines; and (2) Bayer paid illegal kickbacks to physicians to induce them into using the drug for the off-label purposes. In response, Bayer argued that, even if the hospital's use of Trasylol was not reasonable or necessary or the hospital over-utilized Trasylol due to illegal kickbacks, the Medicare claims were not false under the FCA as a matter of law because Trasylol was "bundled" with all other surgical expenses, rather than itemized on the bill such that the fixed cost claim amounts for the surgeries did not change based on whether Trasylol was or was not administered.

The court rejected Bayer's argument, emphasizing the difference between factual and legal falsities in the FCA context. A claim is factually false when the claimant misrepresents the goods or services it provided to the government. A claim is legally false when the claimant misrepresents (or misleadingly omits) "its compliance with a statutory, regulatory, or contractual requirement[s]." The relator contended the at-issue claims were legally false because the hospitals made express certifications to Medicare by signing certain standard Medicare forms — a Medicare Enrollment Application (form CMS-855A) and Medicare annual reports (form CMS-2552) — that were false. The Medicare Enrollment Application includes the following certification:

I agree to abide by the Medicare laws, regulations and program instructions. ... I understand that payment of a claim by Medicare is conditioned upon the claim and the underlying transaction complying with such laws, regulations, and program instructions (including, but not limited to, the Federal anti-kickback statute ...

Likewise, hospitals' annual reports to Medicare (form CMS-2552) include an acknowledgement that:

IF SERVICES IDENTIFIED IN THIS REPORT WERE PROVIDED OR PROCURED THROUGH THE PAYMENT DIRECTLY OR INDIRECTLY OF A KICKBACK OR WERE OTHERWISE ILLEGAL, CRIMINAL, CIVIL AND ADMINISTRATIVE ACTION, FINES AND OR IMPRISONMENT MAY RESULT.

The court held these certifications of compliance with the Anti-Kickback Statute (AKS) were false, as a matter of law, if the bundled claims submitted to Medicare included any items or services that resulted from an unlawful kickback. The court reasoned that "Congress expressly made AKS violations actionable under the FCA ... 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 FCA." Furthermore, even where a noncompliant claim did not cost the government more than a compliant claim, that payment of such a claim "does not mean the Government is indifferent to underlying compliance violations" because "[t]he Government does not get what it bargained for when a defendant is paid ... for services tainted by a kickback."

For these reasons, the court denied Bayer's motion for summary judgment and held that Bayer may be liable under the FCA for Medicare claims it submitted for surgical procedures in which the drug Trasylol was administered "regardless of whether the relevant requests for reimbursement were bundled rather than itemized, and regardless of whether the administration of Trasylol in these procedures affected the total amount of corresponding reimbursement."

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