Fifth Circuit Anti-Kickback Law Cases of Treatment and Financial Incentives


The United States Court of Appeals for the Fifth Circuit ruled on two cases involving the federal anti-bribery law in June, offering a fresh look at how courts can interpret it.

The United States v. Cooper and United States v. Hamilton cases proceeded differently — one ruling for the defendant, the other against — on separate aspects of the law.

The federal anti-bribery statute, 42 USC Section 1320a-7b(b), criminalizes the knowing and willful payment of “remunerations” (such as kickbacks, bribes, or rebates ) to induce or reward patient referrals or the generation of business involving articles. or services that are paid for by a federal health care program. Rewards can include anything of value and take many forms, including cash, expensive dinners, free rent, waiver of co-payment, or overcompensation.

The anti-kickback law covers both those who offer to pay compensation as well as those who receive or solicit it. Penalties can include substantial fines, jail time, and exclusion from participation in federal health care programs.

The purpose of anti-bribery law is to ensure that healthcare providers do not make patient treatment decisions based on financial incentives rather than the patient’s actual needs. Bribes can lead to inappropriate dismissals, the administration of unnecessary medical services, and an overall increase in healthcare costs.

Cooper and the concept of “self-references”

In February 2016, the United States indicted John Cooper for allegedly using his marketing company, CMGRX, to pay individual recipients of TRICARE, a federal healthcare program, $250 each to sign up for certain creams and vitamins. Once a person accepted the offer, CMGRX sent pre-filled prescription forms to doctors with payment for each signed prescription, TRICARE paid pharmacies for creams and vitamins, and pharmacies contributed a portion revenue to CMGRX.

In July 2020, a federal jury in the United States District Court for the Northern District of Texas convicted Cooper of one count of conspiracy to commit health care fraud, one count of receiving of illegal bribes from a pharmacy and six counts of paying illegal bribes to TRICARE Beneficiaries in violation of anti-bribery law. The jury was instructed as to the evidence required to violate a certain subsection of the statute, 42 USC Section 1320a-7b(b)(2)(A) (“Subsection (2)(A)”), which prohibits payments to induce referrals, but did not receive instructions on other provisions of the anti-bribery law.

On appeal to the United States Court of Appeals for the Fifth Circuit, Cooper challenged his convictions for illegally bribing TRICARE beneficiaries, arguing there was insufficient evidence to show he paid to induce referrals under subsection (2)(A) because the beneficiaries were only requesting orders for their own use. Cooper argued that without proof that the beneficiaries referred a third party, he could not be held liable for inducing referrals under Section 1320a-7b(b)(2)(A). In response, the government countered that Cooper’s payments induced “self-referrals” by recipients, and thus complied with the letter of the law.

The Fifth Circuit—in a split decision—agreed with Cooper, finding that the plain text of Subsection (2)(A) did not unambiguously include self-references because it distinguished between the ” person” paid and the “person” who is paid. referred. The court held that if a self-reference qualified as a reference under subsection (2) (A), it would duplicate subsection (2) (B), which criminalizes the act of induce someone to “buy” or “order” a substance directly. According to the court, Cooper may have violated (2)(B) by paying individuals to order drugs for themselves, but did not violate (2)(A).

Judge James L. Dennis, in his agreement, wrote that he would have found that subsection (2)(A) extends liability to those who pay to induce self-referral. However, he acknowledged that while subsection (2)(A) criminalized self-references, it only did so for references to another person.

The court’s decision in Cooper suggests the government could scale back its use of subsection (2)(A) to charge for self-referral inducement, though it’s unclear whether other circuits will adopt the reading of the fifth circuit of the anti-bribery law. For Cooper, his nearly 20-year sentence will now be reconsidered on remand after the Fifth Circuit overturned his convictions on six counts of unlawful bribery.

Hiding bribes as co-payment in Hamilton

In Hamilton, the Fifth Circuit looked at when copayments qualify as bribes. The government alleged that Dr. Yolanda Hamilton, who owned and operated a clinic, demanded that home care agencies (HHAs) pay her a $60 fee in exchange for certifying patients for home care services. She was found guilty of conspiracy to solicit bribes, conspiracy to commit health care fraud and two counts of misrepresentation regarding health matters by a jury in the court of US District of the Southern District of Texas in 2020.

On appeal, Hamilton did not deny that the home care certifications she issued depended on HHAs paying $60 to the clinic. However, she argued that the $60 fee was a legitimate copay allowed under Medicare regulations. In response, the government claimed the fee was an illegal bribe disguised as a co-payment, similar to a bribe HHAs had to pay to receive certification from Hamilton.

The Fifth Circuit upheld Hamilton’s conviction. Although the court acknowledged that there was evidence from which the jury could have decided that the $60 fee was, in fact, a legitimate copayment, it ultimately agreed with the government that the evidence was sufficient. to demonstrate that the $60 fee was a bribe. The court found that the jury could reasonably conclude that the fee was an illegal bribe rather than a legitimate copayment because (a) Hamilton had discussed the fee with the owners of the HHAs, (b) the patients rarely paid the fee, (c) HHAs usually paid the fee, and d) the fee was uniform regardless of the services rendered.

Hamilton’s conviction carried a 60-month prison sentence, a $9.5 million restitution order and a 35-year ban from participating in federal health care programs.

Ultimately, the Hamilton case is another reminder that compensation under anti-bribery law can come in many different shapes and sizes.


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