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Anti-Kickback Statute Explained

When it comes to eliminating fraud and abuse in the health care industry, the federal government utilizes many resources to initiate audits and investigations, as well as several laws when prosecution and penalties are sought. Aside from the False Claims Act (FCA) and the Stark law (which prohibits physician self-referral), the Anti-Kickback Statute (AKS) is one of the most important federal fraud and abuse laws that apply to physicians and health care providers.

At Hendershot, Cannon & Hisey, P.C., our Houston-based attorneys are recognized as industry leaders in the area of health and medical law. Aside from providing the proactive counsel health care practices need to ensure compliance and mitigate exposure to penalties, we also deliver the immediate response and strategic representation required of matters involving health care fraud, including allegations brought under the federal Anti-Kickback Statute. Because understanding the AKS is critical to avoiding violations and taking appropriate steps when being investigated by federal authorities, we want to explain some of the most important elements of the law.

What is the Anti-Kickback Statute?

The Anti-Kickback Statute is a federal criminal law that makes it illegal to willfully and knowingly exchange payment (or anything of value) in order to influence referrals of federal health care program business, such as:

  • Health care services for patients covered by Medicare or Medicaid
  • Health care services for Military members or families (i.e. TRICARE)
  • Drugs, including compounded drugs and specialty creams
  • Medical supplies or equipment covered by federal payors

While rewards and compensation for business referrals may be acceptable or even commonplace in some industries, paying for referrals for federal health care program business is a crime. Under the AKS, both payors of kickbacks (those who pay or offer payment) and recipients of kickbacks (those who receive or solicit payment) can be prosecuted and subject to punishment. Even on the state level, physician relationships are heavily scrutinized. In 1999, the Texas Legislature passed its Solicitation of Patients Act, a criminal provision that is roughly analogous to the federal Anti-Kickback Statute. This state law is often referred to as Texas' Stark Law, as it regulates physician referrals at the state level.

Penalties

Penalties for violating the Anti-Kickback Statute are steep. Although it is a criminal statute, it imposes both criminal and civil penalties for violations, both of which can have a profound impact on one’s personal and professional life. While penalties and repercussions will vary depending on the circumstances involved, violations may result in:

  • Criminal fines up to $25,000 per violation
  • Up to 5 years in federal prison for a single violation
  • Civil fines up to $50,000 plus three times the damages (treble damages) sustained by the government
  • Exclusion from federal health care programs
  • Loss of medical license

Severe penalties for violating the AKS make it critically important for health care practitioners to ensure they are complying with the law and structuring their professional relationships accordingly. They also highlight the importance of taking immediate action when providers face audits, investigations, subpoenas, or Civil Investigative Demands.

Safe Harbors

Health care providers can and often do make referrals that don’t violate the AKS, and they do this through protections provided by “safe harbors” written into the statute. Safe Harbors are specific arrangements exempt from civil and criminal prosecution. They may include various types of business and payment practices without corrupt intent, including:

  • Personal services and management contracts
  • Payments for leasing equipment or renting office space
  • Investments in ambulatory surgical centers
  • Payments made for health practitioner recruitment
  • Compensation for legitimate employees

Protection under a safe harbor exists only when arrangements meet qualifying criteria. For example, a relationship between physicians who are paid by compounding pharmacies to speak about products at conferences may fall under the personal services safe harbor if there is a written agreement of at least 1 year signed by both parties that covers all services to be provided, and sets compensation consistent with fair market value in advance, without taking volume or value of referrals into account, among other requirements. As requirements associated with safe harbors can be complex, providers should consult attorneys to evaluate referral or payment arrangements to ensure they fall within a safe harbor.

Enforcement & Prosecution

Federal authorities have become increasingly aggressive in fighting fraud in the health care industry, and are very active in investigating and prosecuting health care providers for suspected violations. While any professional health care provider (including physicians and nurse practitioners) or non-licensed health care business owners can be prosecuted under the AKS, federal authorities pay particular attention to arrangements involving compounding pharmacies, individual physicians, imaging or surgical centers, laboratories, medical device companies, and home health / hospice care providers.

Just as with any criminal case, it is the government’s burden to prove beyond a reasonable doubt that a defendant violated the Anti-Kickback Statute. Here are some facts about prosecution under the AKS:

  • Intent – The Anti-Kickback Statute is an intent-based law. This means individuals must have acted knowingly and willfully in order to be convicted. As such, arguing intent is important, as not every remuneration paid, offered, or accepted will constitute a violation of the AKS – provided that no single purpose of the payment or offer was to induce referrals, and that parties demonstrate clear and good intent.
  • Medical necessity – Even if a physician provided services that were medically necessary, they can still be guilty of violating the AKS. As such, arguing that a provider who received payment or other gifts of value from a company would have rendered certain services, written a prescription, or ordered medical equipment even without a kickback is not a viable defense.
  • Harm or losses – There is no requirement for the government to prove patients suffered harm as a result of a defendant’s conduct, or that a federal health care program suffered losses, to prove a violation.

Because the law provides for both civil and criminal prosecution, early intervention to dissuade the government from pursuing criminal indictment is a top priority. This can allow for investigations to remain civil, and for providers to have opportunities in exploring their options for defending against violations or reaching a positive resolution.

High Stakes Demand Proven Representation

The complexity of the legal landscape surrounding the Anti-Kickback Statute, the government’s zealousness in prosecuting providers, and the significant penalties involved make for immensely high stakes when investigations arise. When notice of an AKS investigation is received, even if it is a seemingly understated demand for documentation, providers need to act responsively and immediately to consult with proven lawyers who can help evaluate their current situation, respond appropriately to authorities, and explore options and strategies for a positive resolution.

With more than 150 years of combined experience, our legal team has the breadth of insight to help physicians and health care providers across Texas in a range of matters involving fraud, audits, investigations, and the Anti-Kickback Statute (as well as Texas’ state law equivalent Patient Solicitation Act). Our firm is available to help immediately. Contact us for an initial consultation.

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