The federal government utilizes many resources in its quest to eliminate fraud and abuse in health care, including audits, investigations, and prosecution under several federal laws. In addition to the False Claims Act (FCA) and Stark Law, the Anti-Kickback Statute (AKS) is one of the most important tools in the government’s enforcement arsenal.
At Hendershot Cowart P.C., our Houston attorneys are recognized industry leaders in health and medical law. In addition to providing proactive counsel to help providers ensure compliance and mitigate exposure to penalties, we also deliver immediate and strategic representation to defend against health care fraud enforcement and investigations under the federal Anti-Kickback Statute.
Because understanding the AKS is critical to avoiding violations and taking the right steps when regulators come knocking on your door, we’ve broken down the most important elements of the law for you here.
What is the Anti-Kickback Statute?
In some industries, it is acceptable to reward those who refer business to you. Paying for referrals for federal health care program business, however, is a crime.
The Anti-Kickback Statute 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
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 at the state level, physician relationships are heavily scrutinized. In 1999, Texas passed its Solicitation of Patients Act, a criminal provision that is roughly analogous to the federal Anti-Kickback Statute. This state law, however, takes it a step further – prohibiting remuneration for referrals involving private insurance companies or self-pay, as well as state-funded health programs. While the state Attorney General enforces this law, many insurance companies also conduct investigations that can lead to exclusion from the insurer’s covered network.
Penalties for Anti-Kickback Statute Violations
Penalties for violating the Anti-Kickback Statute are steep. Although it is a criminal statute, it imposes both criminal and civil penalties for violations, and can have a profound impact on one’s personal and professional life.
While penalties vary on a case-by-case basis, violations may result in:
- Criminal fines up to $25,000 per violation
- Up to five 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
Career-altering penalties for AKS violations make it critical that health care practitioners ensure they are in compliance 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.
AKS 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 one 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 safe harbor requirements can be complex, providers should consult attorneys to evaluate referral or payment arrangements and ensure they satisfy all statutory elements to fall within a safe harbor.
UPDATE: In November 2020, the U.S. Department of Health and Human Services (HHS) finalized rule changes to modernize the AKS and Stark Law and create new flexibilities for value-based arrangements among providers, suppliers, practitioners, and others.
The rule changes add three new safe harbors to the Anti-Kickback Statute:
- Care coordination arrangements to improve quality, health outcomes, and efficiency without requiring the parties to assume risk.
- Value-based arrangements with substantial downside financial risk.
- Value-based arrangements with full financial risk.
Our firm can help you evaluate implications of the new safe harbors for your practice or health care business.
AKS Enforcement & Prosecution
Federal authorities have become increasingly aggressive in fighting health care fraud, and are very active in investigating and prosecuting providers for suspected violations.
While any health care provider 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.
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. Arguing intent is important, as not every remuneration paid, offered, or accepted will constitute a violation – provided no single purpose of a 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. 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 keep investigations civil, and allow providers to explore their options for reaching a positive resolution.
How Our Attorneys Can Help
If you find yourself entangled in an Anti-Kickback Statute scheme or investigation, we can help:
- Proactive legal counsel. Don’t wait for the Office of the Inspector General (OIG) or another state or federal authority to raise concerns. We can work with you today to ensure your practice or facility is in compliance with the Anti-Kickback Statute and its “safe harbor” exceptions.
- Identify safe harbors. It is possible to make referrals that do not violate the Anti-Kickback Statute through protections provided by “safe harbors” within the law. Our health law team can examine the structure of existing referral arrangements or payment practices – or guide you in establishing these arrangements for your enterprise – to ensure they fall within a safe harbor.
- Understand potential violations. Even when an arrangement is made with mostly good intentions, if one single purpose of a payment or offer was to induce referrals, then the entire arrangement is in violation. This is known among regulators as the “one-purpose” test and can implicate all parties involved in the business arrangement. If you are concerned about violating the Anti-Kickback Statute, we will work with you to identify and address any breaches, so you and your practice remain safe from regulatory fallout.
- Navigate private insurance company investigations. In Texas, the Patient Solicitation Act follows the Anti-Kickback Statute, prohibiting financial payments and rewards for patient referrals. The state law, however, takes it a step further – prohibiting remuneration for referrals involving private insurance companies or self-pay. While the state Attorney General enforces this law, many insurance companies are also conducting investigations that can lead to exclusion from the insurer’s covered network. Our attorneys can help you navigate such investigations and minimize your time away from serving your patients.
Should you find yourself the subject of an audit or health care fraud investigation, Hendershot Cowart P.C. can step in immediately to defend your livelihood and professional reputation. Our award-winning attorneys counsel clients across Texas and beyond. Contact us for an initial consultation