Link to At a Glance At a Glance
- New 11th Circuit standard: U.S. v. Chun held the AKS’s “knowingly” element does apply to the federal healthcare program reference, reversing the prior suggestion in previous decision that the element was merely jurisdictional.
- Low bar for knowledge: The government need only show a defendant knew referred patients “could” be federally insured — not that a specific patient was actually covered. Participation in Medicare alone was deemed sufficient evidence in Chun.
- Aligns with 5th Circuit: The 11th Circuit adopted the reasoning from the 5th Circuit’s ruling in U.S. v. Shah, which was grounded in the Supreme Court’s Ruan v. United States construction of “knowingly” and the AKS’s proviso that no actual knowledge or specific intent is required.
- Action item: Providers should ensure AKS compliance across any patient population that may plausibly include federally insured patients, since ignorance of individual patients’ coverage status will rarely be a viable defense.
Link to Introduction Introduction
The 11th Circuit Court of Appeals recently clarified the government’s burden to prove a defendant’s knowledge with respect to the source of payments for an item or service furnished in violation of the Anti-Kickback Statute (AKS). The court held that a defendant practitioner is liable if he or she refers patients in violation of the AKS knowing that they “could” be federally insured. The court in United States v. Chun went on to hold that the government presented sufficient evidence of such knowledge by showing that the defendant “participated in the Medicare program, and, therefore, that he had Medicare patients.”
This holding represents a departure from prior 11th Circuit precedent suggesting that the “Federal healthcare program” reference in the AKS was merely jurisdictional, and therefore not an element as to which the government must prove knowledge or intent. It is now clear that the government must prove the defendant’s knowledge that payment for the items or services at issue might come from a federal healthcare program. However, it is not necessary for the government to prove that the defendant knew that the specific item or service at issue would be paid for by federal funds.
Link to The Chun Facts The Chun Facts
The Chun prosecution arose in the wake of prior convictions of the founder and several former executives of Insys Therapeutics, Inc. Those individuals were tried and convicted in the District of Massachusetts based on bribes paid to physicians to prescribe Subsys, Insys’ breakthrough cancer pain medication. The 1st Circuit Court of Appeals affirmed those convictions.
The defendants were among the physicians to whom Insys paid remuneration for prescribing Subsys. Those payments were characterized as compensation for physician speaker programs. These programs were poorly attended and often documented with sign-in sheets containing forged signatures. The court deemed the events “obvious shams” created to hide the fact that the money Insys paid violated the AKS.
Link to Previous 11th Circuit Law Previous 11th Circuit Law
The AKS prohibits an individual from “knowingly” accepting remuneration in exchange for “any item or service for which payment may be made in whole or in part under a Federal health care program.” Until Chun, the 11th Circuit had never specifically addressed in a published opinion what the government must show to establish the AKS’s “knowingly” element as applied to the statute’s federal healthcare program requirement.
In United States v. Ruan, however, the 11th Circuit suggested that this element was merely jurisdictional. The Supreme Court vacated Ruan on other grounds, leaving the issue unsettled. Interestingly, however, the Supreme Court’s construction of the Controlled Substances Act’s scienter requirement in its opinion vacating Ruan was cited by the 5th Circuit in its later opinion holding that the AKS’s “knowingly” requirement did apply to the federal healthcare program element. And in Chun, the 11th Circuit adopted the 5th Circuit’s reasoning.
Link to The 5th Circuit’s Decision in Shah The 5th Circuit’s Decision in Shah
The 5th Circuit’s 2024 opinion in United States v. Shah cited the 11th’s Circuit’s initial conclusion in Ruan, as well as the Supreme Court’s reversal, when considering whether the “knowingly” element was jurisdictional. Shah involved surgeons who accepted kickbacks, funneled through pass-through marketing and consulting entities, in exchange for referring patients to an out-of-network hospital. The 5th Circuit rejected the government’s argument that the federal healthcare program reference in the AKS was merely a jurisdictional hook, as the 11th Circuit had suggested in its Ruan opinion. But it also rejected the defense argument that the government was required to prove the defendants knew the specific patients they referred were federally insured.
Instead, the 5th Circuit pointed to the AKS’s language prohibiting kickbacks for items or services “for which payment may be made in whole or in part under a Federal health care program” (emphasis added) — together with the statute’s proviso that “a person need not have actual knowledge of this section or specific intent to commit a violation of this section” — in reasoning that the government need only show the defendant “knowingly agreed to accept remuneration for referring patients that could be federally insured.” This is a notably lower bar than requiring proof the defendant knew a specific patient was covered by Medicare or another federal program.
The Shah court also grounded its reasoning in the Supreme Court’s decision in Ruan,which held, in construing the Controlled Substances Act, that “knowingly” modifies the words directly following it. Here, “Federal healthcare programs” is part of the clause that follows “knowingly” in the statute’s text. The 5th Circuit later applied the same rule to reject a similar argument from another defendant, reiterating that “the Government did not need to prove that the defendants knew their conduct targeted federal healthcare programs,” only that they knew services to some referred patients might be paid for, in whole or in part, by a federal healthcare program.
Link to The 11th Circuit’s Decision in Chun The 11th Circuit’s Decision in Chun
The Chun court provided two reasons for adopting the same standard as the 5th Circuit. First, the statute’s text only requires that payment “may be made… under a Federal health care program” — and the word “may” signals that liability attaches whenever there is a possibility of federal payment, which the court found sensible “given the nature of most medical practices, where Medicare constitutes a portion, but not the entirety, of the patients’ insurance coverage.” Second, the court found this reading consistent with the AKS’s own text, which provides that “a person need not have actual knowledge of this section or specific intent to commit a violation of this section.”
Applying that standard, the court held that because the defendant had participated in the Medicare program and therefore had Medicare patients, the jury had sufficient evidence to find that he “knowingly agreed to accept remuneration for referring patients who could be federally insured.” The government did not need to prove the defendant knew that any particular patient who received Subsys was a Medicare beneficiary — only that his patient population plausibly included federally insured patients when he knowingly received payment for referrals.
Link to Takeaway for Healthcare Practices Takeaway for Healthcare Practices
It is now clear in the 11th Circuit that the AKS “knowingly” requirement is not merely jurisdictional, but subject to the statute’s intent requirement. The ruling nevertheless adopts a reading of the AKS’s mens rea requirement that will make it hard for providers to avoid liability by claiming ignorance of whether individual patients they refer are federally insured. Where practices or referral bases plausibly include federal-program patients, the government will likely meet its burden of proof. Providers must therefore be cognizant of and compliant with the AKS for all patient populations that may be federally insured.