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Fraud Crimes Federal Anti Kickback Statute

By Spodek Law Group | February 14, 2023
(Last Updated On: October 18, 2023)

Last Updated on: 18th October 2023, 09:02 am


Fraud Crimes Federal Anti Kickback Statute

The Federal Anti-Kickback Statute is a criminial law that prohibits the exchange of anything of value to induce or reward referrals of federal healthcare program business. It was enacted to combat fraud and abuse in federal healthcare programs like Medicare and Medicaid. Here’s a quick rundown of the law works and some of it’s implications.

The Anti-Kickback Statute makes it a felony to knowingly and willfully offer, pay, solicit or receive remuneration to induce or reward referrals of business reimbursed by federal healthcare programs. Remuneration includes anything of value and can take many forms like cash payments, entertainment, credits, gifts, free goods or services, the forgiveness of debt, or the sale or purchase of items at a loss or for inflated prices. Even discounts on medical services not available to the general public could be considered illegal kickbacks.

For example, say a medical testing company offers physicians a vacation package for every 100 Medicare patients they refer for lab tests. Even if the physicians believe the tests are medically necessary, they are violating the Anti-Kickback Statute by accepting the vacation packages as reward for the referrals. The testing company is also in violation for offering the vacations as an inducement. Both parties could face fines up to $100,000 and up to 10 years in prison.

However, the law contains exceptions for certain arrangements that promote access to care and pose minimal risk of harm. For instance, discounts given to physicians for medical products they purchase so long as the price reduction is properly disclosed and accurately reflected on the claims submitted to federal healthcare programs.

The Affordable Care Act also created new exceptions related to Accountable Care Organizations and shared savings arrangements. The details get pretty complicated but basically it allows providers to share cost savings as an incentive to deliver more coordinated care under certain circumstances.

Proving an Anti-Kickback violation requires showing that the defendant knowingly and willfully intended to induce referrals or reward past referrals. This means prosecutors have to demonstrate the improper intent beyond a reasonable doubt, which can be challenging.

For example, a pharmaceutical sales rep takes a physician out to an expensive dinner and then shortly after, the physician prescribes the company’s drug to lots of Medicare patients. On the surface, it looks like a classic kickback scheme. But if the sales rep can show he was just trying to educate the doctor about the drug over dinner and had no intention of inducing Medicare referrals, then it may not meet the technical requirements for an Anti-Kickback violation.

To make enforcement easier, the Anti-Kickback Statute prohibits any payment intended even in part to influence referrals. So even if just one purpose of the dinner was to induce prescriptions, it could still potentially violate the law. But again, proving intent beyond a reasonable doubt is difficult without clear evidence like a quid pro quo agreement.

Because directly proving intent can be so challenging, the government often relies on the Anti-Kickback Statute’s “one purpose” test. This means that if even one purpose of a payment or other benefit is to induce federal healthcare program business, then it violates the law. The government doesn’t need to show it was the primary purpose or the only purpose.

For example, a medical device company offers a surgeon a $500k consulting deal. Even if the surgeon provides some legitimate consulting services to the company, if one purpose of the high payment was to reward past device purchases or induce future ones, it’s still illegal under the Anti-Kickback Statute.

The broad nature of the “one purpose” test makes it easier for prosecutors to go after arrangements that smell fishy even if they can’t directly prove improper intent. But it also creates uncertainty for providers about whether common business arrangements like discounts, professional courtesies, and medical directorships comply with the law.

To reduce this uncertainty, the Department of Health and Human Services created safe harbor regulations that specify certain arrangements are permitted. If an arrangement fits squarely in a safe harbor, it’s immune from Anti-Kickback prosecution even if it technically violates the statute. However, safe harbors are narrow and there are only a handful of them. Many common business arrangements don’t qualify.

For example, space and equipment rental agreements must satisfy several specific standards to comply with the safe harbor. The rental charge must be consistent with fair market value, the agreement must be in writing, specify the premises or equipment covered, and be for at least a year. Any arrangement that doesn’t meet all these requirements won’t be protected.

Because safe harbors are narrow, healthcare businesses often try using the “one purpose” test to their advantage. They argue that business arrangements serving any lawful purpose – even if only minor – should comply with the law. So a nominal consulting deal or discounted sale price could provide lawful cover even if the true purpose is improper.

But prosecutors often see right through these pretextual arrangements. And the broader context will be used against defendants. For example, if a medical supply company gave a physician a 50% discount right after he promised to use their products for all Medicare patients, that context would show the real unlawful purpose despite the facial legality.

The Anti-Kickback Statute also contains various penalties for violations. The baseline penalty is a felony conviction with up to 5 years in prison and criminal fines up to $25,000. But if the kickback scheme results in serious bodily injury, the prison term goes up to 10 years. And for schemes involving federal healthcare programs, the fine can be increased to triple damages – three times the amount of kickbacks involved.

In addition to criminal penalties, violating the Anti-Kickback Statute can also trigger civil monetary penalties and exclusion from participating in federal healthcare programs. A violator can be excluded from Medicare, Medicaid and all other federal programs for at least 5 years. This is often referred to as the “death sentence” for healthcare providers since most cannot survive without federal program revenue.

On top of fines and exclusion, healthcare providers can also face False Claims Act liability for Anti-Kickback violations. If a provider submits claims to Medicare or Medicaid that result from illegal kickbacks, those claims are considered false under the False Claims Act. This can lead to even larger financial penalties plus treble damages.

So the consequences for running afoul of the Anti-Kickback Statute can be severe. Healthcare businesses need to scrutinize their financial relationships for any improper inducements. Discounts, professional courtesies, medical directorships, recruitment arrangements, and joint ventures are all areas that require careful review.

But even with robust compliance programs, ambiguity in the law makes it difficult for providers to feel confident their business dealings won’t be second guessed. For example, how should hospitals compensate physicians serving in legitimate leadership roles? There’s always a risk regulators will allege the compensation was inflated to reward patient referrals.

The line between lawful incentives promoting care coordination and unlawful kickbacks is not always clear. And reasonable people can disagree on where it should be drawn. But clarity is critical so healthcare businesses know how to operate within the bounds of the law.

Perhaps additional safe harbors could help by giving more “bright line” guidance on common arrangements. But any new safe harbors would need to be crafted carefully to avoid creating loopholes that undermine the law’s purpose of protecting federal healthcare programs and patients from fraud.

Navigating the Anti-Kickback Statute is complex but the stakes are high. Healthcare businesses that take compliance seriously and get competent legal advice can mitigate their risk. But there are rarely guarantees when it comes to kickback laws given their fact-specific nature. Understanding the key provisions and penalties is the first step towards reducing legal exposure.


Anti-Kickback Statute Safe Harbors

DOJ Criminal Resource Manual on Anti-Kickback Statute

False Claims Act Liability for Anti-Kickback Violations

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