Dykema Leads Oaklawn Hospital to Victory in Precedent-Setting False Claims Act Case

The U.S. Court of Appeals for the Sixth Circuit affirmed the dismissal of a False Claims Act (FCA) case against Oaklawn Hospital (Oaklawn) and made an important ruling regarding the Anti-Kickback Statute (AKS), which prohibits, among other things, organizations and individuals such as medical providers from making certain referral arrangements in return for remuneration. The Dykema team representing Oaklawn was led by Jonathan Feld and included members Eric Klein and Mark Magyar, and associate Andrew VanEgmond.

In 2018, Oaklawn, which is located in  Marshall, Michigan, declined to employ the plaintiff ophthalmologist in the case. A result of that decision was that Oaklawn did not disrupt an existing relationship with an outside ophthalmologist. The plaintiff sued, alleging a violation of the AKS and the FCA, claiming the decision not to hire her constituted “remuneration” to the other ophthalmologist.

The Sixth Circuit affirmed the District Court’s ruling in favor of Oaklawn, finding that remuneration is limited to payments and other transfers of value, rather than any act that may be valuable to another.  The Court’s decision was the first of its kind to begin placing parameters around the meaning of “remuneration” under the AKS.

“This is a major victory for the healthcare industry. By clarifying the definition of remuneration to require a specific payment or transfer of value, those being sued under the AKS now have stronger arguments to defend against unwarranted claims,” said Feld.

Besides the Court’s groundbreaking holding as to remuneration, the Sixth Circuit also aligned itself with the Eighth Circuit in adopting the “but-for” causation standard for the “resulting from” language of the AKS, as argued by Dykema on behalf of Oaklawn. The Sixth Circuit rejected the more lenient “taint” standard of causation adopted by the Third Circuit and advocated by the plaintiff and the DOJ, as amicus curiae in support of the plaintiff. By doing so, the Sixth Circuit has adopted a standard that requires plaintiffs to directly connect an alleged kickback with the resulting healthcare billing in order to survive dismissal of the case. 

The case is United States, ex rel. Martin, et al. v. Hathaway, et al., Case Number 22-1463. Chief Judge Jeff Sutton issued his decision on March 28, 2023.

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