AKS but-for causation has emerged as a decisive threshold issue in healthcare fraud litigation, and this development examines how a recent district court ruling using that standard reshapes False Claims Act exposure when alleged kickback schemes fail on both remuneration and causation elements.
The interaction between the Anti-Kickback Statute and the False Claims Act has long been a core driver of enforcement risk for health care providers, life sciences companies, and financial sponsors. The most recent decision from the U.S. District Court for the Middle District of Tennessee in United States ex rel. Nolan v. HCA Healthcare, Inc. illustrates how the convergence of a stringent reading of remuneration and a demanding but-for standard for causation can defeat whistleblower claims at the pleading stage, even in a judicial district known for active FCA enforcement.
In that case, relators alleged that a hospital system and pathology laboratories engaged in an unlawful referral arrangement under the Anti-Kickback Statute, and that claims submitted to federal health care programs were therefore actionable under the False Claims Act. The court rejected both the asserted kickback theory and the relators’ contention that claims were tainted for FCA purposes, reinforcing a line of authority that requires plaintiffs to plausibly allege both remuneration as defined by statute and a direct causal link between any AKS violation and the claims in question.
This ruling does not stand in isolation; it aligns with the Sixth Circuit’s interpretation of the phrase resulting from in the AKS’s 2010 amendment, which the appellate court has held imposes a but-for causation requirement for FCA claims predicated on kickback violations. It also sits against a broader circuit split, as multiple courts of appeals have now embraced but-for causation while the Third Circuit continues to endorse a looser causal connection standard. For businesses, the Tennessee decision signals that courts in AKS-intensive jurisdictions may be increasingly willing to police both remuneration and causation rigorously at the Rule 12 stage, narrowing the path for speculative theories of liability.
Regulatory Landscape
The modern risk profile for AKS/FCA litigation begins with the Anti-Kickback Statute, codified at 42 U.S.C. § 1320a-7b, which prohibits knowingly and willfully offering, paying, soliciting, or receiving any remuneration to induce or reward referrals for items or services reimbursable by a federal health care program. The statutory definition of remuneration is intentionally broad and encompasses transfers of value in cash or in kind, subject to specific safe harbors promulgated by the Office of Inspector General of the U.S. Department of Health and Human Services. The Nolan court focused squarely on this remuneration element and concluded that the alleged arrangement did not plausibly involve the type of value transfer the statute targets.
Federal regulators and enforcement authorities have long used the False Claims Act, 31 U.S.C. §§ 3729–3733, to pursue civil remedies when AKS violations are alleged to have tainted claims submitted to Medicare, Medicaid, and other federal programs. Congress tightened this link in 2010, amending the AKS to provide that a claim that includes items or services resulting from a violation of the statute constitutes a false or fraudulent claim for purposes of the FCA. That resulting from language is now the fulcrum of the but-for causation debate, with appellate courts increasingly holding that it requires proof that the claim would not have been submitted but for the unlawful kickback.
The Sixth Circuit, within which the Middle District of Tennessee sits, squarely addressed this language in United States ex rel. Martin v. Hathaway, holding that the ordinary meaning of resulting from is but-for causation and that FCA claims predicated on AKS violations must satisfy that standard. The district court in Nolan relied on this binding precedent, stating that even if an AKS violation had been adequately alleged, relators still needed to plead that the violation caused the claims for federal reimbursement in a but-for sense.
This interpretation places the Middle District of Tennessee among a growing set of jurisdictions adopting the same approach as the Sixth, Eighth, and First Circuits, which have all held that resulting from in the 2010 amendment triggers a but-for causation requirement for AKS-based FCA theories. Other courts, notably the Third Circuit, have taken a different view and endorsed a more flexible causal link, demonstrating a live circuit split that raises the prospect of eventual review by the Supreme Court.
Enforcement authorities central to this landscape include the U.S. Department of Justice, which leads FCA civil enforcement, and the Civil Division’s Commercial Litigation Branch, Fraud Section. The HHS Office of Inspector General and the Centers for Medicare & Medicaid Services play key policy and oversight roles, including through regulations, advisory opinions, and administrative sanctions. Their primary statutory and programmatic guidance can be accessed through official channels such as the HHS OIG and CMS websites, which inform how remuneration and safe harbor concepts are interpreted operationally.
The Nolan decision also sits alongside a pattern of rulings from the same district scrutinizing government intervention decisions in qui tam matters and weighing procedural requirements strictly. By demanding detailed allegations on both remuneration and causation at the outset, the court signaled a willingness to narrow cases based on statutory text and binding circuit precedent, even where alleged conduct occurs within large, sophisticated health systems.
Why This Happened
The emergence of a clear AKS but-for causation requirement in FCA cases is rooted in both statutory interpretation and policy pressure to cabin expansive fraud theories. The 2010 amendment deliberately linked AKS violations and FCA exposure, but used the phrase resulting from without elaboration. Subsequent Supreme Court case law interpreting similar language in other statutes, such as controlled substances provisions, reinforced a default presumption that resulting from denotes actual causality, which courts have now imported into the AKS/FCA context.
At the same time, decades of aggressive enforcement relying on broad tainted claims theories and implied certification have generated concern among courts about overreach and weak causal narratives. Appellate decisions in multiple circuits reflect a judicial effort to align enforcement with traditional causation principles while still preserving tools to combat genuine kickback-driven overutilization. Nolan is a direct product of that environment: the court applied a rigorous textual analysis to both remuneration and resulting from, and treated Martin’s but-for standard as a controlling constraint on relators’ theories.
This moment matters because it arrives amid ongoing debates about the appropriate balance between deterring fraud and preserving lawful business arrangements in complex provider networks. As more circuits endorse but-for causation, district courts are increasingly comfortable dismissing cases that rest on attenuated or speculative causal chains. The Nolan ruling therefore exemplifies a broader recalibration of risk, where AKS allegations alone no longer guarantee FCA viability absent clear, well-pleaded causal detail.
Impact on Businesses and Individuals
The most immediate impact of the Nolan decision and the growing acceptance of AKS but-for causation is a recalibration of litigation risk for organizations facing whistleblower suits. Defendants now have a stronger basis to challenge complaints at the motion-to-dismiss stage by attacking both the existence of remuneration and the sufficiency of causation allegations. If relators cannot plausibly allege a value transfer that fits within the AKS’s scope and demonstrate how that transfer caused specific claims to be submitted, courts in but-for jurisdictions are increasingly likely to dismiss FCA counts early.
From an operational perspective, health systems, physician groups, laboratories, and life sciences companies can take some comfort that ordinary commercial relationships, especially at market value and documented for legitimate purposes, are less likely to be recharacterized as kickbacks absent specific indicia of improper inducement. The Nolan court emphasized that remuneration is not a synonym for any favorable contractual term or business outcome; rather, it requires a benefit offered or received with the intent to influence referrals for federal program items or services. This distinction gives compliance teams a clearer lens through which to evaluate structure, documentation, and approval of referral-sensitive arrangements.
However, the decision does not eliminate risk. In jurisdictions applying but-for causation, plaintiffs may respond by increasing their factual development at the pleading stage, including more granular allegations about referral patterns, internal communications, and decision processes that supposedly link remuneration to claims. Businesses must therefore anticipate more detailed and intrusive pre-suit investigations by relators and counsel, as well as increased emphasis on documents that could be interpreted as linking financial incentives to volume or value of referrals.
Financially, the burden of FCA litigation remains severe. Even when cases are ultimately dismissed, defendants incur significant costs associated with internal reviews, litigation holds, e-discovery, and professional fees. When claims survive, the risk of treble damages and per-claim penalties persists, especially in circuits that have not adopted a stringent but-for standard. The emerging split means that geographically diversified providers and manufacturers face uneven exposure depending on where claims are submitted and where cases are filed, complicating risk modeling and reserve planning.
For individual practitioners and executives, the emphasis on causation changes how personal accountability may be argued. Prosecutors and relators will scrutinize communications that suggest clinical or contracting decisions were driven by financial incentives tied to government-reimbursed services. Where but-for causation is required, those communications can be pivotal in showing that, absent the incentive, a particular referral or order would not have been made. Conversely, strong contemporaneous documentation of independent medical judgment, patient choice, and legitimate business rationale can help break the causal chain.
Boards and senior leadership must also reassess governance frameworks around referral-sensitive arrangements. The Nolan court’s reliance on the absence of plausible remuneration and causation indicates that strong governance, including board-level oversight of high-risk relationships, can materially influence litigation outcomes by demonstrating intentional alignment with statutory requirements. Failure to implement and monitor such frameworks increases the likelihood that relationships will be characterized as disguised kickbacks in subsequent disputes.
For whistleblowers and their counsel, the ruling raises the bar for case development. Complaints premised on generalized assertions of steering or volume growth are less likely to survive; instead, relators will need to link specific remuneration mechanisms to particular claims and to articulate why those claims would not have existed but for the alleged inducements. This shift may reduce the number of weaker filings but could also lead to more targeted and sophisticated suits focused on relationships with clear causal markers.
Enforcement Direction, Industry Signals, and Market Response
Recent decisions embracing AKS but-for causation, including Nolan at the district level and appellate rulings in multiple circuits, indicate a discernible enforcement trajectory toward tighter causation standards for FCA claims based on kickback theories that rely solely on the resulting from pathway. Government lawyers are being pressed to substantiate not just the existence of suspect financial arrangements but also the causal mechanics linking those arrangements to specific claims for payment.
In response, enforcement strategies are evolving. Authorities are increasingly attentive to alternative FCA theories, particularly express and implied false certification, where a provider affirmatively represents compliance with the AKS as a condition of payment or participation. Appellate courts have underscored that such certification-based pathways remain viable and do not necessarily require but-for causation to prove falsity. As a result, organizations can no longer assume that prevailing on a but-for analysis will end an investigation if other theories are available.
Industry actors have taken note. Large health systems and national chains are devoting more resources to centralizing contract oversight, implementing standardized fair market value and commercial reasonableness reviews, and documenting non-referral-based justifications for arrangements with physicians and ancillary providers. Transactional markets, including mergers and acquisitions in the laboratory and specialist sectors, are also adjusting; due diligence increasingly focuses on whether legacy arrangements could be portrayed as remuneration linked to claims and whether documentation supports the absence of a but-for relationship.
Capital markets and investors are likewise monitoring these developments. While stricter causation standards can reduce tail risk in some jurisdictions, the persistence of a circuit split and the possibility of Supreme Court review mean that legal risk remains dynamic. Investors are paying closer attention to geographic concentration of revenue in circuits with less stringent standards, as well as to disclosures about pending or threatened qui tam actions that hinge on AKS theories.
Compliance Expectations and Practical Requirements
For organizations, the practical consequence of the AKS but-for causation showdown is not a relaxation of compliance obligations but a more nuanced blueprint for designing and defending referral-sensitive relationships. Compliance programs must be calibrated to address both elements that proved dispositive in Nolan: the existence of remuneration under the Anti-Kickback Statute and the causal relationship between any such remuneration and claims submitted under federal programs.
From a program design standpoint, organizations should ensure that contracts with referring providers or entities are structured at fair market value, commercially reasonable, and not tied to the volume or value of referrals. Each arrangement should have a clearly articulated, documented business rationale independent of referral generation. Routine reviews by legal and compliance teams should test whether any component of compensation, discounting, or support could be perceived as contingent on federally reimbursable referrals, and whether changes over time undermine the original rationale.
To manage causation risk, organizations should reinforce documentation that clinical decisions and ordering patterns are driven by patient needs, clinical guidelines, and independent professional judgment rather than financial inducements. Policies should require that selecting laboratories, imaging centers, or other downstream providers be based on quality, access, and patient-specific factors, with financial terms expressly carved out of any clinical decision frameworks. Training should emphasize that internal communications must avoid language suggesting that referrals are expected or rewarded as part of contractual relationships.
Common compliance mistakes to avoid include entering into informal or undocumented arrangements with referral sources; relying on legacy contracts that no longer reflect actual services rendered; using productivity or incentive metrics that can be interpreted as directly linked to federally reimbursable referrals; and failing to align marketing or physician liaison activities with approved compliance guardrails. These weaknesses can provide relators with material to assert both remuneration and causation, particularly if internal emails or presentations link financial outcomes to referral behavior.
Organizations should also refine their approach to internal investigations. When credible allegations emerge about potential kickbacks, investigative protocols should assess not only whether remuneration occurred but also how, if at all, it influenced claim submission. That means examining referral patterns, comparing them to baseline data, reviewing communications, and assessing whether alternative, legitimate explanations exist for any observed changes. Where a risk of but-for causation exists, prompt remediation, self-disclosure where appropriate, and restructuring of arrangements may mitigate exposure.
In multi-jurisdictional operations, compliance planning must incorporate the uneven legal landscape. Companies should map their revenue and referral relationships against circuits that require but-for causation and those that do not, recognizing that the same factual arrangement could carry different litigation risk depending on venue. Contract templates, approval thresholds, and monitoring intensity may reasonably vary based on jurisdictional risk, but must always meet baseline federal program requirements as interpreted by HHS OIG and CMS.
Finally, governance structures should ensure regular board-level visibility into AKS and FCA risk. Boards should periodically review summaries of high-risk arrangements, results of internal audits, significant whistleblower allegations, and external enforcement trends. They should also verify that the organization’s enterprise risk management framework treats AKS/FCA exposure as a strategic risk with cross-functional ownership spanning legal, compliance, finance, and operations.
As more courts accept AKS but-for causation as a prerequisite for certain FCA theories, organizations have an opportunity to re-anchor compliance practices in the statutory text and authoritative guidance. Doing so can both reduce litigation risk and demonstrate to regulators and courts that the enterprise is committed to lawful, patient-centered operations.
Looking ahead, the trajectory of AKS/FCA jurisprudence suggests that causation standards will remain a contested issue until resolved at the highest levels. The growing bloc of circuits endorsing but-for causation increases the likelihood of Supreme Court review, particularly if more courts continue to diverge from the Third Circuit’s more flexible approach. In the meantime, enforcement agencies are likely to refine their theories and evidence strategies, with greater emphasis on certification-based falsity, scienter, and materiality, alongside detailed causation narratives.
For regulated entities, the safest course is to assume that both remuneration and causation will be scrutinized rigorously. The Nolan decision demonstrates that where remuneration is not plausibly alleged and causation is not clearly articulated, courts are willing to close the door on FCA claims early. Yet it also underscores that, where evidence supports a direct link between kickbacks and claim submission, liability can still be severe. Organizations that invest now in robust design, documentation, and oversight of referral-sensitive arrangements will be better positioned to navigate this evolving environment, regardless of how the ultimate causation standard is resolved.
FAQ
1. What does but-for causation mean in AKS-based False Claims Act cases?
Ans: It means that to impose FCA liability based on an Anti-Kickback Statute violation, plaintiffs must show that the claims at issue would not have been submitted to a federal health care program but for the alleged kickback arrangement.
2. How did the Nolan decision change FCA risk for health care organizations?
Ans: The Nolan ruling showed that when a complaint fails to plausibly allege both remuneration under the AKS and but-for causation between any violation and submitted claims, courts may dismiss FCA allegations at the pleading stage, reducing exposure to weak or speculative cases.
3. Can the government still pursue FCA cases without proving but-for causation?
Ans: Yes, in many instances the government can rely on false certification theories, where a provider’s express or implied representation of compliance with the AKS forms the basis for falsity and does not always require but-for causation to establish liability.
4. What practical steps should companies take to address AKS but-for causation risk?
Ans: Companies should structure referral-sensitive arrangements at fair market value, document independent business and clinical rationales, avoid tying remuneration to referral volume or value, maintain strong oversight and auditing, and ensure communications and policies reinforce that clinical decisions are not driven by financial incentives.
5. Does the circuit split on causation affect how organizations should design compliance programs?
Ans: Yes, because exposure can vary by jurisdiction; organizations should map their operations across circuits, assume strict scrutiny of both remuneration and causation, and design compliance controls that satisfy the most demanding interpretations while remaining aligned with federal guidance.