On November 24, 2020, the Eleventh Circuit issued an opinion in U.S. v Shah (Case No. 19-12319), in which it disposed of the Anti-Kickback Statute’s (AKS or the “statute”) “one purpose” rule in certain circumstances. In this decision, the Court held that to prove a violation of the AKS against a recipient of a kickback, the government need not prove the defendant’s motivation for accepting the payment, so long as the defendant did so knowingly and willfully. However, to prove a violation against a payor, the government must prove unlawful motive under the statute.
The defendant, Dr. Shah, is a podiatrist in Columbus, Georgia, who was convicted for his role in a kickback scheme that involved writing prescriptions for costly compounded drugs issued to TRICARE beneficiaries. Dr. Shah allegedly received $5,000.00 per month to serve as a “medical director” for PGRx Group, an intermediary which directed a compounding pharmacy to fill the prescriptions issued by Dr. Shah and others. In addition to providing office space in the PGRx Group’s facility, the medical director contract described Dr. Shah’s duties as “performing on-site supervision and training, management, and administrative responsibilities.” However, Dr. Shah allegedly did not perform these duties, and did not even know where the PGRx Group was located. In total, Dr. Shah received $55,350.43 from PGRx Group. In addition, Dr. Shah’s prescriptions for compounded medications increased significantly after the payments began as compared to his earlier prescribing practices. Moreover, electronic communications “showed that the medical director and speaker contracts were a sham” and demonstrated that prescriptions were written to maximize reimbursements.
At the conclusion of trial and at the government’s request, the district court issued a “one purpose” jury instruction that read:
To satisfy the second element of this offense, the Government does not have to prove that the defendant’s sole purpose in soliciting or receiving the remuneration or kickback was to obtain payment in return for the purchasing, leasing, ordering and arranging for, and recommending purchasing, leasing and ordering. Rather, the Government must only prove that obtaining payment in return for the purchasing, ordering or leasing was one of the defendant’s purposes in soliciting or receiving the remuneration or kickback.
Dr. Shah was convicted of conspiring to receive health care kickbacks or defraud the United States and two counts of receiving kickbacks. Dr. Shah appealed to the Eleventh Circuit, arguing that the District Court’s jury instruction was erroneous and harmful.
The Eleventh Circuit instructed the parties to address at oral argument “whether the text of the [AKS] statute makes clear that Shah’s motivation for accepting the kickbacks was irrelevant.” Both parties agreed that the jury instruction was erroneous and that the statute requires no proof of the defendant’s motivation for accepting the illegal payment, so long as he accepts the kickback knowingly and willfully. This concession signified a large shift in the government’s position, as for years it has argued to uphold the “one purpose” rule that it now abandoned with respect to recipients of alleged kickbacks. Regardless, the parties disagreed about whether the error harmed Dr. Shah.
As to the motivation issue, the Eleventh Circuit held that the AKS “says nothing about the defendant’s motivation for accepting the payment.” Specifically, the portion of the statute related to the payee reads:
Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—
. . .
(B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program,
shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.
42 U.S.C. § 1320a-7b(b)(1). The next subsection addresses the payor and states no person may “knowingly and willfully offer or pay any remuneration . . . to any person to induce such person” to cause the purchase of something paid by a federal healthcare program. Id. § 1320a-7b(b)(2) (emphasis added).
Reading these provisions, the Court concluded that the statute “says nothing about the reasons the defendant accepted the payment.” Rather, the words “in return for” describe only the payment. The Court clarified that the “crime requires no proof of the defendant’s motivation for accepting the payment.” In reaching this conclusion, the Court likened the AKS to a federal bribery statute that prohibits public officials from “corruptly” taking payments “in return for … being influenced in the performance of any official act.” The Court noted that officials could be convicted under that statute for a promise to perform an official act in exchange for a bribe even if the official never intended to follow through on that promise. The Court held that, likewise “the phrase ‘in return for’ in section 1320a-7b(b) speaks to the nature of the payment, not Shah’s reasons for accepting it.” Therefore, the Court concluded that the district court “erred by instructing the jury that the government had to prove Shah accepted the payments at least in part because they were made in return for the prescriptions he wrote. No such proof was required.” However, the Court determined that this error did not harm Dr. Shah, as the “erroneous instruction required the government to prove more than the statute required.”
While this case clarifies that the “one purpose” rule will not be used in the Eleventh Circuit to evaluate the motivation of the alleged recipient of kickbacks, it raises more questions than answers. Even though the government no longer has to prove the motivation for recipients of kickbacks, it still has to show that there was a kickback—remuneration “in return for” referrals—and that the defendant acted “knowingly and willfully.” Following through on the Court’s bribery analogy, while the government need not prove that the recipient of a kickback intended to follow through on a promise to provide referrals “in return for” remuneration, it must prove that the recipient made the promise to provide referrals “in return for” remuneration—i.e., that there was a kickback. It remains to be seen how the Eleventh Circuit will treat cases where the alleged recipient of a kickback is receiving payments, but is actually providing legitimate services and making referrals. Will it be enough if “one purpose” of the payment was to reward referrals, or does that need to be the primary or sole purpose of the payment? Or will there be a different test? For the “knowingly and willfully” elements, will it be enough that the recipient understands that “one purpose” of the payment is to reward referrals or does he have to understand that the primary or sole purpose of the payment is to induce referrals? Even if the recipient’s intent to make referrals in exchange for payments is not an element of the crime, these questions still need to be answered to determine whether the payment was “in return for” referrals within the meaning of the statute and whether the recipient acted knowingly and willfully. Perhaps future cases will provide further clarity.