Anti-Kickback Statute Risk Issues for Health Care Providers and Suppliers

We defend health care providers in alleged violations of the Anti-Kickback Statute.The Federal Anti-Kickback Statute (codified at 42 U.S.C. § 1320a-7(b)), makes it a crime to knowingly and willfully offer, pay, solicit or receive remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to purposefully induce or reward referrals of items or services payable by a Federal health care program. Simply put, it is against the law to pay or provide anything of value in an effort to induce referrals or business related to a Federal health care program. The Federal Anti-Kickback Statute has been in place (in one form or another) since 1972. [1] Both a party offering a kickback and the intended recipient can be held criminally liable under the Anti-Kickback Statute.

I.  Potential Penalties and Imprisonment for Violations:

Any person convicted of violating the Anti-Kickback Statute could face an array of penalties, including: (1) a sentence of up to ten years in prison; (2) up to a $100,000 fine; (3) exclusion from participation in a Federal or state health care program; or (4) civil monetary penalties per violation and assessments equal to not more than three times the amount of remuneration paid under the arrangement. Moreover, if convicted of this crime, a party is automatically excluded from participating in Federal health care programs, including Medicare and Medicaid.

The Anti-Kickback Statute covers Federal health benefits programs. These programs include, but are not limited to: Medicare, Medicaid, TriCare/Civilian Health and Medical Program of the Uniformed Services (Champus) and the Federal Employee Health Benefits Program (FEHBP). Notably, most states have also passed legislation criminalizing improper kickbacks and patient solicitation. For instance, the state of Texas has passed an anti-solicitation statute which is exceptionally broad.[2] Texas’ statute applies to any payor, including private payors. As the statute provides:

A person commits an offense if the person knowingly offers to pay or agrees to accept, directly or indirectly, overtly or covertly any remuneration in cash or in kind to or from another for securing or soliciting a patient or patronage for or from a person licensed, certified or registered by a state health care regulatory agency.[3]

II. State Anti-Kickback Statute Considerations:

In addition to this broad prohibition, Texas also has a specific statute which makes it illegal to engage in kickback-type activity in connection with Medicaid items and/or services. The statute reads:

A person commits a violation if the person: . . . solicits or receives, directly or indirectly, overtly or covertly any remuneration, including any kickback, bribe or rebate, in cash or in kind for referring an individual to a person for the furnishing of or for arranging the furnishing of, any item or service for which payment may be made, in whole or in part, under the medical assistance program.[4]

As the Texas example shows, it is not sufficient to merely review an existing or proposed business practice against Federal enforcement statutes. Every state is different and we strongly recommend that you take the time to determine how your particular state enforces alleged illegal kickbacks, patient inducements, improper self-referrals and similar problematic conduct.

III.  Safe Harbors Under the Anti-Kickback Statute:

In consideration of both health care provider concerns and the broad scope of the statute’s coverage, Congress authorized the Department of Health and Human Services (HHS) to designate safe harborswhich effectively carve out certain business practices that would otherwise violate the Federal Anti-Kickback Statute. As set out under 42 C.F.R.§1001.952, a total of 25 safe harbors have been established.    Although the specific business practices associated with these safe harbors may technically violate the law, it has been determined that these practices do not represent a significant risk of harm to Federal health care programs, as long as certain requirements have been met. Importantly, in order for the protections of a safe harbor to apply:

. . . an arrangement must fit squarely in the safe harbor. Failure to comply with a safe harbor provision does not mean that an arrangement is per se illegal. Compliance with safe harbors is voluntary and arrangements that do not comply with a safe harbor must be analyzed on a case-by-case basis for compliance with the anti-kickback statute.”

As you can imagine, when examining a specific business arrangement, it is not uncommon to find that one or more of the ongoing or proposed set of practices does not neatly fit within the four corners of a safe harbor. As discussed above, the failure to fully meet each and every aspect of a safe harbor does not necessarily mean that the business practice is illegal. Nevertheless, the further a business practice deviates from the safe harbor, the higher the risk that it may be a violation of the Federal Anti-Kickback Statute.

If a health care provider is unclear about whether the arrangement crosses the proverbial “line” and violates the Federal Anti-Kickback Statute, the provider can file a request for an Advisory Opinion regarding the set-up from the Department of Health and Human Services, Office of Inspector General (OIG). The filing of an Advisory Opinion is a serious step and should not be taken prior to a full analysis of the business practice by a qualified health lawyer.

IV.  Impact of the Affordable Care Act on the Anti-Kickback Statute:

Enactment of the “Affordable Care Act” in 2010 greatly expanded the scope of the Federal Anti-Kickback Statute. Although the statute continued to require that a person knowingly and willfully commit the crime, parties were no longer required to have actual knowledge that they are violating the Federal Anti-Kickback Statute insofar as healthcare is concerned in order for a violation to occur and they are not required to have specific intent to violate the statute. The amendment was passed primarily to respond to the fact that prohibited activity in healthcare is often perfectly acceptable in other industries and defendants often raised that as a defense. To be clear, a party must still have some level of knowledge and intent to commit a “kickback,” but the language of the amendment is subject to interpretation and the level of intent that must be established in order for there to be a kickback violation is not precisely established.

As a final point, it is worth noting that the Affordable Care Act also amended the Federal Anti-Kickback Statute so that a violation of the law automatically qualifies as a violation of the civil False Claims Act: [5]

In addition to the penalties provided for in this section or section 1320a–7a of this title, a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of title 31.”

Violations of the civil False Claims Act are subject to treble damages and penalties which vary, depending on when the false claim was submitted to the government.

V.  Impact of the SUPPORT Act and EKRA on Federal Anti-Kickback Statute:

The “Substance Use-Disorder Prevention that Promotes Opioid Recovery and The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act” (SUPPORT Act) seeks to address the opioid epidemic and the “Eliminating Kickbacks in Recovery Act” (EKRA), is actually Section 8122 of the SUPPORT Act. EKRA makes it unlawful to solicit, receive or pay any remuneration, directly or indirectly, in return for referring a patient or patronage to a recovery home, clinical treatment facility or laboratory," and, importantly, it EKRA’s prohibitions extend to “all-payers” making it a kickback violation regardless of whether the items or services are paid by commercial health insurer or by a government health benefit program such as Medicare, Medicaid, TRICARE and CHIPS.

VI.  Examples of Improper Kickback Conduct:

The Federal Anti-Kickback Statute makes it a crime to knowingly and willfully solicit, receive, offer or pay any remuneration (anything of value, in cash or in kind) in return for: (1) referring or arranging for services payable by any Federal or state health care program; or (2) purchasing,  leasing, ordering or arranging for any goods, facilities or services that may be paid for, in whole or in part, by Federal or state health care programs. In other words, Federal law prohibits health care providers from "buying" patient referrals or seeking out referrals by improper means. Importantly, this doesn't just apply to physicians, but also to NPs, PAs, therapists and other health care providers. Conducting an Anti-Kickback analysis, and whether a particular arrangement meets any of the "safe harbors" established by the Federal government, is a complex process, and skilled counsel should be retained.Kickbacks can take a wide variety of forms, some of which are more easily discernible than others. For instance, the giving of cash payments in exchange for referrals is a violation of law that is easily recognized by health care providers. In contrast, a lease arrangement whereby space is offered by a health care provider lessor at less than market value to a potential referral source may be slightly less obvious in appearance but is nonetheless a likely violation of law. Such lease agreements and other similar business arrangements are sometimes referred to as “disguised kickbacks.”

Among the more complicated situations encountered are those where one or more legitimate purposes for a business arrangement may be cited but a less apparent reason for the arrangement is that it serves as an incentive to refer patients to one of the parties. Importantly, courts have consistently held that if even one purpose of the arrangement was to obtain something of value in exchange for referrals, the arrangement is a violation of the Federal Anti-Kickback Statute. This is commonly referred to as the “One Purpose Rule.” This Rule was first set out in a ruling in United States v. Gerber, 760 F.2d 68 (3d Cir. 1985). As the Court held: “If one purpose of the remuneration is to induce referrals, the statute is violated, even if the payment was also intended to compensate for professional services.”  Possible examples of illegal kickbacks could include:

(1) A wheelchair supplier pays a physician approximately $200 for each prescription issued to a Medicare beneficiary ordering an electric wheelchair from the supplier. (Notably, medical necessity would not even be a factor in such a case – the mere payment by the supplier for each referral would directly violate the statute).

(2) A physician specialist who rents out excess space in his office building (at less than fair market value) to another physician who regularly refers Medicare patients to the landlord-physician for care and

(3) An orthopedic device manufacturer pays a surgeon $50,000 to serve as a “consultant” to the company with respect to its prostheses. The surgeon hired is also one of the highest users of the manufacturer’s products. Other than attending several expensive dinners, no consulting work of any real value was ever performed by the

(4) A physician offers to provide discounted care and treatment to an uninsured patient in exchange for the patient’s referral of several family members covered by Medicare to the treating

VII. Questions to Ask When Assessing a Business Relationship to Reduce the Risk of a Kickback Situation:

When analyzing a set of business practices to determine whether the conduct violates the Federal Anti-Kickback Statute, there are a number of questions you can ask, several of which might include:

(1) What is the business nature of each party in a proposed business arrangement?

(2) Do any of the parties in the proposed business arrangement currently conduct business with each other?

(3) Do the parties currently refer health care business to one of the other parties to the proposed business arrangement?

(4) Under the proposed business arrangement, will one or more parties actually refer or have the potential to refer health care business to another party in the arrangement?

(5) What types of value may or could be paid, referred, recommended or offered from one party to another in the arrangement, either directly or indirectly?

(6) To what extent are health care items, supplies or services provided by any party to the agreement covered, billed or reimbursed by a Federal or state funded health care program?

(7) Under the proposed business arrangement, is it anticipated that there will be:

  • An increase in the overall cost of health care services?
  • A decrease in a beneficiary’s access to health care services?
  • A decrease in the quality of care provided to beneficiaries?
  • A decrease in the number of overall providers a beneficiary may choose from when obtaining health care services?
  • A less competitive marketplace between competing health care providers?
  • A decreased ability of underserved beneficiaries to obtain health care services?
  • A negative impact, of any type whatsoever, on the Medicare Trust Fund?

If you answered “Yes” to any of the above questions, we strongly recommend that you engage a qualified health lawyer to delve more deeply into the specific facts in order to determine if a violation of the Federal Anti-Kickback Statute is likely to result from a proposed business arrangement.

NATIONWIDE REPRESENTATION   Call: 1 (800) 475-1906.

Liles Parker attorneys have represented clients and obtained favorable resolutions of the charges in numerous anti-kickback cases.   Several of our attorneys held significant positions at DOJ.  In fact, we are the only law firm in the country with two former Federal prosecutors who served as “National Health Care Fraud Coordinator” for the 94 U.S. Attorneys Offices around the country.  We have the skills, knowledge and abilities to help you successfully traverse this complicated process.  Questions?  For a free consultation, please give us a call:  1 (800) 475-1906.

[1] For a basic overview of the law, you may wish to review the Fact Sheet issued by OIG in November 1999, titled “Federal Anti-Kickback Law and Regulatory Safe Harbors.”.

[2] Tex. Occ. Code 102.001(a).

[3] Id.

[4] Tex. Hum. Res. Code 32.039.

[5] For an additional discussion on bringing a False Claims Act claim based on a provider's violation of the Anti-Kickback Statute, see our page titled "False Claims Act Matters and Cases — An Overview."