On April 29, 2020, the Seventh Circuit handed down a startling new decision that has the potential to drastically change the landscape of False Claims Act cases, as well as criminal prosecutions for potential violations of the Anti-Kickback Statute, 42 U.S.C. § 1320(a)-7b(b), and the Illinois False Claims Act, 740 ILCS 175/1 et seq. See Stop Illinois Health Fraud v. Sayeed et al, (No. 19-2635, 7^th Cir. April 29, 2020).

In a bench trial before the district court, the defendant, MPI, a health care marketing company, admitted to entering into a contract with HCI, a provider of case management services, who gathered information by performing wellness and safety assessments for Illinois residents who may be in need of medical and social services. Pursuant to this contract, the defendant MPI paid HCI $5,000 per month in exchange for certain “patient file information.” MPI used this information to contact residents and attempt to have the residents sign up for healthcare services with MPI’s clients.

Nothing linked the monthly payments to HCI caseworkers telling their clients that they should use MPI’s services, and MPI’s contract was even approved by its attorneys. But the plaintiff put forward another, less direct theory — that MPI’s payments under the agreement were intended to secure access to the client information in the HCI files that it then used to place solicitation calls.

The district court held that such an arrangement did not constitute a patient “referral” under the Anti-Kickback Statute. The Seventh Circuit reversed, holding that the arrangement could constitute a patient referral as long as MPI acted with the intent to induce a referral. According to the appeals court, “The applicable lesson is instead that the definition of a referral under the Anti-Kickback Statute is broad, encapsulating both direct and indirect means of connecting a patient with a provider. It goes beyond explicit recommendations to include more subtle arrangements. And the inquiry is a practical one that focuses on substance, not form.” The Seventh Circuit remanded the case to this district court for a more nuanced inquiry into whether MPI paid HCI with the intent to induce referrals.

This opinion has broad-ranging implications for the health care industry. Simply purchasing patient contact information could now be seen to violate the Anti-Kickback statute. 

Clients in the health care space should be careful to scrutinize the means by which they procure clients and have experienced counsel vet any agreements before they are finalized.