The federal Anti-Kickback Statute (AKS) was enacted to prevent Fraud, Waste, and Abuse (FWA) of federal healthcare programs, such as Medicare, Medicaid, and CHIP. In a nutshell, it makes it a crime to compensate someone in exchange for patient referrals or other business reimbursed by federal healthcare programs. In its essence, the AKS is a good and much needed law. Incentivizing people to refer business can lead to coercing patients into treatment, unnecessary visits or treatment, lying about the number of patients referred, and other unethical behavior.
However, some activities that would otherwise violate the AKS are necessary for proper healthcare operations and/or do not pose any real threat of FWA. Thankfully, the federal government has exercised at least enough common sense to understand that some exceptions should apply to this law. These exceptions are called Safe Harbors, and they exempt certain activities from violating the AKS. However, most of these Safe Harbors need to satisfy specific criteria to qualify for exemption. These exempted activities include:
- Bona Fide Employment Relationship
- Personal Service Arrangements
- Lease or Rental of Office Space or Equipment
- Referral Services
- Group Purchasing Organizations
- Manage Care Arrangements
- Several Others.
Third-Party Contractors vs. W2 Employees
Under the AKS, healthcare providers cannot compensate contracted employees or vendors based on the “value or volume of referrals.” This means paying a fee for a percentage of business brought in or for each patient or unit of business. This behavior even violates many state kickback laws. Compensation can be a flat fee for services rendered, but all compensation must be at Fair Market Value for the particular services. However, other than a few exceptions, a provider or healthcare entity can compensate a bona fide W2 employee based on a percentage, per patient, or other ways.
Other Arrangements Not Covered by a Safe Harbor
Just because a particular arrangement is not covered by one of the Safe Harbor exceptions does not mean it automatically violates the AKS.
Advisory Opinions. First, the specific activity or arrangement could fall within the framework of what is called an OIG Advisory Opinion. The Office of Inspector General for Health and Human Services (OIG) is tasked with interpreting the AKS. It not only creates Safe Harbors, but it can also decide if other situations do or do not violate Congress’s intention for the AKS. It does this by publishing official Advisory Opinions that speak to the legality of a specific situation it feels is not in violation. These opinions carry legal authority, but the OIG makes clear that each Opinion only applies to the very specific set of circumstances discussed. Nevertheless, the closer another provider’s situation mirror’s those in the Opinion, the closer they are to being safe from violating the AKS. Many providers and companies have successfully relied on Advisory Opinions to argue they have not broken the law.
No Actual Kickback. Another way to proceed with a business model that appears to violate the AKS is to show that no FWA could occur. In other words, setting up an arrangement that does not and could not induce illegal referrals or otherwise run afoul of the AKS is also a valid defense.
Conclusion
Navigating the AKS can be tricky at best, perilous at worst. And although protections such as Safe Harbors and Advisory Opinions are available, understanding them and complying with them can be its own kind of endless maze.
Let KAP help guide you through this process to ensure compliance and safety!