Schroeder v. Medtronic plc

Filing 562

MEMORANDUM AND ORDER denying 397 United States of America, ex rel. Thomas Schroeder Relator's Motion for Partial Summary Judgment; granting 429 Medtronic, Inc. and Covidien LP's Motion for Partial Summary Judgment; granting 434 Hutch inson Regional Medical Center's Motion for Partial Summary Judgment; and granting in part and denying in part 465 United States of America, ex rel. Thomas Schroeder Relator's Motion to Limit or Exclude Expert Testimony and Report. The motion to limit expert Tony Maida's legal conclusions is granted. The motion to limit or exclude expert Tony Maida's legal conclusions otherwise is denied. Signed by District Judge Daniel D. Crabtree on September 26, 2024. (mls)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

UNITED STATES OF AMERICA,
ex. rel. THOMAS SCHROEDER,
Case No. 17-2060-DDC-BGS
Relator,
v.
HUTCHINSON REGIONAL MEDICAL
CENTER, MEDTRONIC, INC.,
COVIDIEN, LP and WICHITA
RADIOLOGICAL GROUP, PA,
Defendants.

MEMORANDUM AND ORDER
This is a case about doing enough. Specifically, it asks the court to decide whether
defendants Medtronic, Inc., Covidien, LP (together “Medtronic”), and Hutchinson Regional
Medical Center completed enough documenting and reporting to avoid violating the law.
Defendants engaged in medical device transactions, with Medtronic supplying—and HRMC
purchasing—directional atherectomy devices and drug-coated balloons (DCBs) for the treatment
of peripheral artery disease (PAD). Some of those DCB transactions involved bulk sales—where
purchasing a given quantity of DCBs decreased the price per unit because of the number
purchased. It’s a familiar arrangement for anyone who has frequented a wholesale club. And
some of the DCB transactions involved bundled sales—where Medtronic provided directional
atherectomy devices, and additional DCBs, for no extra charge alongside a bulk DCB purchase.
Again, not an unusual scheme, as any late-night infomercial watcher can attest. Neither of these
transaction types appear problematic on its face. But here’s the kicker: HRMC reports its costs

to Federal health care programs, like Medicare. And so, the bulk and bundled sales transactions
pass muster solely when the Federal health care programs also benefit from the deal. Otherwise,
such bulk and bundled transactions violate the Anti-Kickback Statute (AKS), a law designed to
address fraud and other abusive practices involving Federal health care programs.
Relator contends defendants didn’t do enough with the bundled transactions—not enough
documenting and not enough reporting. And so, he argues, the no-charge1 devices Medtronic
supplied to HRMC from April 2015 to July 2019 qualify for the AKS’s illegal remuneration
category. Illegal remuneration violates the AKS and taints HRMC’s Federal health care program
claims—ultimately making them false claims. And so, on behalf of the government, Relator
brings this action under the False Claims Act (FCA). The FCA provides civil liability for
violating the AKS’s criminal provisions.
But defendants cry foul. They contend that their transactions are protected under the law,
asserting a safe harbor affirmative defense. Defendants invoke both the AKS’s statutory
discount exception (and the corresponding regulatory safe harbor provisions) to absolve their
exchange of no-charge medical devices in the bundled transactions.
Relator moves for partial summary judgment against defendants’ safe harbor affirmative
defense. Doc. 397. He argues that the documents defendants produced in discovery speak for
themselves—defendants didn’t do enough to qualify for the statutory exception and the
regulatory safe harbor. Defendants Medtronic and HRMC each filed cross summary judgment

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The parties quibble over semantics, with Relator preferring the term “free devices,” e.g., Doc. 398
at 2–4, and defendants insisting on the term “no-charge devices,” Doc. 430 at 26–27; Doc. 435 at 2. The
court employs the phrase “no-charge” devices because it more closely tracks the regulatory language that
describes the transactions at issue here. See 42 C.F.R. § 1001.952(h)(5)(ii) (“The term discount does not
include . . . [s]upplying one good or service without charge or at a reduced charge[.]” (emphasis added)).
What’s more, Medtronic provided no-charge devices to HRMC solely alongside bulk orders—never,
strictly speaking, for free (i.e., without any purchase at all). And so, the term “no-charge” more
accurately describes the nature of the transactions at issue here.

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motions. Doc. 429; Doc. 434. Their motions ask the court to hold that the statutory exception
and the regulatory safe harbor protect their bundled transactions.
But before the court can rule on these cross summary judgment motions, it must address a
preliminary issue. It asks whether the court should limit or exclude Medtronic’s expert report
when evaluating these cross motions. Relator argues that Medtronic’s expert (Tony Maida)
inappropriately draws legal conclusions and purports to speak on behalf of the government—all
without authorization from his former employer, the Department of Health and Human Services
(HHS). The court grants in part and denies in part Relator’s Motion to Limit or Exclude Expert
Testimony and Report (Doc. 465). The court limits expert Maida’s testimony and report to
exclude legal conclusions but finds his expert opinions otherwise admissible.
Then the court evaluates the parties’ cross partial summary judgment motions together to
answer this question: did defendants, as a matter of law, satisfy—or fail to satisfy—the
regulatory safe harbor provisions or the statutory discount exception? To answer these
questions, the court engages in regulatory and statutory interpretation, applying both the
regulatory safe harbor provisions and the statutory discount exception to the undisputed facts.
The court provides an overview of the rulings to come, below.
On both Relator’s motion and Medtronic’s cross motion, the court holds that no
reasonable jury could find from the summary judgment facts that defendant Medtronic failed to
satisfy the regulatory safe harbor provisions. And so, the court grants summary judgment in
Medtronic’s favor on its safe harbor affirmative defense. When considering Relator’s motion
and HRMC’s cross motion, no reasonable jury could find that HRMC failed to satisfy the
statutory discount exception. The court thus grants summary judgment in HRMC’s favor on its
safe harbor affirmative defense.

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And the court denies Relator’s partial summary judgment motion. The court explains the
reasons for all its decisions and how they interact in more detail, below.
I.

Background
The following facts are uncontroverted for purposes of the parties’ summary judgment

motions, unless otherwise noted. The court first introduces the parties to the transactions at issue
and then explains the devices sold. Next, the court outlines the bulk and bundle devices sales—
and their accompanying documents—all before explaining how HRMC reported those
transactions to the Federal health care program. Each description is relevant to the statutory and
regulatory analysis that follows.
Parties to the Device Transactions
HRMC is a not-for-profit hospital in Hutchinson, Kansas. Doc. 233 at 5 (Fifth Am.
Compl. ¶ 7). It’s organized under the laws of the state of Kansas. Id. Medtronic is a medical
device company. Doc. 384 at 2. Medtronic, Plc. acquired Covidien, Plc. in 2015 and both
Medtronic, Inc. and Covidien, LP are wholly owned subsidiaries of Medtronic, Plc. Id. Over
time, by and through its employees, Medtronic began making, using, selling and/or importing
medical devices formerly sold by Covidien. Id.
The Devices Sold
In the transactions at issue in these motions, Medtronic supplied two types of devices to
HRMC: directional atherectomy devices and drug-coated balloons. See, e.g., Doc. 432-11 at 3
(HRMC Ex. C-1); Doc. 432-16 at 2 (HRMC Ex. D-3); Doc. 432-26 at 2 (HRMC Ex. H-3).
These devices treat peripheral artery disease in the legs, a progressive disorder that causes
vessels that carry blood from the heart to the legs to narrow or close. Peripheral Vascular
Disease, Johns Hopkins Medicine, https://www.hopkinsmedicine.org/health/conditions-anddiseases/peripheral-vascular-disease (last visited Sept. 19, 2024). Three directional atherectomy
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devices are involved in the bundled transactions—the HawkOne, the TurboHawk, and the
SilverHawk. See, e.g., Doc. 432-11 at 3 (HRMC Ex. C-1); Doc. 432-16 at 2 (HRMC Ex. D-3);
Doc. 432-26 at 2 (HRMC Ex. H-3). These devices allow physicians to excise plaque from the
peripheral vascular system to restore blocked flow. Directional Atherectomy Systems,
Medtronic, https://www.medtronic.com/us-en/healthcareprofessionals/products/cardiovascular/directional-atherectomy-systems.html (last visited Sept.
14, 2024). The drug-coated balloons, for their part, function to transfer a drug—paclitaxel—to
the artery walls to prevent an opened artery from becoming narrow again (re-stenosis). Doc.
430-3 at 37–38, 39–40 (Huyser Decl. Ex. 2, Oster Dep. 89:20–90:9; 91:20–92:8). Some
combination of directional atherectomy devices and DCBs made up all the transactions relevant
here.
Documents Associated with the Device Sales
During the 2015 to 2019 time period, Medtronic occasionally offered HRMC bulk deals
on DCBs at the end of a quarter. Doc. 398-2 at 81 (Winger Dep. 315:19–25). These bulk deals
gave HRMC a volume-based discount. Doc. 430-15 at 3–4 (Winger Decl. ¶ 9). Medtronic
provided invoices corresponding to these bulk deal offers. See, e.g., Doc. 432-6 at 2 (HRMC Ex.
A2); Doc. 432-9 at 2 (HRMC Ex. B-2). For example, here’s an invoice from a 50 DCBs bulk
deal—dated January 24, 2017—with an invoice total of $69,797, before any potential quick pay
discount.

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Doc. 430 at 10; Doc. 432-15 at 2 (HRMC Ex. D-2). The bulk invoice identifies the number of
devices in the bulk offer (i.e., 50 DCBs), the contract price (“$76,700”), the invoice total
(“$69,797”), and the potential quick pay discount (“$1,395.94”), among other things. Id. (red
outline added by the court). It doesn’t list any no-charge devices. Id. All of Medtronic’s bulk
invoices also provided notice informing the buyer of its discount reporting obligations under the
AKS. See, e.g., Doc. 432-6 at 2 (HRMC Ex. A2); Doc. 432-9 at 2 (HRMC Ex. B-2).
Sometimes, Medtronic also included no-charge devices as part of these bulk sale
purchases, including them as a package deal. Doc. 435-3 at 3 (Davisson Dep. 268:10–13).
When offering these no-charge device bundles, the Medtronic salesperson would create a table
on a separate piece of paper to reflect the no-charge devices. See, e.g., Doc. 432-7 at 2 (HRMC
Ex. A-3); Doc. 432-10 at 2 (HRMC Ex. B-3); Doc. 432-11 at 3 (HRMC Ex. C-1); Doc. 432-16 at
2 (HRMC Ex. D-3).
As an example, the following table corresponds to the January 24, 2017 bulk invoice
(shown above). This table indicates a bulk purchase of 50 DCBs and also lists no-charge
devices, including five Hawk One atherectomy devices. Doc. 430 at 12; Doc. 432-16 at 2
(HRMC Ex. D-3). In the separate box on the right of the table bundle sheet, it identifies the
value of the no-charge devices. Doc. 430 at 12; Doc. 432-16 at 2 (HRMC Ex. D-3).

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Doc. 430 at 12; Doc. 432-16 at 2 (HRMC Ex. D-3) (explanation in red text boxes added by the
court). The total payment price for this bundle is reflected in the final row of the 9% discount
column—$69,797. Doc. 430 at 12; Doc. 432-16 at 2 (HRMC Ex. D-3). Neither the associated
invoice (shown above), Doc. 430 at 10; Doc. 432-15 at 2 (HRMC Ex. D-2), nor the purchase
order generated by HRMC’s purchasing department (not shown here) included these no-charge
devices, Doc. 432-14 at 2 (HRMC Ex. D-1). But the total payment price of $69,797 remained
constant over all three documents—the invoice, the purchase order, and the bundle table sheet.
Doc. 432-15 at 2 (HRMC Ex. D-2); Doc. 432-14 at 2 (HRMC Ex. D-1); Doc. 432-16 at 2
(HRMC Ex. D-3).
To make a device offer to HRMC, the Medtronic sales representative would deliver the
bundle table sheet to HRMC. Doc. 398-2 at 79 (Winger Dep. 307:10–308:2). HRMC’s
purchasing director then would forward the bulk invoice and the bundle table sheet to the
purchasing department. Doc. 398-5 at 11–12 (Atkins-Ray Dep. 32:17–33:3).2 After receiving

2

The deposition testimony cited here referenced “Exhibit 1” and “Exhibit 3.” Earlier in the same
deposition, the questioning attorney identified these exhibits by Bates number. Doc. 398-5 at 11 (Atkins-

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these two documents, the purchasing department input the total purchase price into HRMC’s
software system, producing a purchase order. Id. at 12 (Atkins-Ray Dep. 34:4–11).3
HRMC’s Report of Expenses
Because HRMC is a cost-reporting entity, it owes an obligation to submit an annual Cost
Reports to HHS. Doc. 435-12 at 20 (Russo Expert Report). The purchases entered into
HRMC’s software enabled a third-party accountant to compile the data from HRMC’s general
ledger to prepare this HHS-required Cost Report. Doc. 398-6 at 14 (Baldetti Dep. 41:18–43:3).
The process moving the purchase price from HRMC’s software system to the Cost
Report occurred like this: For each purchase entered into HRMC’s software system, HRMC
staff assigned that total purchase price a “spend category.” Id. at 10 (Baldetti Dep. 27:3–10).
The “spend category” identified which “cost center” received the allocation for that purchase—
such as the cath lab, the operating room, or the laboratory. Id. at 10 (Baldetti Dep. 27:11–17).
HRMC’s “cost center” for medical devices billed to Medicare and other payors was designated
as revenue code 272. Doc. 435-12 at 20 (Russo Expert Report). Once HRMC paid for the
devices, the software system automatically reflected the expense as part of the relevant cost
center on the hospital’s general medical supplies ledger line. Id. at 8–9 (Russo Expert Report).
HRMC’s accounting firm then used its general ledger to catalogue the costs it must include in its

Ray Dep. 31:13–16). The attorney identified Exhibit 1 as marked with HRMC Bates number 3853. Id. It
thus corresponds to Doc. 399-1 at 75 and is a bundle table sheet. Similarly, the attorney identified Exhibit
3 as marked with HRMC Bates number 3852. Doc. 398-5 at 11 (Atkins-Ray Dep. 31:13–16). It thus
corresponds to Doc. 399-1 at 78 and is a bulk invoice.
3

Relator disputes this fact, contending—because HRMC’s purchasing department didn’t include
any of the no-charge device data in HRMC’s software system—that the purchasing department didn’t
enter the data accurately. Doc. 445 at 34. And so, the background facts state solely that the purchasing
department entered the total purchase price—which didn’t change regardless of whether the purchasing
department represented the no-charge devices in its system. To be sure, the price per unit would change
with those no-charge devices added in. But the relevant figure for the court’s analysis here is the total
purchase price, not any itemized, price-per-unit amount. See § IV.B.1.b.

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Cost Report. Doc. 398-6 at 26 (Baldetti Dep. 91:12–21). To say it another way, the purchase
invoice “rolls up” to the department cost center, then it “rolls up” to medical supplies as the subgeneral ledger line, and then it “rolls up” to HRMC’s trial balance (or general ledger), from
which HRMC compiled its Cost Report. Id.
Before applying the relevant statutory and regulatory language to the undisputed facts
recited above, the court addresses a threshold issue—one presented by Relator’s Motion to Limit
or Exclude Expert Testimony and Report (Doc. 465). The outcome of this motion affects the
content of the summary judgment record the court considers when deciding the cross summary
judgment motions. So, the court deems it prudent to begin with this later-filed motion.
II.

Motion to Limit or Exclude Expert Testimony and Report (Doc. 465)
After the parties had completed the summary judgment briefing on the safe harbor issue,

Relator moved to limit or strike the testimony and report of Medtronic’s designated expert, Tony
Maida. Relator’s motion relied on Daubert and Federal Rules of Evidence 403 and 702. Doc.
465. The court construes these arguments as ones asserting objections under Rule 56(c)(2).4

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Medtronic argues that Relator’s motion is procedurally improper, and the court thus should deny
it. Doc. 479 at 8–10. Medtronic is correct. Following amendments to Rule 56 in 2010, a party may not
properly move to strike an opposing party’s evidence at summary judgment. Instead, the challenging
party should object in its summary judgment briefing, as provided under Rule 56(c)(2). See Fed. R. Civ.
P. 56 advisory committee’s note to 2010 amendment (“There is no need to make a separate motion to
strike.”). What’s more, courts have expressed concern about parties using motions to strike to manipulate
page limits. See TDY Indus., LLC v. BTA Oil Producers, LLC, No. 18-CV-0296-SWS/MLC, 2019 WL
12661227, at *1 (D.N.M. June 5, 2019) (“The Court is wary of Defendant's attempt to evade the page
limitations and get further briefing on why it believes the Court should not consider Plaintiff's
evidence.”); Mobile Shelter Sys. USA, Inc. v. Grate Pallet Sols., LLC, 845 F. Supp. 2d 1241, 1253 (M.D.
Fla. 2012) (denying a motion to strike evidence submitted with a summary judgment motion and
concluding such a motion may function “as a procedural device by which a party may try to exceed the
page limits imposed by the Local Rules and the orders of the Court”).
Nonetheless, when confronted with improper motions like this one, district courts have taken one
prevailing approach: to construe the arguments as objections and consider them at summary judgment.
See Lee v. Burwell, No. CV-16-366-SCY/KK, 2018 WL 4964547, at *1 n.1 (D.N.M. Oct. 15, 2018)
(“[F]or the sake of judicial efficiency, the Court will construe Plaintiff's motion as making objections to
the defense exhibits. . . . If the Court determines that Plaintiff's objection to a defense exhibit is valid, the

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The court must decide this Rule 56(c)(2) issue first. That’s so because its outcome will define, in
part, the summary judgment facts that apply on summary judgment.
Federal Rule of Civil Procedure 56(c)(2) provides that a “party may object that the
material cited to support or dispute a fact cannot be presented in a form that would be admissible
in evidence.” The objection “functions much as an objection at trial, adjusted for the pretrial
setting.” Fed. R. Civ. P. 56(c)(2) advisory committee’s note to 2010 amendment. “The burden
is on the proponent to show that the material is admissible as presented or to explain the
admissible form that is anticipated.” Id.
Relator here asserts three grounds for his objections. First, Relator argues that the court
should limit Maida’s opinions because he draws legal conclusions which “are improper,
inadmissible, and should be excluded from consideration at summary judgment.” Doc. 465 at 3.
Specifically, Relator takes issue with Maida’s “conclusion that Medtronic’s (and even HRMC’s)
actions complied with the requirements of the safe harbor defense.” Id. Second, Relator argues
that Maida improperly offered opinions on behalf of the government. Id. at 9–10. Third, Relator
contends that the court should strike Maida as an expert because he didn’t secure agency
authorization before rendering his opinions—as mandated by the Touhy regulations of the United
States Department of Health and Human Services (HHS), his former employer. Id. at 3–4.
Relator asserts that Maida’s failing to secure authorization precludes him from serving as an

Court will disregard the exhibit as inadmissible evidence rather than strike it from the summary judgment
record.”); TDY Indus., LLC, 2019 WL 12661227, at *2 (“[T]he Court will construe Defendant's motion to
strike as objections under Rule 56(c) and consider them when resolving the summary judgment
motions.”); Douglass v. Garden City Cmty. Coll., No. CV-20-2076-KHV, 2023 WL 137501, at *1 (D.
Kan. Jan. 9, 2023) (denying motion to strike but clarifying that the “Court is aware of its duty to consider
only evidence which would be admissible at trial and will consider defendants' evidentiary arguments in
its forthcoming order on defendant's motion for summary judgment”). Here, the court follows suit and
construes Relator’s motion as one presenting objections.

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expert here because Maida’s expert opinion flows from the knowledge and experience he
secured while working at HHS. Id. at 11.
The court addresses each of Relator’s arguments, in turn. But first, the court recites the
legal standard governing admission of expert testimony.
A.

Expert Testimony Admissibility under Daubert and Fed. R. Evid. 702 & 704

The court bears a “gatekeeping obligation” to determine whether expert testimony is
admissible. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999) (citing Daubert v. Merrell
Dow Pharms., Inc., 509 U.S. 579, 589 (1993)). This duty applies at the summary judgment
stage, just as it does at trial. See Johnson v. Weld Cnty., 594 F.3d 1202, 1209 (10th Cir. 2010)
(clarifying that it is “well settled in this circuit” that courts can consider only admissible
evidence at summary judgment (citation omitted)); see also Fed. R. Civ. P. 56(c)(2) (“A party
may object that the material cited to support or dispute a fact cannot be presented in a form that
would be admissible in evidence.”). When performing this gatekeeping role, the court has broad
discretion. Kieffer v. Weston Land, Inc., 90 F.3d 1496, 1499 (10th Cir. 1996) (citation omitted).
Courts exercise this discretion under the standard adopted in Fed. R. Evid. 702. It provides:
A witness who is qualified as an expert by knowledge, skill, experience,
training, or education may testify in the form of an opinion or otherwise if the
proponent demonstrates to the court that it is more likely than not that:
(a) the expert’s scientific, technical, or other specialized knowledge will
help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert’s opinion reflects a reliable application of the principles and
methods to the facts of the case.
Fed. R. Evid. 702.

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Our Circuit has directed trial judges to apply a two-part test when determining
admissibility of expert testimony under Daubert and Rule 702. Conroy v. Vilsack, 707 F.3d
1163, 1168 (10th Cir. 2013). First, the court must determine “whether the expert is qualified ‘by
knowledge, skill, experience, training, or education’ to render an opinion.” United States v.
Nacchio, 555 F.3d 1234, 1241 (10th Cir. 2009) (en banc) (quoting Fed. R. Evid. 702). Second,
the court “‘must satisfy itself that the proposed expert testimony is both reliable and relevant, in
that it will assist the trier of fact, before permitting a jury to assess such testimony.’” Id.
(quoting United States v. Rodriguez-Felix, 450 F.3d 1117, 1122 (10th Cir. 2006)). On this
second prong, “the touchstone of admissibility is helpfulness to the trier of fact.” Werth v.
Makita Elec. Works, Ltd., 950 F.2d 643, 648 (10th Cir. 1991) (quotation cleaned up). “The
proponent of expert testimony bears the burden of showing that the testimony is admissible.”
Conroy, 707 F.3d at 1168 (citing Nacchio, 555 F.3d at 1241). “[R]ejection of expert testimony is
the exception rather than the rule.” Fed. R. Evid. 702 advisory committee’s note to 2000
amendments.
1. Expert Qualifications
Here, the court concludes, Medtronic has carried its burden to show that Maida is
qualified by knowledge, experience, training, and education to render an opinion. Even Relator
agrees. He doesn’t challenge Maida’s qualifications. Doc. 465 at 6. Nor could he plausibly do
so. Maida worked from 2005 to 2014 as an attorney in the Administrative & Civil Remedies
Branch (ACRB) of the Office of Counsel to the Inspector General of the Department of Health
and Human Services. Doc. 435-10 at 7–8. ACRB partners with the Department of Justice “on
investigating and resolving False Claims Act cases involving HHS programs, including
Medicare.” Id. at 8. And Maida served during that time “as the internal subject matter expert on
the Anti-Kickback Statute[.]” Id. at 7. After his time at ACRB, Maida became a partner at an
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international law firm where he serves as co-leader of the Healthcare Regulatory & Compliance
practice. Id. So, for nearly two decades, Maida has worked intimately on matters that involve
the regulations and statute at issue here. The court concludes this work history demonstrates that
Maida possesses knowledge, experience, and training—coupled with his legal education—
sufficient to satisfy the first part of our Circuit’s test for admissible expert testimony. Now, the
court takes up the second part of the test: admissible expert testimony must consist of reliable,
relevant testimony that is helpful to the trier of fact.
2. Reliable, Relevant Testimony Helpful to the Trier of Fact
“An opinion is reliable if the reasoning or methodology of the expert is valid and ‘can be
applied to the facts in issue.’” Lua v. QBE Ins. Corp., No. 18-CV-01233-KLM, 2019 WL
5104477, at *2 (D. Colo. Oct. 11, 2019) (quoting Daubert, 509 U.S. at 592). “An opinion is
relevant if it ‘will assist the trier of fact to understand the evidence or to determine a fact in
issue.’” Id. (quoting Daubert, 509 U.S. at 592).
Here, Relator doesn’t attack Maida’s reliability. See generally Doc. 465. Instead,
Relator challenges whether Maida’s testimony is relevant to help the trier of fact. Relator
concedes that Maida provides some information about the AKS’s history and background, as
well as statutory/regulatory context that may help the trier of fact. Doc. 465 at 2; Doc. 482 at 4–
5. But Relator seeks to limit what he calls Maida’s “legal conclusions” because Maida allegedly
“renders opinions on ultimate issues of law.” Doc. 465 at 6. Given the type of relevance
challenge Relator levels at Maida’s report, the court concludes Relator’s argument more
appropriately falls under the line of cases analyzing both Fed. R. Evid. 702 and Fed. R. Evid.
704, together.
Rule 704 allows an expert witness to testify about an ultimate question of fact. But our
Circuit limits the scope of Rule 704 testimony, holding it permissible “as long as the expert’s
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testimony assists, rather than supplants, the jury’s judgment.” United States v. Dazey, 403 F.3d
1147, 1172 (10th Cir. 2005). That is, to “ensure testimony is helpful, an expert may not state
legal conclusions drawn by applying the law to the facts, but an expert may refer to the law in
expressing his or her opinion.” United States v. Richter, 796 F.3d 1173, 1195 (10th Cir. 2015)
(quotation cleaned up). And so, expert testimony crosses the line between helpful and
impermissible when it either “‘usurps the function of the jury in deciding facts’” or “‘interferes
with the function of the judge in instructing the jury on the law.’” Id. at 1196 (quoting Dazey,
403 F.3d at 1171).
To avoid crossing into impermissible territory “an expert may not simply tell the jury
what result it should reach without providing any explanation of the criteria on which that
opinion is based or any means by which the jury can exercise independent judgment.” Id. at
1195–96 (quotation cleaned up). Instead, our Circuit permits witnesses “to testify about how the
law applies to a certain set of facts, so long as they provide adequate explanations for their
conclusions.” Id. at 1196. And so, “[p]ermissible testimony provides the jury with the tools to
evaluate an expert's ultimate conclusion and focuses on questions of fact that are amenable to the
scientific, technical, or other specialized knowledge within the expert's field.” Id. at 1195.
Of course, the “‘line between a permissible opinion on an ultimate issue and an
impermissible legal conclusion is not always easy to discern.’” Id. (quoting United States v.
McIver, 470 F.3d 550, 562 (4th Cir. 2006)). Offering some assistance is another regulationcentric case: Adams v. New England Scaffolding, Inc., No. 13-12629-FDS, 2015 WL 9412518
(D. Mass. Dec. 22, 2015). The court finds the analysis in Adams both persuasive and instructive.
There, the United States Occupational Safety and Health Administration (OSHA) had issued a
regulation concerning scaffolds. Id. at *1. Plaintiff had fallen from a scaffold, incurring a

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workplace injury that instigated his negligence action. Id. Defendant moved the court to
exclude an expert report opining about the OSHA scaffold regulations. Id. at *4. Defendant
asserted that the report “constitute[d] improper expert testimony as to a legal issue, which is
properly reserved to the Court.” Id. The report opined at issue, in part:
A review of OSHA standards indicates several safety standards were not being
followed by [defendant]. . . . These unsafe conditions were created by [defendant]
and were in violation of OSHA standards. . . . [Defendant] had a duty under OSHA
standards and contractually to provide[] a minimum level of safety protection.
They failed to do so.
Id. at *2–*3. The court admitted one portion of this expert’s opinion—the portion asserting that
defendant had violated OSHA regulations. Id. at *9. It reasoned that defendant’s violating the
OSHA regulations wasn’t dispositive of the negligence issue but functioned, instead, as evidence
of negligence potentially helpful to the jury. Id. But the court also limited the expert’s opinion
to the extent it “effectively [told] the jury how to decide the ultimate legal issue of negligence.”
Id. Here, the court concludes it must split the same hair.
Start with Maida’s report. Relator identifies two specific opinions in the report that
Relator contends are impermissible legal conclusion:


“‘[T]he discounts [given by Medtronic to HRMC] are each protected by the Statutory
Discount Exception.’” Doc. 465 at 7 (quoting Doc. 435-10 at 28 (Maida Expert Report)).



“‘This [transaction] information satisfies Medtronic’s obligations as a seller to claim
protection under the Discount Safe Harbor.’” Id. (quoting Doc. 435-10 at 38 (Maida
Expert Report)).

Relator argues these statements in the report, and others of a similar tenor, “are all simply legal
conclusions that Medtronic’s and HRMC’s conduct complied with the requirements of the safe

15

harbor affirmative defense, and thus, they did not violate the AKS.” Id. The court agrees—but
only to a point.
On one hand, this court concludes that a significant portion of Maida’s expert report is
admissible. Maida didn’t offer his allegedly offending opinions in isolation. If he had, these
statements would qualify as “bare legal conclusion”—without accompanying explanation—that
our Circuit has found impermissible. Richter, 796 F.3d at 1196. But Maida explained, instead,
how he reached these opinions. For example, he helpfully explained that the Statutory Discount
Exception merely requires that a provider properly disclose and appropriately reflect a discount
in its costs claimed but needn’t disclose the value of the discount in terms of the percentage off
the original price. Doc. 435-10 at 26–27. This opinion helps the trier of fact to understand a
complex regulatory framework. See Antrim Pharms. LLC v. Bio-Pharm, Inc., 950 F.3d 423,
430–31 (7th Cir. 2020) (“[C]ourts have permitted regulatory experts to testify on complex
statutory or regulatory frameworks when that testimony assists the jury in understanding a
party’s actions within that broader framework.”).
On the other hand, Maida also included several conclusory statements—often asserted in
a final concluding sentence at the end of an explanatory paragraph. These concluding statements
invade the province of the trier of fact. They thus are inadmissible—not because they are
“bare”—but because they decide defendants’ affirmative defense. The opinions about the safe
harbor defense typify this problem.
Defendants contend their discounts fall under AKS’s safe harbor provision. When Maida
concludes, for example, that the discounts at issue “are each protected by the Statutory Discount
Exception[,]” he effectively decided the ultimate affirmative defense issue, thus supplanting—
rather than assisting—the trier of fact. Doc. 435-10 at 28 (Maida Expert Report); Dazey, 403

16

F.3d at 1172. In sum, the court will consider those significant portions of Maida’s report that
assist the trier of fact. But it will disregard as inadmissible Maida’s concluding statements that
overwhelm the court’s exercise of independent judgment. See Moses v. Halstead, 477 F. Supp.
2d 1119, 1124 (D. Kan. 2007) (“To the extent that [the expert’s] opinions include legal
conclusions, the Court . . . is capable of screening factual statements from legal conclusions.”).
Relator also argues that the tables Maida formulated—Exhibits B and C—include
inappropriate legal conclusion. See Doc. 435-10 at 62–70 (Def. Ex. B), 71–73 (Def. Ex. C). The
opinion statements in Exhibit B read like this:


A given purchase order “meets the requirements of the Discount Safe Harbor and
Statutory Discount Exception; it fully and accurately reports the discount submitted to the
buyer.” Doc. 435-10 at 62–70 (Def. Ex. B).

These tables present a heightened risk of “bare legal conclusion” because—when cited in
isolation from Maida’s report—the table format offers little opportunity to “provide adequate
explanations for their conclusions.” Richter, 796 F.3d at 1196. Indeed, every opinion statement
in Exhibit B proffers a legal conclusion because it asserts a given order “meets the requirements
of the Discount Safe Harbor and Statutory Discount Exception.” Doc. 435-10 at 62–70. Those
statements are inadmissible both because they invade the province of the trier of fact—like the
concluding sentences in Maida’s report, above—and also because they don’t offer adequate
explanation. The accompanying statement—that “it fully and accurately reports the discount
submitted to the buyer”—insufficiently explains how Maida reached his conclusion. See id.
And so, the court sustains Relator’s objection to Maida’s opinion in Exhibit B and thus won’t
consider the “Opinion” column when deciding the summary judgment motions.

17

Finally, Relator also challenges the admissibility of statements in Exhibit C. Here’s a list
of the challenged statements from that table:


“This order contains a single bulk product type and provides a bulk discount.” Id. at 71
(Def. Ex. C).



“Bulk discounts are calculated separately for each product. Documentation shows that
the balloons included at no additional charge are applied only to the purchase of the
balloons.” Id.



“Bulk discounts are calculated separately for each product.” Id.



“Purchase occurred after Add-On Payment Period ended.” Id. at 72.



“DCB were eligible for Add-On Payments.” Id. at 73

These statements less obviously assert legal conclusions. They don’t assert directly that
defendants’ actions fall under the AKS’s safe harbor provisions. And so, the court consults a
different test—the “inadequately explored legal criteria” test—to determine their admissibility.
The court begins by explaining the test. Rule 704’s advisory committee notes from 1972
clarify that the court should exclude opinions involving “inadequately explored legal criteria.”
For instance, the advisory committee notes contrast a question about one’s “capacity to make a
will”—inadequately explored and excludable—with a question about one’s “sufficient mental
capacity to know the nature and extent of his property and the natural objects of his bounty and
to formulate a rational scheme of distribution”—adequately explored and allowed. Fed. R. Evid.
704 advisory committee’s note to 1972 proposed rule. Notice that both questions ask for the
responsive answer content, and both utilize the word “capacity.” But the second question “adds
a description that explains how the legal test for capacity relates to the facts. [Thus] a jury will
be better able to understand the answer . . . and employ that answer in resolving the factual issues

18

in the case.” Charles A. Wright, Arthur R. Miller, & Victor J. Gold, Federal Practice &
Procedure § 6284 (2d ed. 2024). At bottom, then, “the admissibility of opinion testimony that
may involve legal conclusions ultimately rests upon whether that testimony helps the jury
resolve the fact issues in the case.” Id. And so, the court should exclude testimony “when an
expert uses a specialized legal term and usurps the jury's function.” United States v. Schneider,
704 F.3d 1287, 1294 (10th Cir. 2013).
Here, Maida’s vocabulary in Exhibit C is largely pedestrian. Words like “bulk discounts”
and “no additional charge” don’t qualify as specialized legal terms—any consumer is familiar
with this kind of arrangement. Nor do words like balloons or DCBs, though a jury might not
know their meaning in this case until it has heard some of the evidence. But “Add-On Payment
Period” and “Add-On Payments”—by their capitalization alone—appear to qualify as specialized
legal terms. And Maida’s report supports that conclusion. See Doc. 435-10 at 33 (explaining
that Medicare alone provides certain Add-On Payments under specific plans). While Maida’s
report explores the legal criteria of this term, Exhibit C—when cited in isolation—offers no such
explanation. And so, the court determines that the Add-On statements in the Analysis column of
Exhibit C are inadmissible as well. The court thus will disregard those statements in its
summary judgment ruling.
In sum, the court limits the portions of Maida’s expert report and tables it will consider,
as set forth above, to avoid inadmissible legal conclusion. The court addresses next the second
objection embodied in Relator’s motion: the purported inadmissibility of Maida’s opinions on
behalf of the government under Fed. R. Evid. 403.
B.

Admissibility of Maida’s opinions under Fed. R. Evid. 403

19

Relator next argues that some of Maida’s opinions are improper because they purport to
explain how the government would view Medtronic’s conduct pertinent to this matter. Doc. 465
at 9. And, Relator contends, these opinions could mislead or create confusion for the trier of fact
and so the court should exclude them under Fed. R. Evid. 403. Rule 403 provides that the court
may exclude relevant evidence “if its probative value is substantially outweighed by a danger
of . . . confusing the issues [or] misleading the jury[.]” However, our Circuit has instructed
district courts to remain mindful that “exclusion of evidence under Rule 403 that is otherwise
admissible under the other rules is an extraordinary remedy and should be used sparingly.”
United States v. Smalls, 605 F.3d 765, 787 (10th Cir. 2010) (quotation cleaned up).
Here, Relator contends that Maida speaks as if he knows the government’s views.
Relator neglects to specify where in the record Maida allegedly speaks on the government’s
behalf. But he twice directs the court to this purportedly offending sentence: “there is no reason
that the government would be concerned about the discounts that Medtronic provided.” Doc.
465 at 9–10. The court reviewed Maida’s report and discovered that this offending sentence—in
one variation or another—appeared in the following contexts:


“Additionally, there is no reason that the government would be concerned about
the discounts that Medtronic provided, including the bundled discounts,
because: . . . The government has provided favorable advisory opinions
approving arrangements that involve bundled discounts[.]” Doc. 435-10 at 9.



“Further, based on its favorable guidance regarding non-safe harbored
arrangements, including bundled discounts, the government would not likely
have concerns about the discounts in Exhibit B because they are unlikely to result
in harms to federal healthcare programs or beneficiaries[.]” Id. at 24.

20



“Furthermore, these bundled discounts are otherwise unlikely to harm federal
healthcare programs and beneficiaries and therefore, the government would not
be concerned about any of these discounts. Specifically, there are several
mitigating facts and circumstances, including: The government has provided
favorable advisory approving arrangements[.]” Id. at 42–43.



“The government would not be concerned about the bundled discounts, which are
unlikely to result in harms to federal healthcare programs and beneficiaries for a
variety of reasons, including that the costs are reported together under a common
methodology and the availability of the discount[.]” Id. at 44.

Relator doesn’t persuade the court that these assertions could suggest that Maida spoke on behalf
of the government. In context, all but the last statement couches the government’s absence of
concern in terms of the government’s own guidance and advisory opinions, not Maida’s
experience. He doesn’t identify himself as someone who speaks for the government but, instead,
refers to government-produced sources.
To be sure, excerpts from Maida’s deposition testimony suggest that he may have viewed
his opinion as synonymous with the opinion of HHS. Consider, for example, the following
exchange:
Q. Is your testimony based in any way on the fact that you believe that HHS would
basically be rendering the same opinion as you have in your report?
...
A. I mean, as my -- you know, as somebody who was an attorney there for almost
10 years, I think that that's how people in the agency would -- you know, I think
how I approach and think about the situation is similar to how people in the agency
would.
Doc. 465-1 at 6 (Maida Dep. 178:20–179:6). But, in fairness, Maida clarifies shortly thereafter
that the opinions are his alone: “You know, I can't speak for the agency. I'm speaking for myself

21

based on my experience and my career, and looking at the guidance, you know. My report is
essentially based on the publicly available guidance that OIG has issued over the years.” Id.
(Maida Dep. 180:21–181:2). And so—considering the whole of this exchange—Maida didn’t
consider his opinions as synonymous with those of HHS. What’s more, his role with HHS ended
about a decade ago—a timeline clearly communicated in his expert qualifications. So, the trier
of fact isn’t likely to confuse his opinions with his employer of ten years ago. Nonetheless, out
of an abundance of caution, the court offers Relator this reassurance: To the extent the court
might confuse Maida with a government spokesperson based on the phrasing of his opinions at
summary judgment, it will disregard them under Rule 403.
This holding means that the designated portion of the expert’s opinions qualify as facts
properly considered at the summary judgment stage.
C.

Touhy Regulations

Finally, Relator argues that the court should strike Maida as an expert because Maida
failed to secure HHS’s authorization to function as an expert under HHS’s Touhy regulations.
Doc. 465 at 11. Relator cites two cases for the proposition that an expert must request and secure
this kind of authorization. Id. at 13 (first citing U.S. ex rel. Pogue v. Diabetes Treatment Ctrs. of
Am., Inc., 246 F.R.D. 322, 324 (D.D.C. 2007) (noting that HHS Touhy regulations require
agency approval before securing the testimony of a former agency employee and finding HHS
had approved the testimony) then citing In re Scully, No. Civ. A. 06-0077(GK), 2006 WL
1523231, at *1 (D.D.C. April 11, 2006) (holding motion to compel testimony of a former HHS
administrator premature because party seeking to compel had failed to exhaust administrative
remedies)). To be sure, these cases suggest that HHS Touhy regulations may apply here.

22

But Relator has cited no authority—nor has the court found any—that the court’s proper
response to Maida’s absence of HHS authorization is striking Maida as an expert. Indeed, the
weight of authority—in similar contexts—suggests the opposite conclusion. See Roy v. County
of Los Angeles, No. CV 12-09012-AB (FFMx), 2018 WL 914773, at *11 (C.D. Cal. Feb. 7,
2018) (“DHS is attempting to use noncompliance with its Touhy regulation as a basis for striking
the expert witness declarations. This is inappropriate . . . . [B]ecause a Touhy regulation does not
provide an independent ground of privilege, this Court cannot strike the expert witness
declarations on that basis alone[.]”); Gordon v. United States, No. C20-0980-JCC, 2021 WL
3472376, at *2 (W.D. Wash. Aug. 6, 2021) (holding that VA’s Touhy regulation doesn’t govern
admissibility of expert testimony and so isn’t a sufficient basis to exclude expert testimony);
Spears v. United States, No. 13-CV-47-DAE, 2014 WL 258766, at *4 (W.D. Tex. Jan. 23, 2014)
(denying motion to strike plaintiff’s expert under Army Touhy regulations and collecting cases
holding “that a court’s power to govern the admissibility of expert witnesses cannot be
circumscribed by regulation”). What’s more, Relator never explains how he has standing to act
on HHS’s behalf and enforce its regulations. And so, even if HHS’s Touhy regulations apply to
this case, it doesn’t follow that the court should strike Maida as an expert or should enforce—at
Relator’s behest—HHS’s regulations. The court overrules this objection.
With the scope of Maida’s admissible opinions thus defined, the court attends next to the
parties’ cross partial summary judgment motions. The court begins by reciting the legal standard
for partial summary judgment motions, specifically partial motions premised on an affirmative
defense.
III.

Partial Summary Judgment Legal Standard
Fed. R. Civ. P. 56(a) explicitly contemplates partial summary judgment motions and

permits a movant to train such motions on an affirmative defense: “A party may move for
23

summary judgment, identifying each claim or defense—or the part of each claim or defense—on
which summary judgment is sought.” Fed. R. Civ. P. 56(a). The same rule clarifies the standard
a court employs in evaluating such motions: “The court shall grant summary judgment if the
movant shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Id. A plaintiff may move for summary judgment “to test a
defense’s sufficiency.” 10B Charles A. Wright, Arthur R. Miller, & Adam N. Steinman, Federal
Practice & Procedure § 2734 (4th ed. 2024). Likewise, a “defendant may use a motion for
summary judgment to test an affirmative defense which entitles that party to a judgment as a
matter of law.” Hutchinson v. Pfeil, 105 F.3d 562, 564 (10th Cir. 1997). For a defendant to
succeed on such a motion, he “must demonstrate that no disputed material fact exists regarding
the affirmative defense asserted.” Id. (citation omitted). To defeat the motion, a plaintiff thus
“need only identify a disputed material fact relative to the affirmative defense.” Hamric v.
Wilderness Expeditions, Inc., 6 F.4th 1108, 1122 (10th Cir. 2021) (quotation cleaned up).
“An issue of fact is ‘genuine’ ‘if the evidence is such that a reasonable jury could return a
verdict for the non-moving party’ on the issue.” Nahno-Lopez v. Houser, 625 F.3d 1279, 1283
(10th Cir. 2010) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “An issue
of fact is ‘material’ ‘if under the substantive law it is essential to the proper disposition of the
claim’ or defense.” Id. (quoting Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.
1998)). Those “facts must be identified by reference to affidavits, deposition transcripts, or
specific exhibits incorporated therein.” Adler, 144 F.3d at 671. “Only disputes over facts that
might affect the outcome of the suit under the governing law will properly preclude the entry of
summary judgment.” Anderson, 477 U.S. at 248. The court views the evidence and draws
inferences in the light most favorable to the non-moving party. Nahno-Lopez, 625 F.3d at 1283.

24

When deciding whether the parties have shouldered their summary judgment burdens, “the
judge’s function is not . . . to weigh the evidence and determine the truth of the matter but to
determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249.
The federal courts don’t view summary judgment as a “disfavored procedural shortcut.”
Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). To the contrary, it’s an important procedure
“designed ‘to secure the just, speedy[,] and inexpensive determination of every action.’” Id.
(quoting Fed. R. Civ. P. 1).
While a court can treat cross motions for summary judgment separately, and “the denial
of one does not require the grant of another[,]” Buell Cabinet Co., Inc. v. Sudduth, 608 F.2d 431,
433 (10th Cir. 1979), it properly may address the legal arguments together, Berges v. Standard
Ins., 704 F. Supp. 2d 1149, 1155 (D. Kan. 2010). Here, the three motions, and their legal
arguments, overlap substantially. Indeed, the parties’ papers invoke and incorporate briefing
filed to respond or reply to another one of the motions.5 The court thus exercises its discretion
and addresses together the legal arguments made by the three dueling motions.
IV.

The Safe Harbor Affirmative Defense
Relator moves the court to grant partial summary judgment against defendants’ safe

harbor affirmative defense. Doc. 397 at 2. Medtronic and HRMC have asserted the safe harbor

5

All three parties to these cross summary judgment motions identify the interrelated nature of their
motions by referencing and incorporating briefing. For instance, HRMC “incorporate[d] by reference
Medtronic’s statement of undisputed facts in its Motion for Partial Summary Judgment[.]” Doc. 435 at
11. Similarly, Medtronic repeatedly cited Relator’s Response to HRMC’s Partial Summary Judgment
Motion in its Reply in support of its own motion. Doc. 464 at 19, 21, 22. And Relator—in his
response/reply to HRMC’s cross motion—refers the court “to the response/reply to Medtronic’s brief for
additional analysis” on more than one occasion. Doc. 450 at 29, 32 n.6. All parties thus have
acknowledged the interrelatedness of their motions, which explains the court’s decision to address the
arguments together.

25

defense to excuse Medtronic providing no charge medical devices to HRMC in conjunction with
bulk medical device purchases. Doc. 379 at 25; Doc. 384 at 24. Defendants bear the burden of
establishing this affirmative defense. See In re EpiPen Direct Purchaser Litig., No. 20-CV-0827
(ECT/TNL), 2021 WL 147166, at *15 (D. Minn. Jan. 15, 2021) (“Courts generally treat the
AKS’s safe-harbor provisions as affirmative defenses. . . . Defendants have the burden to plead
and prove affirmative defenses[.]”).
Relator asks the court to conclude on summary judgment that the safe harbor defense
isn’t available to defendants. He contends that defendants’ “testimonial admissions and
documentation” preclude any possibility that defendants could prevail under “the AKS’s ‘safe
harbor’ affirmative defense.” Doc. 398 at 58–59. Medtronic and HRMC, in their cross partial
summary judgment motions, ask the court to conclude (again, at the summary judgment stage)
just the opposite: that defendants’ “conduct falls within the applicable statutory and regulatory
‘safe harbor’ to the Federal Anti-Kickback Statute.” Doc. 429 at 1; Doc. 434 at 1 (“Based on the
arguments and evidence submitted with this Motion, [HRMC] is entitled to judgment as a matter
of law on Relator’s [claims] because the medical device purchases are protected by exceptions
and safe harbors to the Anti-Kickback Statute.”). Summary judgment is an “‘appropriate
procedural device’” to address the relevant safe-harbor provisions. In re EpiPen, 2021 WL
147166, at *15 (quoting 5B Arthur R. Miller, Mary K. Kane, & A. Benjamin Spencer, Federal
Practice and Procedure § 1357 (3d ed. Oct. 2020 Update)); see also, e.g., United States v. Aids
Healthcare Found., Inc., 262 F. Supp. 3d 1353, 1362 (S.D. Fla. 2017) (granting summary
judgment to defendants because bonus payments met both elements required by AKS’s
employee safe harbor provision), aff'd sub nom. Carrel v. AIDS Healthcare Found., Inc., 898
F.3d 1267 (11th Cir. 2018).

26

The court addresses these overlapping cross summary judgment motions, first, by
outlining the statutory and regulatory scheme under which the safe harbor affirmative defense
arises. Then, the court explains the specific regulatory requirements for a given transaction to
qualify for the safe harbor provisions. Next, the court evaluates the at-issue transactions in light
of those specific requirements. This analysis begins with the regulatory definition of a discount
and then addresses the requisite standards for a seller and a buyer to qualify under the safe
harbor. Because the court concludes that the safe harbor regulations protect Medtronic, the court
addresses the statutory discount exception solely as it applies HRMC. In the end, the court
grants Medtronic and HRMC’s partial summary judgment motions and denies Relator’s partial
summary judgment motion.
A.

Statutory and Regulatory Scheme

The pertinent statutory and regulatory scheme involves three tiers. The top tier is the
FCA. The middle tier is the AKS. And the bottom tier includes both the statutory exception and
the safe harbor regulations. The court explains each tier, beginning at the top.
Relator alleges defendants violated the FCA. The FCA imposes civil liability on any
person who “knowingly presents, or causes to be presented, a false or fraudulent claim [to the
government] for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). The FCA also contains a
qui tam provision that allows a private party—a relator—“‘to bring an FCA action on behalf of
the Government.’” U.S. ex rel. Louderback v. Sunovion Pharms., Inc., 703 F. Supp. 3d 961, 969
(D. Minn. 2023) (quoting State Farm Fire & Cas. Co. v. U.S. ex rel. Rigsby, 580 U.S. 26, 29
(2016)). This qui tam provision “‘encourage[s] insiders to disclose fraud and thereby bolster[s]
enforcement” of the FCA. U.S. ex rel. Everest Principals, LLC v. Abbott Lab'ys, Inc., 622 F.
Supp. 3d 920, 930 (S.D. Cal. 2022) (quoting Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 995
(9th Cir. 2010)).
27

Relator here premises his FCA claims on defendants violating the AKS. See 42 U.S.C.
§ 1320a-7b(g) (“[A] claim that includes items or services resulting from a violation of this
section constitutes a false or fraudulent claim for purposes of the [FCA].”); see also U.S. ex. rel.
Gaskill v. Nw. Cmty. Action Program of Wyo., Inc., No. 16-CV-00201-ABJ, 2019 WL
13226259, at *2 (D. Wyo. July 3, 2019) (“[I]f [defendant] violated the AKS and a Medicaid
claim resulted from [defendant’s] violation, then [defendant] is deemed to have also violated the
FCA.”). That is, the “AKS and FCA work in conjunction to create a private right of action for
violation of the federal criminal anti-kickback statute.” U.S. ex rel. Hart v. McKesson Corp., 602
F. Supp. 3d 575, 584 (S.D.N.Y. 2022). And Relator here invokes that private right of action.
Under this approach, to prove defendants violated the FCA, Relator first must prove that
defendants violated the AKS. See U.S. ex rel. Brown v. Celgene Corp., No. CV-10-3165-GHK
(SSX), 2014 WL 3605896, at *8 (C.D. Cal. July 10, 2014) (“Because the government would not
knowingly reimburse kickback-tainted claims, any claims resulting from [defendants’] alleged
kickbacks constitute false claims.”).
Congress intended for the AKS to “to strengthen the capability of the Government to
detect, prosecute, and punish fraudulent activities under the Medicare and Medicaid programs.”
U.S. ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 96 (3d Cir. 2018) (quotation
cleaned up). To accomplish this end, the AKS sweepingly prohibits illegal remuneration when
“payment may be made in whole or in part under a Federal health care program[.]” 42 U.S.C.
§ 1320a-7b(b)(1)–(2). Courts and the HHS Office of the Inspector General (HHS OIG) have
interpreted remuneration under the AKS broadly, including “virtually anything of value
including goods, meals, and gifts” or, put another way, “anything of value in any form
whatsoever.” Jones-McNamara v. Holzer Health Sys., 630 F. App'x 394, 400 (6th Cir. 2015)

28

(quotation cleaned up) (collecting cases and HHS OIG authority “affirm[ing] this expansive
understanding of remuneration”). But—or, more precisely, because of this broad definition—
Congress has implemented an exception to the AKS under 42 U.S.C. § 1320a-7b(b)(3)(A).
This statutory exception to the AKS provides that discounts and price reductions—if
properly disclosed and appropriately reflected—don’t constitute illegal renumeration. Id. That
is, the penalties the AKS outlines for illegal renumeration don’t apply to:
a discount or other reduction in price obtained by a provider of services or other
entity under a Federal health care program if the reduction in price is properly
disclosed and appropriately reflected in the costs claimed or charges made by the
provider or entity under a Federal health care program[.]
Id. (emphasis added). In 1987, Congress amended the statute by excluding from illegal
remuneration “any payment practice specified by the Secretary in regulations promulgated
pursuant to section 14(a) of the Medicare and Medicaid Patient and Program Protection Act of
1987 or in regulations under section 1395w–104(e)(6) [1] of this title[.]” 42 U.S.C. § 1320a7b(b)(3)(E). These regulations are commonly referred to as “safe harbors.” United States v.
Shaw, 106 F. Supp. 2d 103, 112 (D. Mass. 2000). The safe harbor provisions protect specified
pricing arrangements which may reduce costs to Federal health care programs, a desired result.
See, e.g., OIG Clarification of the Initial OIG Safe Harbor Provisions and Establishment of
Additional Safe Harbor Provisions Under the Anti-Kickback Statute, 64 Fed. Reg. 63518, 63530
(Nov. 19, 1999) (to be codified at 42 C.F.R. § 1001.952) (“[W]e are persuaded that in certain
circumstances, discounts . . . may benefit the programs through lower costs or charges achieved
through volume purchasing and other economies of scale.”).
The court’s analysis thus narrows to these two questions: First, do the transactions
between Medtronic and HRMC qualify for regulatory safe harbor protection as a matter of law?

29

And, second, if they don’t, do these transactions qualify for protection under the statutory
discount exception? The court analyzes the regulatory safe harbor issue first.
B.

Regulatory Safe Harbor Provisions

The regulatory safe harbor provisions clarify that illegal remuneration doesn’t include
discounts, provided that certain specifications are met. 42 C.F.R. § 1001.952(h) (2023). Section
1001.952(h)(5) identifies what the term discount includes and, just as importantly, what it
doesn’t. The regulations also identify standards that apply to a seller—here Medtronic—and
those that apply to a buyer—here HRMC. Id. Applying these regulations to the summary
judgment facts, the court first evaluates whether a reasonable trier of fact could find that the
transactions at issue qualify as discounts. Concluding a reasonable jury only could find that the
transactions at issue qualify as discounts, the court then asks whether a reasonable jury only
could conclude on the summary judgment facts that Medtronic necessarily satisfies the seller
applicable standards and HRMC necessarily satisfies the buyer applicable standards. To begin,
the court recites, in brief, the regulations at issue, emphasizing in bold the regulatory terms on
which these summary judgment motions turn.
First, the Code of Federal Regulations clarifies when the term discount applies and when
it doesn’t. Here’s how the relevant portion of the regulation defines the term:
For purposes of this paragraph, the term discount means a reduction in the amount
a buyer (who buys either directly or through a wholesaler or a group purchasing
organization) is charged for an item or service based on an arms-length transaction.
The term discount does not include—
...
(ii) Supplying one good or service without charge or at a reduced charge to induce
the purchase of a different good or service, unless the goods and services are
reimbursed by the same Federal health care program using the same methodology
and the reduced charge is fully disclosed to the Federal health care program and
accurately reflected where appropriate, and as appropriate, to the reimbursement
methodology;

30

(iii) A reduction in price applicable to one payer but not to Medicare, Medicaid or
other Federal health care programs;6
...
Id. § 1001.952(h)(5) (emphasis added). The court added emphasis to the terms “same
methodology,” “fully disclosed,” and “accurately reflected” because the parties here explicitly
dispute whether HRMC satisfied these requirements in reporting the no-charge goods. The court
also added emphasis to the words “different good” and “without charge” because, though the
parties don’t argue about these terms7 in the definition of discount, they resurface later in the
standards applied to the buyer analysis.
Second, the regulations outline the standards for a seller. Medtronic—as the seller—
must comply with these regulatory standards for the safe harbor to apply and thus exclude a
discount from the remuneration category. The standards applicable to Medtronic read like this:
If the buyer is an entity that reports its costs on a cost report required by the
Department [HHS] or a State agency, the seller must comply with either of the
following two standards—
(A) Where a discount is required to be reported to Medicare or a State health care
program under paragraph (h)(1) of this section, the seller must fully and accurately
report such discount on the invoice, coupon or statement submitted to the buyer;
6

Relator argues that subsection (iii) also applies to the factual scenario here, Doc. 398 at 63–64,
explaining that “[t]he ‘one payer’ here is HRMC[,]” Doc. 445 at 51. But, as defendants rightly point out,
HRMC is a buyer or provider under this regulatory scheme, not a payer. Doc. 463 at 26; Doc. 464 at 18;
see also United States v. UnitedHealth Grp. Inc., 630 F. Supp. 3d 118, 123 (D.D.C. 2022) (“At a high
level, payments for services in the American healthcare system proceed through a simple process: Health
insurers, also known as ‘payers,’ pay medical claims submitted by caregivers, also known as
‘providers.’”); Id. at 123 n.1 (“Providers include physicians, hospitals, clinics, and other caregivers.”).
Relator never contends that a separate payer—that is, another insurer—received through the transactions
at issue a price reduction that a Federal health care program didn’t receive. And so, the court doesn’t
address subsection (iii) further.

7

The parties don’t dispute whether Medtronic supplied “a different good,” when it supplied
“without charge” devices to HRMC. Medtronic directly acknowledges the different goods. Doc. 430 at
46. And while HRMC doesn’t address it directly, it implicitly concedes that the bundled deals included
different goods. See Doc. 435 at 32 (“[T]he discounts were either earned based on the purchase of the
same good (Bulk Deals) or as part of bundled deals including devices reimbursed under the same
methodology (the Bundle Deals).”). Nonetheless, the court highlights these terms because the issue of the
no-charge devices constituting different goods is relevant to HRMC’s arguments about the buyer
applicable standards.

31

inform the buyer in a manner that is reasonably calculated to give notice to the
buyer of its obligations to report such discount and to provide information upon
request under paragraph (h)(1) of this section;8 and refrain from doing anything that
would impede the buyer from meeting its obligations under this paragraph;9 or
...
Id. § 1001.952(h)(2)(ii) (emphasis added). The emphasized words again highlight the parties’
arguments: Did Medtronic “fully and accurately” report the discounts on the invoices to
HRMC? And did Medtronic “inform” HRMC of its obligation to report the discounts in a
manner “reasonably calculated to give notice”?
Finally, to exclude a discount from qualifying as illegal remuneration, HRMC must
comply with the standards applicable to a buyer. The regulation identifies three different
standards for three different types of buyers—health maintenance organizations and competitive
medical plans, cost-reporting entities, and individuals or entities in whose name claims were
submitted. Id. § 1001.952(h)(1). HRMC is a cost-reporting entity who submits a cost report to
its Medicare Administrative Contractor every year. Doc. 435-12 at 20 (Russo Expert Report).
The regulation explains the standards that apply to a cost-reporting entity:
If the buyer is an entity which reports its costs on a cost report required by the
Department or a State health care program, it must comply with all of the following
four standards—

8

Relator argues that Medtronic would’ve come up short if it were required to provide the requested
information. Doc. 445 at 56. Medtronic would provide to the Secretary the same documentation it
provided in discovery which, Relator argues, would miss the mark. Id. But this argument simply repeats
Relator’s no full and accurate reporting argument that the court addresses separately. What’s more, the
regulation merely requires the seller to provide such information “on request.” 42 C.F.R.
§ 1001.952(h)(2)(ii)(A). And Relator concedes that no one has made that request. Doc. 445 at 56. So,
the court declines to address this repetitive and speculative argument.
9

Relator never argues that Medtronic impeded HRMC from reporting the discount. See generally
Doc. 398; Doc. 445. And Medtronic affirmatively asserts it didn’t impede HRMC. Doc. 464 at 23.
What’s more, Medtronic argues that HRMC accurately reported the actual prices of the bundled
transactions, fulfilling its disclosure obligations and thus demonstrating that it didn’t impede HRMC from
said disclosure. See id. And so, the court doesn’t address this portion of the seller standard in its safe
harbor analysis.

32

(A) The discount must be earned based on purchases of that same good or service
bought within a single fiscal year of the buyer;
(B) The buyer must claim the benefit of the discount in the fiscal year in which the
discount is earned or the following year; 10
(C) The buyer must fully and accurately report the discount in the applicable cost
report; and
(D) The buyer must provide, upon request by the Secretary or a State agency,
information provided by the seller as specified in paragraph (h)(2)(ii) of this
section, or information provided by the offeror as specified in paragraph (h)(3)(ii)
of this section.
42 C.F.R. § 1001.952(h)(1)(ii) (emphasis added). As indicated by the emphasized language,
these motions argue about whether HRMC satisfies the buyer standard, particularly under the
regulatory requirements to purchase the “same good” and to report “fully and accurately” the
discount.
In sum, the court resolves these partial summary judgment motions by applying the
regulatory terms “discount,” “different good,” “fully disclosed,” “accurately reflected,” “fully
and accurately report,” “inform the buyer,” and “same good,” 42 C.F.R. § 1001.952(h)(1)–(5),
and the statutory terms “properly disclosed,” “appropriately reflected,” and “costs claimed or
charges made,” to the undisputed facts, 42 U.S.C. § 1320a-7b(b)(3)(A). The court’s task
requires it to interpret documents11 utilized in the at-issue transactions between Medtronic and

10

Relator also argues that HRMC hasn’t met part B of the buyer applicable standards. But Relator
doesn’t take issue with the year of the discount—the emphasis of this subsection. Instead, Relator argues
that HRMC never reported the discount at all (and hence didn’t report it in the proper fiscal year). Doc.
398 at 66. The court concludes this part B argument overlaps sufficiently with Relator’s part C
argument—that HRMC didn’t report the discount fully and accurately—that the court doesn’t address
part B here.

11

Some of the documents Relator presents to the court for consideration aren’t material to a safe
harbor defense analysis. See, e.g., Doc. 398 at 26 (presenting Medtronic’s master sales data excel sheet
and Medtronic’s delivery note). For example, Medtronic produced master sales data Excel sheets for
sales to HRMC. But these were internal documents, not documents exchanged between the buyer and the
seller. Doc. 430-9 at 90 (Huyser Decl. Ex. 8, Maida Dep. 234:7–24). Relator concedes as much. See
Doc. 398 at 68 (“Medtronic’s Excel data for all sales to HRMC are not ‘documents’ per se provided to
HRMC[.]”). And so, under the regulatory framework described above, such internal documents aren’t
material to whether Medtronic and HRMC fulfilled the safe harbor requirements. Similarly, delivery

33

HRMC. The court thus evaluates these documents—and HRMC’s cost-reporting pursuant to
these documents—to answer the motions’ dispositive question: As a matter of law, could a
reasonable jury only conclude that defendants satisfied the regulatory safe harbor provisions for
the medical device transactions at issue? Or, instead, could a reasonable jury conclude that
defendants failed to satisfy that safe harbor provision? Here’s how the parties see these
questions.
1.

Parties’ Arguments about the Safe Harbor Regulations

Relator argues defendants fail to establish, at least at summary judgment, that the safe
harbor provisions must apply. He contends that the no-charge goods Medtronic provided to
HRMC were different, not the same. And so, he argues, those no-charge goods qualify as a
discount if reimbursed with the same methodology, fully disclosed, and accurately reflected
under 42 C.F.R. § 1001.952(h)(5)(ii). Doc. 398 at 62–64. And, Relator contends, they weren’t,
so the no-charge devices didn’t qualify as discounts. Id. And even if they were discounts,
Relator alternatively argues, the safe harbor affirmative defense still fails under the regulations
because Medtronic didn’t meet its seller applicable standards and HRMC didn’t meet its buyer
applicable standards under 42 C.F.R § 1001.952(h)(1) and (2), respectively. Id. at 64–70.
Not so, defendants say. HRMC asserts that the no-charge devices qualify as discounts
because the Federal health care program reimbursed the no-charge devices and the paid-for
devices under the same methodology. Doc. 435 at 29. And HRMC contends that it disclosed
those discounts by reporting its actual device costs in the Cost Report it submitted to its
Medicare Administrative Contractor. Id. at 25. What’s more, HRMC argues, that reporting
fulfills their disclosure requirement, HRMC argues, because there is no method to report or

notes that accompanied shipment of the medical devices functioned as packing slips, not documentation
relevant to the safe harbor analysis. Doc. 398-5 at 13 (Atkins-Ray Dep. 37:7–11).

34

itemize the cost of individual medical devices. Id. Finally, HRMC asserts, it satisfies all the
requisite standards applicable to a buyer. Id. at 31–33.
Medtronic, for its part, concedes that the bundled transactions involved different goods
but argues that the no-charge goods still qualify as discounts because the goods are reimbursed
with the same methodology. Doc. 430 at 48–49. Medtronic then asserts that it satisfied the
standards applied to the seller. It contends that it properly disclosed the transactions to HRMC
and provided HRMC with sufficient information—the identity of the devices purchased, the total
price paid, and the value of the discounts—so that HRMC could report its costs accurately. Id. at
43–44. And, finally, Medtronic asserts that it informed HRMC of the obligation to report these
discounts.
The court evaluates the parties’ arguments in this sequence: First, the court addresses
whether the no-charge goods at issue qualify as discounts under 42 C.F.R. § 1001.952(h)(5)(ii).
Then the court evaluates whether Medtronic, as the seller, and HRMC, as the buyer, met the
requisite buyer and seller standards so that a reasonable jury only could conclude that they
satisfied the respective safe harbor provisions. But the court’s analysis must follow a few
preliminary clarifications.
The court offers a prefatory note on the buyer and seller standards: HHS OIG’s 1999
preamble to its final rule about the safe harbor provisions clarified that the safe harbor protects a
buyer and seller independently. 64 Fed. Reg. 63518, 63527 (“[I]f the seller, in good faith, meets
its obligations under the safe harbor and the buyer does not meet its obligations due to no fault of
the seller, the seller would receive safe harbor protection.”). This independent treatment informs
the court’s approach here: the court will evaluate whether Medtronic satisfied the standards
applied to sellers independently of whether HRMC satisfied the standards applied to buyers.

35

Also, the court conducts its analysis keeping in mind that—in general—the HHS OIG looks on
discounts in this context with favor. Id. at 63,526 (“As a general rule, discounts for health care
items and services are encouraged under the Federal health care programs so long as the Federal
health care programs share in the discount where appropriate, and as appropriate, to the
reimbursement methodology.”).
2. Legal Standard for Interpreting Regulations
The parties’ arguments require the court to interpret certain regulations. And so, the
court recites the legal standard that governs this task and thus controls the rest of this Order.
When interpreting a regulation, our Circuit applies the same rules it uses to interpret statutes.
Canyon Fuel Co. v. Sec'y of Lab., 894 F.3d 1279, 1287 (10th Cir. 2018) (quotation cleaned up).
That is, a court should “examine the plain language of the regulation and give each word its
ordinary and customary meaning.” Id. (citation omitted). And courts “often begin an ordinary
meaning analysis by consulting contemporary dictionary definitions.” Nat'l Credit Union
Admin. Bd. v. Nomura Home Equity Loan, Inc., 764 F.3d 1199, 1227 (10th Cir. 2014). “If, after
engaging in this textual analysis, the meaning of the regulations is clear, our analysis is at an end,
and we must enforce the regulations in accordance with their plain meaning.” Mitchell v.
Comm'r, 775 F.3d 1243, 1249 (10th Cir. 2015). But “[w]hen an agency reasonably interprets a
genuinely ambiguous regulation that it has promulgated, federal courts generally defer to that
interpretation.” Suncor Energy (U.S.A.), Inc. v. U.S. Env't Prot. Agency, 50 F.4th 1339, 1353
(10th Cir. 2022) (quoting Kisor v. Wilkie, 588 U.S. 558, 563).12 When deciding whether

12

In the rest of this Order, the court frequently cites comment responses and preamble statements
provided by the HHS OIG. The court acknowledges that these responses and statements aren’t binding.
See Jones-McNamara, 630 F. App'x at 400 (explaining that the HHS OIG’s guidance about the meaning
of renumeration is “not binding”). And it understands that recent Supreme Court jurisprudence counsels
against deference to agency interpretations, though that ruling occurred in a different context altogether—
that of Chevron deference when deciding whether an agency had acted within its statutory authority.

36

regulatory language is ambiguous, courts “look to the language itself, the specific context in
which that language is used, and the broader context of the statute as a whole.” In re Taylor, 899
F.3d 1126, 1129 (10th Cir. 2018) (quotation cleaned up). Ambiguity inheres when a regulation
“is capable of being understood by reasonably well-informed persons in two or more different
senses.” Id. (quotation cleaned up).
3. Discounts as Defined by the Regulatory Safe Harbor
a.

Different Goods and Bundled Transactions

The bundled transactions at issue here involved different goods. For example, in one
bundled transaction, Medtronic supplied five Hawk Ones (and additional drug coated balloons)
to induce HRMC’s purchase of 50 drug-coated balloons. Doc. 432-16 at 2 (Medtronic Ex. D-3).
Recall that the Hawk One is an atherectomy device allowing physicians to excise plaque from
the peripheral vascular system to restore blocked flow. Directional Atherectomy Systems,
Medtronic, https://www.medtronic.com/us-en/healthcareprofessionals/products/cardiovascular/directional-atherectomy-systems.html (last visited Sept.
14, 2024). The drug-coated balloons, however, function to transfer a drug to the artery walls to
prevent an opened artery from becoming narrow again (re-stenosis). Doc. 430-3 at 37–38, 39–40
(Huyser Decl. Ex. 2, Oster Dep. 89:20–90:9; 91:20–92:8). All that’s to say, the two are different
devices.
Also recall that a “discount” doesn’t include supplying one no-charge good to induce the
purchase of a different good under the regulatory safe harbor. 42 C.F.R. § 1001.952(h)(5)(ii).

Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244, 2273 (2024) (“But courts need not and under the
APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”). The
court understands Auer deference—when agencies interpret their own regulations—to survive Loper
Bright. See Friends of the Floridas v. Bureau of Land Mgmt., No. CIV-20-0924 JB/GBW, 2024 WL
3952037, at *60 (D.N.M. Aug. 27, 2024) (explaining post-Loper Bright that “courts accord agencies what
is known as Auer deference” “despite the demise of Chevron”).

37

But the pertinent regulations also include a caveat: a discount doesn’t include this arrangement
unless four requirements are met, two applying to reimbursement and two applying to disclosure.
Id. The first two require that the same Federal health care program must reimburse the goods
involved and must use the same reimbursement methodology to do so. Id. The last two require
that the buyer fully disclose the reduced charge to the health care program and accurately reflect
it where appropriate to the reimbursement methodology. Id. The court starts with the same
reimbursement methodology requirements, below.
b.

“Same Methodology” Requirements

The regulation’s “same methodology” requirements don’t lend themselves to plain
language interpretation. While one may define easily enough the words “same” and
“methodology,” combining those words doesn’t provide a clear understanding of what the
regulation requires. The specific context of the regulation means that the court must ascertain
the methodologies by which an entity seeks reimbursement from a Federal health care program.
And so, the court consults the HHS OIG’s interpretation for aid.
The HHS OIG’s 1999 preamble to the final rule amending the safe harbor regulatory
provisions proves helpful. There, the HHS OIG addressed a scenario that illuminates when the
safe harbor protects a bundled arrangement—that is, an arrangement where the seller provides
one good at no charge (or a reduced charge) to induce the purchase of a different good.
Commenters—concerned that the AKS prohibited bundled purchases—argued their case with
this example: “[S]afe harbor protection should be available for a discount to a hospital for sterile
gauze pads in exchange for the purchase of surgical tape, both of which are included in the
hospital’s [Diagnostic Related Group] payment and recorded on the hospital’s cost report as
routine costs not separately reimbursable.” 64 Fed. Reg. 63518, 63530. The HHS OIG agreed.
Its preamble explained that “where the goods and services are reimbursed by the same Federal
38

health care program in the same manner” these discounts “may benefit the programs through
lower costs or charges achieved through volume purchasing and other economies of scale.” Id.
And the HHS OIG also clarified the type of bundled arrangements that caused it concern: when
bundled arrangements induce purchases of products for which the Federal health care programs
pay full price, then the programs don’t benefit from the discount. Put another way, discounts
shifting costs among different reimbursement systems are problematic. Id. The HHS OIG
provides an example of problematic cost shifting: “For example, the safe harbor was not
intended to protect a discount on hospital supplies covered by a Diagnostic Related Group
(DRG) payment in exchange for the purchase at the full price of capital equipment separately
reimbursed by Medicare on a reasonable cost basis in accordance with a hospital’s cost report.”
Id. In short, vendors properly can’t combine hospital supplies and capital equipment to form an
acceptable bundled discount because they are reimbursed separately. On the other hand, a
bundled transaction of sterile gauze pads and surgical tape is just fine—better than fine, actually,
because it stands to lower costs that may benefit the Federal health care programs. It thus
qualifies as a discount—meriting safe harbor protection—even though surgical tape and gauze
pads are different goods.
Here, then, the question is whether the no-charge atherectomy devices HRMC received
with its DCB bulk purchase resemble the impermissible combination of hospital supplies and
capital equipment or, instead, resemble the permissible combination of gauze and tape. Recall
the hospital supplies and capital equipment were different goods reimbursed differently, under
different methodologies. Whereas the gauze and tape were different goods reimbursed under the
same methodology. On the undisputed facts governing HRMC’s motion, no reasonable jury

39

could find that the atherectomy and DCBs resembled the impermissibly combined hospital
supplies and capital equipment.
HRMC’s expert explained that Medicare reimbursed all the at-issue devices under the
same methodology. Highly simplified, here’s how: In most cases, Medicare reimburses a fixed
fee for patients who stay in the hospital—determined prospectively according to a patient’s given
Diagnostic Related Group—to capture the average resource use of the inpatient stay. Doc. 43512 at 22 (Russo Expert Report). This fixed fee reimbursement doesn’t change with any
“individual line-item charges billed, including those for medical devices.” Id. at 21 (Russo
Expert Report). And for outpatients, Medicare reimburses using a “packaging” approach—a predetermined fixed fee for a patient’s primary Ambulatory Payment Classification (APC) wipes
out most separate payments otherwise required for medical devices. Id. at 12 (Russo Expert
Report). HRMC’s expert reviewed the outpatient transactions at issue and reached this
conclusion: “[W]hen PAD devices were billed by Hutchinson [HRMC] to the Medicare program
with any of these codes during the time period at issue, payment for them was packaged into the
APC payment made for the procedure(s) in which they were used, and they were not separately
reimbursed.” Id. at 28 (Russo Expert Report). In other words, the Federal health care program
reimbursed these devices according to a fixed fee methodology.13

13

HRMC’s expert also identified two situations when a fixed-fee reimbursement methodology
doesn’t apply: with outlier patients and with a New Technology Add-On Payment (NTAP). Doc. 435-12
at 22–25 (Russo Expert Report). But, he also explained that the use of the no-charge devices still
wouldn’t have affected the Medicare payment HRMC received. Here’s why, again highly simplified:
Medicare uses the hospital’s cost-to-charge ratio (CCR) to determine both the outlier payment and the
NTAP reimbursement. Id. at 24–25 (Russo Expert Report). And Medicare calculates that CCR using
specified lines from HRMC’s Cost Report. Id. at 24 (Russo Expert Report). None of those specified
lines included costs attributable to the devices. Id. (Russo Expert Report) (explaining that “charges and
costs attributable to devices billed with revenue code 272 were reported only on line 71 of the Cost
Report” (emphasis in original) and Medicare just used lines 30–46, not line 71, to calculate the CCR).

40

In response to the HRMC expert’s analysis, Relator “agrees these types of deals are
permitted where they are properly documented.” Doc. 450 at 35 (emphasis in original). And in
his response to Medtronic’s motion, Relator doesn’t address the reimbursement methodology
requirement at all. See Doc. 445 at 50–51. That is, Relator’s silence concedes that the no-charge
devices satisfy the same-reimbursement requirements. And Relator focuses, instead, on the
disclosure requirements. So, this evidence about the fixed fee reimbursement method—
unchallenged by any conflicting evidence—precludes a reasonable jury from finding that the
devices at issue were like the hospital supplies and the capital equipment—that is to say,
separately reimbursable. Instead, in light of this unchallenged expert testimony, a reasonable
jury only could find that the devices at issue were like the gauze and tape—not separately
reimbursable and thus not problematic. The court thus moves on to these disclosure
requirements, next.
c.

Fully Disclosed and Accurately Reflected

It’s been a while. And so, the court reiterates the relevant regulatory language specifying
how a bundled arrangement can qualify as a discount, even when it involves different goods. In
addition to the same methodology requirements discussed in the previous section, the regulation
also imposes two disclosure requirements: a bundled transaction qualifies as a discount when
“the reduced charge is fully disclosed to the Federal health care program and accurately reflected
where appropriate, and as appropriate, to the reimbursement methodology[.]” 42 C.F.R.
§ 1001.952(h)(5)(ii). And so, the no-charge devices at issue here fall into the “discount”
definition only if “fully disclosed” and “accurately reflected.”
Keep in mind that a court often conducts an “ordinary meaning analysis by consulting
contemporary dictionary definitions.” Nat'l Credit Union, 764 F.3d at 1227. The HHS OIG
amended the pertinent regulatory requirements in November 1999. See 64 Fed. Reg. 63518,
41

63527 (adopting clarifications to the discount safe harbor). So, the court looks to a 1999
contemporary dictionary for aid in interpreting the two adjective phrases—“fully disclosed” and
“accurately reflected.” The 1999 Black’s Law Dictionary defines “full disclosure” as a
“complete revelation of all material facts.” Full Disclosure, Black’s Law Dictionary (7th ed.
1999). This definition serves only to beg the question: What facts are material in this regulatory
safe harbor context? The HHS OIG has answered that question like this:
[F]or purposes of submitting a claim or request for payment . . . what is necessary
is that the value of the discount be accurately reflected in the actual purchase price.
It is not necessary to distinguish whether this price is the result of a discount or to
state “net discount.” Consequently, parties who were uncertain about how or where
to report on a particular form the fact that the price was due to a discount need not
be concerned with reporting that fact, as long as the actual purchase price
accurately reflects the discount.
64 Fed. Reg. 63518, 63527 (emphasis added). The HHS OIG thus clarifies that accurately
reporting the actual purchase price—even apart from any designation that such purchase price
was due to a discount—suffices for a party to reflect the value of the discount accurately.
Here, Relator contends that HRMC didn’t reflect accurately these bundled discounts
because HRMC didn’t identify anywhere in its reporting to the Federal health care program that
it received no-charge devices. He cites how the HRMC purchasing department neglected to
enter the no-charge devices when it created purchase orders for these transactions. Doc. 398-5 at
12–13 (Atkins-Ray Dep. 35:25–37:6) (agreeing that the no-charge devices weren’t included on
the invoice, purchase order, or delivery note). And Relator’s expert walks through how this
failure to reduce each unit price to account for the no-charge devices resulted in inflated unit
prices later charged to Medicare. She explains:
When [HRMC’s buyer] failed to reduce the unit price to include the free devices,
the system captured a cost for each unit that was too high and did not include the
discount associated with the free devices. . . . When the claims for the free devices
were submitted to the government for payment with inflated charges, the
42

government assumed these devices had a cost and added an additional payment
based upon the pass-through methodology to defray HRMC’s costs for the device.
Doc. 451 at 80 (Schmor Rebuttal Report) (emphasis in original).
Relator’s argument has some logical appeal. But here’s the problem. Relator never cites
any authority hinting even that Medicare requires reporting these sorts of unit-based price
reductions to qualify for fully disclosing and accurately reflecting a discount. And the court has
found none. The sole authority Relator invokes are two HHS OIG Advisory Opinions. See Doc.
450 at 31, 36–37. And neither of those opinions says what Relator wants it to say. But first,
before supporting that conclusion, the court considers the appropriate weight of advisory
opinions.
“Congress created a process by which parties may seek advisory opinions from HHS OIG
as to whether a proposed course of action would violate the AKS.” Pfizer, Inc v. U.S. Dep't of
Health & Hum. Servs., 42 F.4th 67, 72 (2d Cir. 2022). But advisory opinions are, by their own
terms, not authoritative. See HHS OIG Advisory Op. No. 99-03 (Dep't of Health & Human
Servs. March 23, 1999) (“This advisory opinion is limited in scope to the specific arrangement
described in this letter and has no applicability to other arrangements, even those that appear
similar in nature or scope.”); see also Mills v. Natchitoches Nursing & Rehab. Ctr., LLC, No. 21CV-00336, 2021 WL 6129102, at *3 (W.D. La. Apr. 30, 2021) (“The advisory opinions do not
create binding legal norms, are not meant to bind the public in any way, do not have the force
and effect of law, and are not final agency action.” (quotation cleaned up)). And so, the court
treads lightly when reviewing them, understanding that the HHS OIG never intended them to
bear much weight, particularly not authoritative weight. Instead, “interpretations contained in
formats such as opinion letters are entitled to respect . . . but only to the extent that those

43

interpretations have the power to persuade.” Christensen v. Harris County, 529 U.S. 576, 587
(2000) (quotation cleaned up).
The first advisory opinion Relator invokes addresses an arrangement between a
distributor of therapeutic mattresses and Medicare-certified skilled nursing facilities (SNFs).
HHS OIG Advisory Op. No. 99-03 (Dep’t of Health & Human Servs. March 23, 1999). The
mattress distributor sought to bundle powered and non-powered support surface mattresses, thus
providing them at a discount to SNFs. Id. And the distributor described its plan to document the
discounted price: it would “apportion the discount between the two products in proportion to
their fair market value.” Id. The HHS OIG concluded that it wouldn’t subject the distributor to
sanctions under the anti-kickback statute. Id. In reaching its conclusion, the HHS OIG took into
account—among other considerations—the discount apportioning approach, explaining that it
would “assure that the price reported . . . will fairly reflect the value of the discount.” Id. But
this conclusion suggests, at most, one possible means to structure a bundled transaction—not a
singular acceptable approach. And this opinion issued before the discount safe harbor regulation
under which this case arises.14 So, any guidance it may provide didn’t purport to interpret the
“fully disclosed” or “accurately reflected” language of Section (h)(5)(ii).
The Relator’s cited second advisory opinion provides even less insight for how a discount
is “fully disclosed” or “accurately reflected.” In it, a seller of products used to treat
ophthalmologic disorders inquired whether a tiered rebate program would qualify for protection
under the discount safe harbor. HHS OIG Advisory Op. No. 13-07 (Dep't of Health & Human

14

The final rule adding Section (h)(5)(ii)—which permitted bundled arrangements—became
effective on November 19, 1999. See 64 Fed. Reg. 63518, 63518. The cited advisory opinion issued
March 23, 1999. Indeed, that discrepancy in time explains why the HHS OIG concluded that it wouldn’t
impose sanctions, instead of concluding that the bundled arrangement met the discount safe harbor. See
HHS OIG Advisory Op. No. 99-03.

44

Servs. July 1, 2013). A buyer would reach each new tier based on purchase combinations that
included both reimbursable and non-reimbursable products. Id. at 1. The HHS OIG concluded
that, with a percentage rebate program, the customer easily could calculate the net price of each
item by applying the rebate percentage to the individual item’s original price. Id. at 5. The
ability to calculate the net price was crucial to this rebate program, where not all products were
reimbursable. Id. On the other hand, a bundled discount system—such as supplying a free
surgical pack if the customer purchased five surgical packs—made such calculations inherently
more difficult. Id. at 5–6. And so, the safe harbor provision would protect a bundled discount
but only when the Federal health care program reimbursed the items under the same
methodology. Id. at 6.
Relator contends that this second advisory opinion demonstrates an appropriate way—in
contrast to HRMC and Medtronic’s bundled deals—to structure a safe harbor deal. Doc. 450 at
36–37. Namely, a deal should permit a customer to determine—and write down and report—the
effective cost of every device. Id. at 36. But this advisory opinion doesn’t prescribe line-item
pricing for safe harbor deals. Instead, it stands for the proposition that when the discount
involves both reimbursable and non-reimbursable products, line-item pricing is important. But if
the items all are reimbursed under the same methodology, such line-item pricing isn’t crucial.
Indeed, the opinion recognizes the difficulty inherent in determining line-item pricing for a
bundled deal like HRMC and Medtronic’s. But that difficulty doesn’t disqualify bundled deals.
Instead, the opinion suggests that such an inability to determine an effective cost for each device
isn’t an issue—so long as the same reimbursement methodology is used. So, this advisory
opinion thus supports HRMC and Medtronic’s bundled deals—without line-item pricing—

45

because they were reimbursed under the same methodology. And it undermines Relator’s
argument that HRMC should have itemized the bundled deals.
In the end, Relator concedes what he must. There is no requirement to structure a deal in
a specific way. Doc. 450 at 36. He then provides carefully crafted suggestions for ways HRMC
and Medtronic could have disclosed their discount—such as submitting claims with $0 charges
for no-charge devices or lowering line-item invoice pricing. Id. These suggestions might work,
though the second advisory opinion suggests the line-item pricing may prove difficult. But the
regulations don’t require it. Nowhere do the relevant regulations discuss unit-based pricing. Nor
do they appear concerned with a hospital’s charges to its patient for a given device. The court
understands how “fully disclose” and “accurately reflect” could include unit-based pricing and
patient device charges. But these are simply options, not requirements. Thus, they provide no
basis for a reasonable jury to find that HRMC failed to disclose fully or reflect accurately the nocharge device discounts.
In general, deferral district courts shouldn’t pretend they’re well-versed in the intricate
inner-workings of Medicare payment systems. This means they must lean into the legal sources
available to interpret the regulations at hand. And those legal sources suggest reporting costs is
what counts—and nothing else. See 64 Fed. Reg. 63518, 63527 (“[P]arties who were uncertain
about how or where to report on a particular form the fact that the price was due to a discount
need not be concerned with reporting that fact, as long as the actual purchase price accurately
reflects the discount.”). What’s more, other language in the same regulatory subsection
reinforces this understanding. The buyer applicable standards clarify that for a buyer like
HRMC to qualify for this discount safe harbor, it must “fully and accurately report the discount
in the applicable cost report.” 42 C.F.R. § 1001.952(h)(1)(ii)(C) (emphasis added). This

46

standard explicitly links full and accurate reporting with the entity’s cost report. The court
doesn’t opine whether the regulation’s sole focus on the cost report adequately serves its
purposes. Instead, the court simply concludes that, according to the legal authorities identified
by the parties—as supplemented by the court’s research—the cost report is what counts. So, as
long as the applicable cost report includes the actual purchase price, HRMC fully has disclosed
the discount and accurately reflected it. And Relator has conceded that “HRMC properly
reported the bulk and quick pay discounts in its cost reports.” Doc. 450 at 19.
Undeterred, Relator offers another argument. He contends that HRMC didn’t report
accurately because it solely reported the price it paid to Medtronic on each purchase, not the
value of the devices received. Id. at 23. But HRMC doesn’t have to report the value of the
devices received, as long as it reports the total purchase price. The total purchase price—with
the bulk and quick pay discounts included—reflected the reportable actual purchase prices
because the addition of the no-charge devices didn’t increase the price totals. That’s what “nocharge” means, after all. What’s more, this actual purchase price requirement makes sense.
Fraud or abuse would arise when an entity reported a cost higher than—not equal to—the price
they actually paid, as Medtronic’s expert explained.
[I]f there had actually been an invoice that said or purported to say, you know,
[HRMC] you're supposed to pay $105,000 but they really only paid, you know,
some lesser amount, you know, that could create some risk because they might then
report—they might have an invoice that said you're going to pay 105,000 but really
reported—you know, but really paid less, and then somehow an inflated cost is
reported.
Doc. 445-2 at 60 (Maida Dep. 232:6–15). No such risk of inflated costs presents itself here.
Piling on, HRMC also has adduced evidence that its cost report included the purchase
price HRMC actually paid to Medtronic for the bundled deals. HRMC Corporate Representative
Nick Baldetti explained how HRMC tracks costs and discounts to ensure total purchase prices
47

get reported to Federal health care programs. An order for devices—like those at issue here—
would produce a purchasing invoice, which would “roll up” to the general ledger. Doc. 435-7 at
4 (Baldetti Dep. 90:21–91:16). That is, these devices’ costs would “roll up” from their purchase
invoice to the Cath Lab cost center, to the medical supplies sub-general ledger line, to the trial
balance, which feeds into the cost report generated by HRMC’s accounting firm. Id. (Baldetti
Dep. 91:12–21).
HRMC’s expert also explained how these costs interacted with other device costs in
HRMC’s cost report: all the devices at issue here were billed to Medicare under revenue code
272. Doc. 435-12 at 20 (Russo Expert Report). The “[c]osts and charges associated with this
revenue code were reported on line 71 of Hutchinson’s Cost Report . . . That line aggregated
costs for cardiovascular devices. Hutchinson was not required to, and in fact could not, break
out the costs of individual devices used in its Cost Report.” Id. at 20–21 (Russo Expert Report).
In light of the guidance from HHS OIG and HRMC’s evidence of cost reporting, no reasonable
jury could find that HRMC failed to disclose fully and report accurately—as defined by the
available legal authority—the discount it received from Medtronic.
The court thus concludes that no reasonable jury would find that HRMC and Medtronic’s
no-charge devices fail to qualify as discounts under 42 C.F.R. § 1001.952(h)(5)(ii). With that
conclusion in mind, the court moves on to the next requirement under the regulatory safe harbor:
the applicable standards for buyers and sellers. The court begins this standards analysis with
Medtronic—the seller.
4. Medtronic as Seller
For ease of reference, the court recites again the contested standards for a seller under the
discount safe harbor. Then, with these standards identified, the court evaluates whether a
reasonable jury could find that Medtronic failed to meet the seller applicable standards. Recall
48

the overarching regulation: A seller “must fully and accurately report” the discount “on the
invoice, coupon or statement submitted to the buyer.” 42 C.F.R. § 1001.952(h)(2)(ii)(A). So,
that’s the first standard the court addresses. Also the seller must “inform the buyer in a manner
that is reasonably calculated to give notice to the buyer of its obligations to report such
discount[.]” Id. The court addresses this “inform the buyer” standard second.
a. Fully and Accurately Reported
Relator argues that Medtronic didn’t satisfy the regulatory seller standards because
Medtronic didn’t report fully and accurately the discounts it provided to HRMC. First, Relator
takes issue with Medtronic’s documentation of the discounts it gave HRMC. Doc. 398 at 63.
Medtronic’s invoices and price proposal agreements didn’t include the no-charge devices. Id.
And those documents stated that HRMC should use the pricing reflected on those documents to
report to Federal and State programs. Id. But that’s not the whole story, Medtronic insists. It’s
true that the invoices didn’t include the no-charge devices. But Medtronic provided separate
sheets with tables—dubbed “deal sheets” by Relator and “bundle statements” by Medtronic—
that identified the no-charge devices provided in each bundled deal and the value of those nocharge devices. Doc. 430 at 51. Relator contends that the separate nature of these bundle table
sheets precluded Medtronic from satisfying the regulation’s requirements. Doc. 445 at 53. And,
he argues, the bundle table sheets were insufficient because they didn’t contain various details—
such as serial number and lot numbers—necessary to track the transfer of these devices. Id. at
54.
But Relator’s argument assumes more stringent reporting requirements than the
regulatory text suggests. Recall that when “interpreting the regulation, we apply the same rules
we use to interpret statutes.” Canyon Fuel, 894 F.3d at 1287 (quotation cleaned up). That is, a
court should “examine the plain language of the regulation and give each word its ordinary and
49

customary meaning.” Id. (citation omitted). And courts “often begin an ordinary meaning
analysis by consulting contemporary dictionary definitions.” Nat'l Credit Union, 764 F.3d at
1227.
Here, the pertinent regulation requires that a seller “fully and accurately report such
discount on the invoice, coupon, or statement submitted to the buyer[.]” 42 C.F.R.
§ 1001.952(h)(2)(ii)(A) (emphasis added). Again, the HHS OIG adopted these seller-specific
regulatory requirements in November 1999. See 64 Fed. Reg. 63518, 63527 (adopting
clarifications to discount safe harbor that include “dividing the parties to a discount arrangement
into three groups—buyers, sellers, and offerors of discounts—with descriptions of each party’s
obligations in separate paragraphs”). The 1999 Black’s Law Dictionary defines “invoice” as:
“An itemized list of goods or services furnished by a seller to a buyer, usu. specifying the price
and terms of sale.” Invoice, Black’s Law Dictionary (7th ed. 1999). This definition of invoice—
with its itemized list and specified price—aligns with what Relator interprets as full and accurate
reporting. So, Relator’s right, sort of. If the regulation required the seller to report the discount
on the invoice—full stop, end of analysis—then the stringent reporting Relator envisions would
follow. But it doesn’t.
Instead, the regulation continues, also permitting a seller to report a discount on a
statement, or even a coupon. As Medtronic aptly observes, a coupon typically means a
document much less formal—and often physically smaller than the stringent requirement Relator
envisions. Doc. 464 at 20 (citing Coupon, Merriam-Webster Dictionary, https://www.merriamwebster.com/dictionary/coupon (defining coupon as “a small piece of paper that allows one to
get a service or product for free or at a lower price”)). This definition of the word coupon
doesn’t describe a stringent standard. And it doesn’t suggest the need for lot numbers and

50

transfer tracking. What’s more, the regulation appears indifferent to which form, precisely, the
reporting takes, giving the reporting party the option to use any of three documents. Finally,
separate documentation of various discounts isn’t unique or so unusual that it counsels special
caution. See U.S. ex rel. Walsh v. Eastman Kodak Co., 98 F. Supp. 2d 141, 148 (D. Mass. 2000)
(noting hospital supply companies’ practice of providing invoices to hospitals for x-ray supplies
that reflect one 40% discount but don’t include the applicable accrual and tiered discounts).
Sometimes business gets done informally. And the regulation’s plain language invites such
flexibility.
In sum, the flexibility inherent in the plain meaning of the regulation means that no
reasonable jury could find that the bulk invoices—together with the bundle table sheets—fail to
qualify as full and accurate seller reporting. And so, Medtronic satisfies the first contested seller
standard.
b.

Inform the Buyer

The second contested standard for a seller to qualify for the regulatory safe harbor
involves notice to the buyer. Relator argues that Medtronic’s notice to HRMC didn’t suffice
because that notice appeared on the bulk invoices, not the bundle table sheets.
To review, the regulations require that the seller must “inform the buyer in a manner that
is reasonably calculated to give notice to the buyer of its obligations to report such discount[.]”
42 C.F.R. § 1001.952(h)(2)(ii)(A). Black’s Law dictionary defines “reasonable notice” as notice
“that is fairly to be expected or required under the particular circumstances.” Reasonable Notice,
Black’s Law Dictionary (7th ed. 1999). In the due process context, the Supreme Court has
defined reasonably calculated notice as that which “apprise[s] interested parties of the pendency
of the action and afford them an opportunity to present their objections.” Mullane v. Cent.
Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950). And the Court explained in Mullane that
51

the means to give such notice should align with “one desirous of actually informing” another
party. Id. at 315. So, the operative question here is whether Medtronic informed HRMC of its
obligation to report in a fashion that demonstrates an actual desire to inform HRMC, under the
particular circumstances.
Also, the HHS OIG has clarified the particular circumstances for notice here, identifying
the flexibility given to defining the requisite notice: “We are not prescribing a specific form of
notice. The form of notice appropriate in particular situations may vary. . . . [A] seller will only
be protected by the safe harbor if it is not complicit in a buyer’s noncompliance[.]” 64 Fed. Reg.
63518, 63529.
Here, Medtronic included a notice statement on its bulk invoices. It announced:
Treatment and Reporting of Discounts: The parties intend that all discounts and
rebates, if any, earned by the Customer under this Agreement shall constitute
discounts as that term is defined in the Discount Safe Harbor to the Anti-Kickback
Statute, (42 U.S.C. 1320a-7(b)). Customer agrees that it shall have the sole
responsibility to properly allocate, disclose, and report all discounts and rebates
earned under this Agreement to its respective state and federal payors in accordance
with the requirements of all applicable state and federal laws and regulations.
Doc. 432-6 at 2–6 (HRMC Ex. A-2). Relator concedes that this language complies with the
regulatory requirement of notice. Doc. 398 at 68. Given the specificity of the notice—which
even cites the statute explicitly—no reasonable jury could find that Medtronic failed to apprise
HRMC of its obligations. Mullane, 339 U.S. at 314–15. And it did so as one desiring to inform
would do. Id. But, Relator contends, this notice doesn’t count because it appeared on the bulk
invoices—a separate piece of paper which didn’t include the no-charge devices. Doc. 398 at 68.
The court is unpersuaded by this separate-piece-of-paper argument. HHS OIG didn’t
prescribe a specific form of notice. 64 Fed. Reg. 63518, 63529. And every bundled transaction
included an invoice. So, each time Medtronic sold devices to HRMC, Medtronic informed

52

HRMC of its obligations anew. To be sure, the bundle table sheets didn’t include this language.
See, e.g., Doc. 432-7 at 2 (HRMC Ex. A-3); Doc. 432-10 at 2 (HRMC Ex. B-3); Doc. 432-11 at
3 (HRMC Ex. C-1); Doc. 432-16 at 2 (HRMC Ex. D-3). But the total purchase price—all that
HRMC had to report—didn’t change between the invoice (that included the notice) and the
bundle table sheet. See, e.g., Doc. 432-15 at 2 (HRMC Ex. D-2); Doc. 432-16 at 2 (HRMC Ex.
D-3). What’s more, HRMC’s purchasing department testified that it received the invoice and the
bundle table sheet together at the point when it created a purchase order. Doc. 398-5 at 11–12
(Atkins-Ray Dep. 32:17–33:3; 34:4–11). And, after the purchasing department created the
purchase order, the price simply “rolled up” until the accounting firm included it in the Cost
Report. Doc. 398-6 at 26 (Baldetti Dep. 91:12–21). So, at the point in the process when
accurate cost reporting occurred, both sheets were present.
In sum, Relator’s notice to the buyer arguments again try to impose more rigid
requirements than the regulatory language of the statute or the HHS OIG guidance demands.
Presented with these undisputed facts, no reasonable jury could find that Medtronic failed to
meet the requirement to inform HRMC in a reasonably calculated manner. And so, Medtronic
satisfies both of the contested buyer standards such that no reasonable jury could find that it fails
to meet the regulatory safe harbor requirements. The court thus grants summary judgment to
Medtronic on its safe harbor affirmative defense.
5. HRMC as Buyer
The safe harbor regulations also provide standards for a buyer who seeks to invoke its
shelter. As noted before, HRMC is a cost-reporting entity. And so, it falls into the second buyer
category outlined by the regulation, one which requires the buyer to meet four standards. The
first standard reads like this: “If the buyer is an entity which reports costs on a cost report . . . it
must comply with all of the following four standards . . . The discount must be earned based on
53

purchases of that same good or service bought within a single fiscal year of the buyer[.]” C.F.R.
§ 1001.952(h)(1)(ii)(A). The court evaluates whether HRMC satisfies this first standard, next.
And, because the court determines that a reasonable jury could find that HRMC fails to satisfy
this first standard, it doesn’t consider the other three buyer standards.
a. Same good
Relator asserts that HRMC fails to meet this first buyer standard because the no-charge
atherectomy devices Medtronic provided—HawkOnes, SilverHawks, TurboHawks—were not
the same devices purchased in the bulk transactions—DCBs. Doc. 450 at 40. HRMC responds,
arguing that it satisfied the “same good” standard because—for the bulk deals—HRMC
purchased the same goods and—for the bundle deals—the Federal health care program
reimbursed the purchased and no-charge devices under the same methodology. Doc. 435 at 32.
That is, HRMC urges the court to interpret the “same good” standard broadly, importing the
bundled discount requirements in subsection (h)(5)(ii) into the buyer standards in subsection
(h)(1)(ii)(A). But, as Relator points out, HRMC provides no authority suggesting the court
should employ a “same good” means “same reimbursement methodology” approach. Doc. 450
at 41. And the plain language of the regulation counsels against it.
Black’s Law Dictionary defines “same” as the “very thing just mentioned or described.”
Same, Black’s Law Dictionary (7th ed. 1999). If a bulk transaction describes a drug-coated
balloon (as do many of the at-issue transactions here), a no-charge atherectomy device provided
in the bundle isn’t “the very thing” just described. These two devices serve different purposes,
with the atherectomy device scraping plaque out while the drug-coated balloon applies the drug
paclitaxel. And it “is a well-established law of statutory construction that, absent ambiguity or
irrational result, the literal language of a statute controls.” St. Charles Inv. Co. v. Comm'r, 232
F.3d 773, 776 (10th Cir. 2000) (quotation cleaned up). It would seem, then, that a reasonable
54

jury could find that HRMC fails to qualify as a buyer because they didn’t earn the discounts at
issue “on purchases of that same good or service[.]” 42 C.F.R. § 1001.952(h)(1)(ii)(A).
But there’s more to it. Following the regulation’s literal language appears—at first blush,
at least—to lead to an irrational result. Under this interpretation, the regulation’s literal language
would never provide safe harbor for a cost-reporting buyer who engages in a bundled, different
goods transaction. And yet, the same regulation protects that precise bundled, different good
transaction. Id. at § 1001.952(h)(5)(ii). The literal language of the regulation requiring a buyer
to engage in a same good transaction, in effect, nullifies the safe harbor for the different goods
discount. And so, the court endeavors to harmonize these subsections in a way that renders
neither subsection, nor its attendant words and phrases, meaningless. See Epic Sys. Corp. v.
Lewis, 584 U.S. 497, 511 (2018) (explaining that rules of statutory interpretation “aim[] for
harmony over conflict”); see also Bridger Coal Co./Pac. Mins., Inc. v. Dir., Off. of Workers’
Comp. Programs, 927 F.2d 1150, 1153 (10th Cir. 1991) (counseling that court should “not
construe a statute in a way that renders words or phrases meaningless, redundant, or
superfluous”).
HRMC would have the court import the different goods conditions into the “same good”
language found in the buyer-applicable standards. Doc. 435 at 32. So, as long as HRMC meets
the conditions for a bundled transaction to qualify as a discount, it also meets the “same good”
buyer standard. But that approach renders the “same good” requirement meaningless. Instead,
the regulation identifies three different categories of buyers— (1) health maintenance
organizations and competitive medical plans; (2) cost-reporting entities; and (3) individuals or
entities in whose name one may submit a claim to a Federal health care program. 42 C.F.R.
§ 1001.952(h)(1). And just the second category includes this “same good” standard. So, the

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regulation avoids irrationality if the two other categories of buyers can utilize—without intersubsection inconsistency—the different goods bundled discount. When the court harmonizes the
regulation this way, it concludes that the “same good” language doesn’t produce irrational results
for the other two buyers and, thus, determines that the plain language of the statute governs.
Under the plain language of the regulation, HRMC fails the buyer standard in Section
h(1)(ii)(A). And the regulation explicitly clarifies that a buyer “must comply with all of the . . .
four standards[,]” not just with some of them. 42 C.F.R. § 1001.952(h)(1)(ii). So, one strike
means HRMC is out. In sum, no reasonable jury could find that HRMC (as the proponent of an
affirmative defense) has carried its burden to establish the regulatory safe harbor shelter.
Nonetheless, HRMC still has a route to safe harbor protection—through the statutory
discount exception, which the court addresses, below.
C.

Statutory Discount Exception

Before the court can apply the statutory discount exception to the summary judgment
facts, it must address a preliminary matter: the relationship between the statutory discount
exception and those regulatory safe harbor provisions the court just interpreted.
The parties disagree whether the statutory exception and the regulatory safe harbor
provisions form independent bases for protection. Relator says no. He insists that the regulatory
safe harbors effectively interpret the statutory exception so that failing to satisfy the safe harbor
provisions necessarily results in failing to satisfy the statutory exception. Doc. 445 at 43–47;
Doc. 450 at 32 (“There is no way for a hospital to fail the regulation’s safe harbor requirements
but meet the language of the statute.”). Defendants disagree. HRMC asserts that “[p]rotection
under the Regulatory Safe Harbor is in addition to the Statutory Exception.” Doc. 435 at 28
(emphasis added).

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The court agrees with defendants. That is, the court is persuaded that one can satisfy the
statutory discount exception without meeting a specified safe harbor provision. Here’s why.
When it permitted the promulgation of safe harbor regulations, Congress explained that any
“‘practices specified in regulations . . . shall be in addition’” to those exempted under the
statutory exception. U.S. ex rel. Banigan v. Organon USA Inc., No. CV 07-12153-RWZ, 2016
WL 10704126, at *3 n.5 (D. Mass. Aug. 23, 2016) (quoting Pub. L. No. 100-93, § 14(a), 101
Stat. 680, 697 (1987)). And the HHS OIG has clarified that the “regulatory discount safe harbor
both incorporates and enlarges upon the statutory discount exception.” Id. (brackets omitted and
emphasis added) (quoting 64 Fed. Reg. 63518, 63528). In other words, “the regulatory safe
harbor expands upon the statutory safe harbor by defining additional discounting practices not
included in the statutory exception[.]” 64 Fed. Reg. 63518, 63528 (emphasis added). And so, a
defendant may assert an affirmative safe harbor defense under either the statutory exception, the
regulatory provisions, or both. See Shaw, 106 F. Supp. 2d at 113 (explaining that the statutory
exception and the safe-harbor provisions provide independent bases for exclusion from criminal
liability such that a defendant may raise just one, or both).15
Anyone who has made it this far may have forgotten the relevant statutory language. So,
the court repeats it here. The statutory discount exception to the AKS provides that discounts
15

Relator spends a chunk of his response/reply brief to Medtronic’s motion explaining why it finds
Shaw’s separate statutory and regulatory holding inapplicable here. Doc. 445 at 43–47. He argues that
Shaw was a rebate safe harbor case and that the federal safe harbor regulations governing rebates have
changed considerably since 1991. Id. at 46. He also contends that the bundled discounts at issue here
haven’t changed over time. But the court doesn’t read Shaw’s analysis as one premised on changes over
time. Instead, Shaw uses changes over time to prove that the regulations exist to account for a “broad
range of commercial transactions in a changing marketplace[.]” 106 F. Supp. 2d at 117. But the
relationship between the regulations and the statutory exception doesn’t rest on those changes occurring,
such that the rebate regulations have a different relationship to the statutory exception than other discount
regulations. In other words, the changes simply explain why both the statutory exception and the
regulations are necessary. The changes—or their absence—don’t determine how a specified safe harbor
regulation relates to the statutory exception. And so, the ways in which Shaw is distinguishable from this
case don’t affect its application here.

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and price reductions—if properly disclosed and appropriately reflected—don’t qualify as illegal
renumeration. 42 U.S.C. § 1320a-7b(b)(3)(A). That is, the penalties the AKS outlines for illegal
renumeration don’t apply to:
a discount or other reduction in price obtained by a provider of services or other
entity under a Federal health care program if the reduction in price is properly
disclosed and appropriately reflected in the costs claimed or charges made by the
provider or entity under a Federal health care program[.]
Id. (emphasis added). Both Medtronic and HRMC claim to satisfy the statutory discount
exception. Doc. 435 at 24–26; Doc. 464 at 23–25. The court already has concluded that
Medtronic has satisfied the regulatory safe harbor provisions, meaning that no reasonable jury
could find Medtronic failed to meet those provisions. So, the court needn’t include Medtronic in
the following statutory discount exception analysis. The court’s analysis, below, thus focuses
solely on HRMC.
As explained above, the statutory exception provides an independent basis to legitimize
otherwise illegal remuneration in the form of discounts. Shaw, 106 F. Supp. 2d at 113. It
requires that HRMC “properly disclosed and appropriately reflected” the discount. 42 U.S.C.
§ 1320a-7b(b)(3)(A). And it also requires that HRMC captured such disclosure and reflection in
the “costs claimed or charges made[.]” Id. In short, “manufacturers are allowed to provide the
discount so long as the discount is documented and passed on to the government.” Shoemaker v.
Cardiovascular Sys., Inc., No. CV-16-568 (DWF/KMM), 2017 WL 1180444, at *10 (D. Minn.
Mar. 29, 2017).
1. Properly Disclosed and Appropriately Reflected
Starting as it must with the statute’s plain language, the court discerns no basis to
interpret this “properly disclosed and appropriately reflected” statutory language, 42 U.S.C.
§ 1320a-7b(b)(3)(A), differently than it interpreted the “fully disclosed” and “accurately
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reflected where appropriate” regulatory language it already analyzed, 42 C.F.R.
§ 1001.952(h)(5)(ii). See Shaw, 106 F. Supp. 2d at 113 (“The independent status of the safeharbor provisions from the ‘discount exception,’ however, does not mandate their isolation from
each other when one is looking for guidance as to the proper interpretation and application of one
of the statutory exceptions to criminal liability.”). Indeed, the language itself differs just
slightly—“properly” instead of “fully” and “appropriately” instead of “accurately . . . where
appropriate.” And “it is reasonable that a court charged with the task of interpreting and
applying the statutory ‘discount exception’ would look to the regulatory agency’s
implementation of its own discount safe-harbor provision as guidance[.]” Id. So, the court
reiterates (without repeating) what it already concluded about HRMC disclosing and reflecting
its costs. The court refers any unsatiated reader to § V.B.1.b., above. There, the court concluded
that—given HHS OIG’s guidance that actual purchase price constitutes proper disclosure,
coupled with HRMC’s evidence of cost reporting—no reasonable jury could find that HRMC
had failed to disclose properly or reflect appropriately the discount it received from Medtronic.
2. Costs Claimed or Charges Made
The analysis so far leaves the last of the statutory phrases for the court to interpret: “in
the costs claimed or charges made by the provider or entity under a Federal health care
program[.]” 42 U.S.C. § 1320a-7b(b)(3)(A). This phrase, too, elicits robust debate among the
parties. HRMC argues that use of “or” in this phrase indicates that HRMC—as the provider and
a cost-reporting entity—solely reports its costs claimed. Its charges are irrelevant. Not so,
Relator contends. He argues that such a reading “would allow HRMC to hide the existence and
value of the free devices from the government.” Doc. 450 at 32.
But the plain language of the statute tilts in HRMC’s favor. The disjunctive “or”
suggests either that an entity has a choice, or that “costs” applies to one party and “charges”
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applies to another. The Shaw court analyzed this language in the AKS and explained that it
establishes:
The phrase “costs claimed . . . by the provider” refers to those costs claimed to
Medicare or Medicaid by the buyer-provider. The phrase “charges made by the ...
entity” refers to those costs charged to the buyer-provider by the seller-supplier.
Both phrases are modified by the phrase “properly disclosed and appropriately
reflected,” which describes the required reporting activities for both the “provider”
and the “entity.” Thus both parties to the transaction, the seller-supplier and buyerprovider, must properly disclose and appropriately reflect the reductions in price in
order to find shelter under the discount exception.
Shaw, 106 F. Supp. 2d at 120 (ellipses in original). The court finds Shaw’s interpretation
persuasive. A buyer-provider like HRMC need concern itself solely with costs claimed, not
charges made. Not only does this interpretation align with the plain language of the statute,
which Congress wrote in the disjunctive, but it also lines up with the HHS OIG guidance already
cited: “[P]arties who were uncertain about how or where to report on a particular form the fact
that the price was due to a discount need not be concerned with reporting that fact, as long as the
actual purchase price accurately reflects the discount.” 64 Fed. Reg. 63518, 63527. And this
emphasis on costs for cost-reporting entities parallels the regulatory requirements, as well,
which, again are relevant here insofar as they assist the court’s interpretation. See Shaw, 106 F.
Supp. 2d at 113 (explaining that the regulations can provide guidance even though they are an
independent basis for safe harbor). The regulatory safe harbor buyer standards say nothing about
charges. Instead, they require solely that the “buyer must fully and accurately report the discount
in the applicable cost report[.]” 42 C.F.R. § 1001.952(h)(1)(ii)(C). It stands to reason, then, that
the “or charges made” language in the statutory discount exception doesn’t apply to buyers. At
bottom, the statute, regulations, and HHS OIG guidance all indicate that when a cost-reporting
entity accurately reflects its costs in its cost report, that’s enough. Relator’s focus on charges
is—in HRMC’s language—a red herring. Doc. 463 at 16. Therefore, no reasonable jury could
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find that HRMC failed to report its costs. So, HRMC qualifies under the statutory discount
exception, and the court thus grants summary judgment in HRMC’s favor on its safe harbor
affirmative defense.
V.

Conclusion
The court grants in part and denies in part Relator’s Motion to Limit or Exclude Expert

Testimony and Report (Doc. 465). The court grants the motion to the extent Medtronic’s expert
announced legal conclusions. The court denies the motion to the extent Medtronic’s expert
provided context to interpret a complex regulatory scheme.
Defendants Medtronic and HRMC’s Motions for Partial Summary Judgment (Doc. 429;
Doc. 434) are granted. Defendants’ no-charge medical device transactions qualify for safe
harbor treatment under either the regulatory safe harbor provisions or the statutory discount
exception (or both). Defendants’ safe harbor affirmative defense thus precludes the no-charge
medical devices from violating the AKS as a form of illegal remuneration. And so, none of the
Medtronic devices purchased by HRMC were tainted, and billing them to the Federal health care
program didn’t give rise to a false claim under the FCA. As such, the court grants summary
judgment in defendants’ favor on Relator’s FCA claims that the no-charge devices violated the
AKS.
IT IS THEREFORE ORDERED BY THE COURT THAT United States of America,
ex rel. Thomas Schroeder Relator’s Motion for Partial Summary Judgment (Doc. 397) is denied.
IT IS FURTHER ORDERED THAT defendant Medtronic, Inc. and Covidien LP’s
Motion for Partial Summary Judgment (Doc. 429) is granted.
IT IS FURTHER ORDERED THAT defendant Hutchinson Regional Medical Center’s
Motion for Partial Summary Judgment (Doc. 434) is granted.

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IT IS FURTHER ORDERED THAT United States of America, ex rel. Thomas
Schroeder Relator’s Motion to Limit or Exclude Expert Testimony and Report (Doc. 465) is
granted in part and denied in part. The motion to limit expert Tony Maida’s legal conclusions is
granted. The motion to limit or exclude expert Tony Maida’s legal conclusions otherwise is
denied.
IT IS SO ORDERED.
Dated this 26th day of September, 2024, at Kansas City, Kansas.
s/ Daniel D. Crabtree
Daniel D. Crabtree
United States District Judge

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