If you’re a surgical device distributor and you want to reward a surgeon for using your products on Medicare and Medicaid patients, you may want to choose a reward that’s less conspicuous than a yacht. That’s one lesson in the recent decision in US ex rel. Cairns v. D.S. Med.
In denying defendants’ summary judgment motion, the court recited relator’s allegations: Neurosurgeon Dr. Sonjay Fonn used devices provided by his fiancée’s distributorship, D.S. Medical, based in part on the fact that she and her distributorship provided him with in-kind kickbacks in the form of a home at below-market rent and use of a yacht and other properties she bought through a company funded by her distributorship. The arrangement, they say, caused the device manufacturers to pay inflated commissions to the distributorship.
The Anti-Kickback Statute and the False Claims Act come into play because Dr. Fonn allegedly used the devices provided by his fiancée’s distributorship when he performed surgeries at St. Francis Med. Center, and St. Francis purportedly billed Medicare and Medicaid.
The defense argued for the “primary-purpose” standard of intent under the Anti-Kickback Statute: that there was no violation unless the primary purpose of providing benefits was inducement. But the court ruled in favor of the “one-purpose” standard: that there was a violation if even one purpose was inducement.
The court also rejected the defense argument that the defendants couldn’t be liable under the False Claims Act for claims submitted by St. Francis rather than themselves. The court ruled that “any person … who knowingly assisted in causing the government to pay claims which were grounded in fraud” can be liable (citing US ex rel. Hutcheson v. Blackstone Med., 647 F.3d 377 (1st Cir. 2011)).
The case is US ex rel. Cairns v. D.S. Med., No. 1:12CV00004 AGF (E.D. Mo., Aug. 31, 2017).