The federal Anti-Kickback Statute (AKS) makes it a crime to knowingly or intentionally give or receive anything of value to induce or reward anyone for referring healthcare business that is in any way reimbursed by federal healthcare programs such as Medicare, Medicaid, etc. For example, if a pharmaceutical company sends a physician on a vacation to induce her to exclusively prescribe its drugs paid for by Medicare, it violates the AKS. If a hospital hires a medical director and pays him an inflated salary for not doing much just so he will refer his patients to that hospital, it violates the AKS. This law was created to address billions of dollars a year in healthcare fraud, waste, and abuse. Inducing others to give or receive patient referrals reimbursed by federal healthcare dollars leads to misuse of taxpayer funds and encourages unnecessary treatments and diagnostic tests.
Value
What exactly constitutes something of “value” is a vital issue. It is more than payment of money. It is literally anything of value that would induce, reward, remunerate, compensate, or otherwise motivate a person to send healthcare business to another. For example, taking someone out to a very expensive dinner to induce or reward them to send patients to the person paying for the dinner is a violation of the AKS. Offering to pay for a doctor’s child’s college is a violation of the AKS. Offering a promotion, or refusing to discipline an employee, or sending someone on a vacation in exchange for receiving healthcare business all violate the AKS. Even offering discounts on services or rental space counts as value for the AKS.
Fair Market Value
Another requirement of the AKS is that compensation for legal arrangements that could possibly have one party sending healthcare business to another must be made at “Fair Market Value.” This is a nebulous term, but it is legally required. Determining fair market value can be tricky, and any arrangement that is scrutinized by government agencies or the Department of Justice must comply with this requirement.
Safe Harbors
The Office of Inspector General for Health and Human Services (OIG) is tasked with interpreting, executing, and enforcing this law. In the course of its duties, the OIG has created certain exceptions to the AKS called “Safe Harbors.” These allow certain business activities that would otherwise violate the AKS. For example, a physician is allowed to engage marketers as bona fide W2 employees to bring Medicare business to the practice and pay them for each patient or based on a percentage of Medicare money reimbursed. This seems to violate the black letter law of the AKS. However, the OIG has stated that engaging 1099 contracted marketers does violate the AKS if they are compensated based on the “value or volume of referrals.” Additionally, some other activities that are not specifically protected by a Safe Harbor exception may also be legal even though they appear to violate the AKS on its face. To say this another way: just because an activity is not covered under a Safe Harbor does not necessarily mean it is illegal.
The AKS is very broad and complicated, with many grey areas. It is important for a healthcare business to retain a healthcare attorney with deep experience in the AKS to review business activities and stay compliant. Some of the key activities a healthcare entity should avoid include:
- Accepting expensive gifts, trips, speaking fees, etc. from pharmaceutical or medical device companies;
- Taking any employment in exchange for patient referrals;
- Accepting medical directorships when the physician could be in a position to potentially refer her own patients, without proper OIG requirements;
- Paying marketers or others for bringing in business based on the value or volume of referrals;
- Receiving compensation from hospitals, labs, or other entities for referring patients.
Penalties
Violation of the AKS carries the following penalties:
- $100,000 per violation;
- up to 10 years in prison; and
- exclusion (debarment) from participating in federal healthcare programs.
Also, charges or convictions under the AKS can trigger the federal government bringing additional charges under the Civil Monetary Penalties law, as well as the False Claims Act.
State Law
Several states have enacted their own versions of the federal AKS. But these differ dramatically from state to state. For example, California’s law is much broader than the federal counterpart. It prohibits kickbacks paid for by federal healthcare programs, commercial payors, and cash pay patients. It even includes fee splitting. Texas simply follows the federal statute, but Florida prohibits any remuneration by a healthcare provider to incentivize someone referring patients. New York’s statute is more narrow and applies only to kickback arrangements for referrals reimbursed by the state’s Medicaid program.
Call us today to ensure you are in compliance with federal and state Anti-Kickback Laws.