Penalties, Exceptions, and Criminal Defense Strategies
The California Anti-Kickback Statute (AKS), codified under Business & Professions Code § 650, prohibits licensed healthcare professionals from offering, paying, soliciting, or receiving anything of value in exchange for patient referrals.
This statute applies broadly to physicians, clinics, laboratories, pharmacies, and other licensed healthcare providers.
Its purpose is to ensure that medical decision-making is based solely on a patient's best interests—not financial incentives or business arrangements.
Violations of California's Anti-Kickback Statute are taken seriously and may result in criminal prosecution, professional discipline, and severe financial penalties.
Your best hope of a favorable outcome is with a skilled criminal defense attorney at Eisner Gorin LLP. To schedule a consultation, call (818) 781-1570 or contact us here.
What Is the California Anti-Kickback Statute?
The California Anti-Kickback Statute makes it illegal for licensed healthcare professionals to exchange compensation—monetary or otherwise—for patient referrals.
Prohibited consideration includes:
- Cash payments or commissions
- Free services or equipment
- Gifts, travel, or entertainment
- Discounted rent or inflated consulting fees
- Any item of value tied to patient volume
For example, a physician cannot receive compensation for referring patients to a specific diagnostic lab, imaging center, or pharmacy based on a business relationship rather than medical necessity.
The statute is designed to protect patients, preserve trust in the healthcare system, and prevent unnecessary or harmful medical services driven by profit.
California Business and Professions Code 650, known as the anti-kickback law, bans healthcare providers from offering or accepting any rebate, refund, or "thing of value" as compensation for referring patients or clients.
How Does California's Anti-Kickback Statute Differ From Federal Law?
California's statute operates alongside the Federal Anti-Kickback Statute, codified at 42 U.S.C. § 1320a-7b(b).
Key differences include:
- California AKS applies to all patient referrals, regardless of payer
- Federal AKS applies only to referrals involving federally funded programs such as Medicare or Medicaid
- Both laws may apply simultaneously in a single investigation
Federal courts have broadly interpreted the federal AKS. If any purpose of a payment is to induce referrals—even if there are legitimate purposes—the arrangement may still violate the law.
What Is the Stark Law and How Is It Different?
The Stark Law, also known as the physician self-referral law, prohibits physicians from referring patients to entities in which they or an immediate family member have a financial relationship when services are paid by Medicare or Medicaid.
Unlike the Anti-Kickback Statute:
• Stark Law is a strict liability statute
• Intent does not need to be proven
• It applies only to designated health services
California Physician Ownership and Referral Act (PORA)
California's Physician Ownership and Referral Act of 1993 (PORA) expands self-referral restrictions beyond federal law.
PORA:
- Applies regardless of payer
- Covers private insurance and cash payments
- Prohibits referrals to entities where the physician has any financial interest
- Is limited to designated health services
PORA is often charged alongside BPC § 650 violations in California healthcare investigations.
What Is Allowed Under Business & Professions Code § 650?
Although strict, the statute includes important exceptions for legitimate healthcare business arrangements.
Permitted activities may include:
Payment for Non-Referral Services
Compensation for consulting, management, or lease agreements—provided payments reflect fair market value and are not tied to referrals.
Licensed Health Center Arrangements
Federally qualified health centers may enter financial relationships that improve access to care and comply with federal law.
Proprietary Ownership Interests
Referrals to an owned entity may be lawful if compensation is proportional to ownership interest and unrelated to referral volume.
Internet-Based Advertising Services
As of January 1, 2022, third-party platforms that list providers or facilitate appointment scheduling are permitted if they do not recommend or endorse specific providers.
What Conduct Is Prohibited?
The following commonly trigger criminal investigations:
- Paying or receiving money for patient referrals
- Compensation linked to referral volume or value
- Sham consulting or lease agreements
- Accepting free or discounted items influences referrals
- Disguised ownership or profit-sharing arrangements
Real-World Examples
Illegal Conduct Example
A physician receives $500 per patient from a diagnostic lab for referrals. The payment is unrelated to medical necessity and tied directly to referral volume. This is a clear violation of BPC § 650.
Lawful Conduct Example
A physician leases office space to a physical therapy clinic at fair market value. Rent is fixed and unrelated to referrals. This arrangement is likely permissible.
Safe Harbors and Exceptions in Anti-Kickback Laws
Both state and federal laws recognize safe harbors that protect legitimate business relationships.
Federal safe harbors include:
- Bona fide employee compensation
- Practitioner recruitment incentives
- Office and equipment leases
- Patient engagement programs
- Electronic health record arrangements
- Referral services
California law similarly provides statutory exceptions, particularly for modern healthcare marketing platforms.
Penalties for Violating California's Anti-Kickback Statute
Violations of Business & Professions Code § 650 are charged as a wobbler, meaning prosecutors may file misdemeanor or felony charges.
Potential penalties include:
Misdemeanor
- Up to 1 year in county jail
- Fines up to $50,000
Felony
- 16 months, 2 years, or 3 years under California Penal Code § 1170(h)
- Fines up to $50,000
Additional consequences may include:
- Medical license discipline
- Exclusion from federal healthcare programs
- Civil penalties and restitution
Common Defense Strategies in Anti-Kickback Cases
Being accused does not mean guilt. Effective defense strategies often include:
Lack of Intent
Prosecutors must prove intentional exchange for referrals.
Legitimate Business Purpose
Demonstrating fair-market-value arrangements unrelated to referrals.
No Quid Pro Quo
Showing compensation was not connected to patient volume.
Statutory Exceptions
Proving conduct fits within lawful safe harbors.
Suppression of Evidence
Challenging unlawfully obtained evidence from audits or investigations.
Early legal intervention is often critical, particularly when investigations begin quietly through audits, subpoenas, or whistleblower complaints.
Speak With a California Anti-Kickback Defense Lawyer
Healthcare fraud and anti-kickback investigations carry serious criminal and professional consequences. Early representation can protect your license, reputation, and freedom.
Eisner Gorin LLP represents physicians, clinics, healthcare executives, and medical professionals throughout Los Angeles and California in state and federal anti-kickback and healthcare fraud cases.
For a confidential consultation, contact our criminal defense law firm at 818-781-1570 today.
If you have one phone call from jail, call us! If you are facing criminal charges,