Federal Anti-Kickback Statute Involving Federal Healthcare Programs - 42 U.S. Code § 1320a-7b(b)
Paying for referrals is a common practice in many industries. Businesses may offer incentives or rewards to individuals who bring them customers or clients.
However, engaging in such behavior is a federal crime under the Anti-Kickback Statute (AKS) in the context of federal healthcare programs such as Medicare and Medicaid.
Title 42 U.S. Code 1320a-7b - Criminal penalties for acts involving federal health care programs says "(b) Illegal remunerations -
(1) Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind-
(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program or
(B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a federal health care program, shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.
(2) Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person…"
This strict prohibition exists due to the potentially adverse effects kickbacks could have on medical decision-making, program costs, and patient trust.
If you're a healthcare professional connected with the federal healthcare system in any way, and you're accused of either offering or receiving a kickback for referrals, you could face up to 10 years in prison if convicted.
Overview of the Anti-Kickback Statute
The Anti-Kickback Statute, codified under 42 U.S.C. § 1320a-7b(b), is a federal criminal law designed to protect patients and federal healthcare programs from fraud and abuse.
The AKS prohibits the knowing and willful exchange of "remuneration," essentially anything of value, to induce or reward referrals for services or items covered by a federal healthcare program.
This includes not only obvious monetary payments, such as bribes or rebates, but also non-monetary compensation, like free perks, expensive trips, or inflated salaries. Specifically, the law targets two main behaviors:
- Receiving Kickbacks - Soliciting or accepting remuneration in exchange for referring individuals for federally reimbursed healthcare services or items.
- Offering Kickbacks - Paying or offering remuneration to influence another party to make such referrals.
This prohibition applies to all individuals and entities involved in federal healthcare programs, including physicians, hospitals, medical suppliers, and healthcare executives. The statute is noteworthy for being broad. Violations can occur even if the services provided were medically necessary or the patient suffered no actual harm.
How is the Anti-Kickback Statute Prosecuted?
Anti-kickback prosecutions are brought against people who make money by recruiting and signing up patients for a federally reimbursed healthcare program.
For example, a doctor pays a third-party per-patient fee if they refer business to their office. The doctor will make a profit because they are treating more patients that can be reimbursed, most often at a high rate, directly paid by the federal taxpayer.
The person making the referral to the doctor's office will also benefit directly from a bribe or kickback from the doctor. This statute also applies to sales of healthcare-related goods, not just services.
For example, a federal benefits program reimburses a pharmacist who pays a kickback to someone supplying patients with high-cost medical devices or prescription drugs, which could be prosecuted under the Anti-Kickback Statute.
Notably, not all compensation received from federally reimbursable healthcare will rise to the level of an anti-kickback prosecution. This federal statute exempts a discount or reduction in price obtained from a provider or even services provided at the discount that is disclosed and stated in the claims for reimbursement submitted to the government.
Similarly, employee compensation issues involving a legitimate relationship with the provider will not qualify as a kickback or bribe—other provisions exempt specific business relationships from the statute's coverage.
The provisions of the Anti-Kickback Statute are primarily focused on the patient referral and kickback activity explained above, not on valid healthcare providers who provide services compensated by federal tax dollars.
What are the Penalties for Violations?
The penalties for violating the AKS are not to be taken lightly. A conviction carries significant consequences, including:
- Criminal Penalties: Individuals found guilty of violating the AKS can face up to 10 years in prison and fines of up to $100,000 per violation.
- Civil and Administrative Sanctions: Violators may also face civil monetary penalties under the Civil Monetary Penalties Law (CMPL). The law can impose fines of up to $50,000 per false claim or kickback, in addition to treble damages (three times the amount of the remuneration involved).
- Exclusion from Federal Healthcare Programs: Those convicted may be excluded from participating in Medicare, Medicaid, and other federal programs. This exclusion can have profound professional implications for healthcare providers and organizations.
What are Safe Harbor Provisions?
The AKS includes provisions known as "safe harbors " to encourage innovation and legitimate business arrangements. These exceptions are designed to protect specific practices that might otherwise be considered illegal under the statute.
Safe harbors allow healthcare professionals to structure their business relationships in a manner that complies with the AKS. For an arrangement to qualify for safe harbor protection, it must fully comply with all the specific requirements of the applicable safe harbor provision.
Some examples of common safe harbors are included but are not limited to:
- Bona-Fide Employment Relationships. This safe harbor exempts payments made as part of a legitimate employer-employee relationship if the compensation is for providing covered services. For instance, if a healthcare provider employs a specialist to perform a specific service, and the specialist is paid a fair market value for their work, this would likely fall under the 'Bona-Fide Employment Relationships' safe harbor.
- Properly Disclosed Discounts. Discounts offered to healthcare providers are permissible if they are properly disclosed and accurately reflected in claims made to federal healthcare programs.
- Personal Services and Management Contracts. Compensation arrangements for personal services or management contributions are allowed if they align with fair market value and meet specific contractual guidelines.
- Investments in Ambulatory Surgical Centers (ASCs). Certain investments in ASCs or joint ventures may qualify for safe harbor protection if the partnership meets regulatory standards.
What are the Possible Defenses to AKS Charges?
If you are a physician or healthcare professional accused of violating the AKS, it is crucial to consult with an experienced federal criminal defense attorney. A good attorney can explore several potential defenses to fight these charges, providing you with the guidance and support you need during this challenging time, such as the following:
- Lack of Intent: Prosecutors must prove beyond a reasonable doubt that the accused knowingly and willfully engaged in illegal kickback activities. If your conduct was unintentional or based on a misunderstanding, this lack of intent can serve as a defense.
- Safe Harbor Compliance: If the specific arrangement in question meets one of the statute's safe harbor provisions, this can shield you from criminal or civil liability. Careful documentation of compliance with safe harbor regulations is vital in mounting this defense.
- Statutory Exemptions: Certain statutory exceptions within the AKS allow specific practices, such as properly disclosed price reductions or permissible arrangements with federally qualified health centers. Attorneys may argue that your actions align with these statutory exemptions.
- Good Faith Compliance Efforts: If you can demonstrate good faith efforts to comply with federal regulations, such as obtaining legal advice or implementing compliance programs, this can serve as a mitigating factor or defense.
For additional information, contact our federal criminal defense law firm, Eisner Gorin LLP, based in Los Angeles, California.
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