In a nutshell, the federal Anti-Kickback Statute and Stark Law make it a crime with serious penalties for providers of medical services to pay or accept any form of remuneration such as kickbacks or anything of value in exchange for receiving referrals of patients who obtain medical treatment paid by government healthcare programs including Medicare and Medicaid, and from entering into certain kinds of financial relationships.
The Anti-Kickback Statute and the Stark Law are designed to keep medical treatment decisions independent from any influence of possible financial gain. The Anti-Kickback Law and the laws prohibiting other unlawful financial arrangements are designed to prevent healthcare providers from referring patients for healthcare services that are not medically necessary.
The Department of Justice has declared that, “[p]atients are entitled to be sure that the care they receive is based on their actual medical needs rather than the financial interests of their physician.”
While both laws cover unlawful financial arrangements, there are important distinctions between them.
The Anti-Kickback Statute
The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), covers a wider range of conduct than the Stark Law, and applies to all medical providers who are in a position to arrange or recommend medical services.
The Anti-Kickback Statute prohibits “referrals” under that include “any item or service for which payment may be made in whole or in part under a Federal health care program.” While the Anti-Kickback Statute covers a wide range of prohibited conduct, it also requires proof of “intent to induce referrals.” The criminal aspects of the Anti-Kickback Statute are violated where something of value is “knowingly and willfully” given with a purpose or intent to induce referrals.
Claims for payment submitted by providers to Medicare or Medicaid that include items or services resulting from violations of the Anti-Kickback Statute qualify as false claims under the False Claims Act, even if the provider did not specifically intent to commit a violation of the Anti-Kickback Statute.
In other words, providers can’t argue that they did not know they were violating the FCA because they were not aware the Anti-Kickback Statute existed.
The Stark Law
Under the Stark Law, 42 U.S.C. § 1395nn, “referrals” are restricted to certain types of medical services, such as lab testing, hospital services, prescription drugs, and durable medical equipment (DME), which are defined as “designated health services.” Additionally, the Stark Law only applies to dealings with physicians.
The Stark Law, unlike the Anti-Kickback Statute, prohibits a wide range of financial arrangements, and does not require proof of intent to induce referrals. Determining whether a particular financial arrangement is prohibited by the Stark Law can be more technically involved.
Examples of unlawful kickbacks and financial relationships under the Anti-Kickback Statute (AKS) and the Stark Law –
There are specific differences between the Stark Law and the Anti-Kickback Statute, with respect to regulations that provide “safe harbors” authorizing certain financial arrangements. Knowledge and experience with the statutes and regulations is often required to build a False Claims Act (FCA) case. Almost always, the core analysis zeros in on the fundamental question: was anything of value given to induce referrals for health care services?
The “item of value” can be cash, or can be more elaborate as a carefully constructed physician employment agreement or being offered an opportunity to invest in a profitable joint venture. Basically, anything of value given to a person who is in a position to refer anything, such as rent for office space at less than fair market value, patients referrals, a free employee, or a fat bonus, can classify as an illegal inducement under the Anti-Kickback and Stark laws.
Classic examples of violations of Anti-kickback and Stark laws include:
- Drug companies, DME companies, nursing homes, dialysis centers hospitals, diagnostic labs, , or paying doctors big salaries or so-called “consulting” fees to serve as proctors Medical Directors, , or “consultants,” where the physicians perform very little actual, useful work;
- Drug companies, DME companies, nursing homes, dialysis centers hospitals, diagnostic labs, or offering doctors in a position to make referrals the opportunity to invest in surgical centers, joint ventures distributorships, , or other opportunities to invest on favorable financial terms — especially when those terms are tied to the amount of business the doctor will refer;
- Hospitals paying their employed doctors salaries or “performance bonuses” connected directly or indirectly to the amount of procedures, lab tests, or x-rays, or ordered at the hospital;
- Providers of healthcare services such as hospitals, and dialysis companies, buying physician practices for above market value prices, with a stipulation that the doctor continue to work at the practice and agree to refer business to the healthcare service provider;
- Hospitals offering doctors to lease office space at a rate below fair market value, free access to administrative support or clinical staff, or offering other special deals to reduce overhead expenses;
- DME companies, pharmaceuticals companies, and providers of skilled therapy paying nursing homes for long term contracts to provide healthcare services to nursing home patients, or providing the nursing homes with free or low cost access to consult with therapists, pharmacists, or other clinical or support staff to gain access to their patient populations;
- Pharmaceutical companies paying kickbacks to pharmacies in exchange for them switching patients’ prescriptions;
- Pharmaceutical companies paying insurers kickbacks in exchange for their drug formularies;
- Payments by nursing homes, DME suppliers, specialty pharmacies, or therapy centers, to patient recruiters or payments directly to patients.
Blowing the whistle on unlawful financial arrangements and kickbacks
Fraudsters have used numerous schemes to cheat the healthcare system and are always finding new ways. Whistleblowers have played a critical role in exposing Anti-Kickback Statue and Stark laws violations, maintaining the integrity of the healthcare system, protecting patients, and safeguarding hard-earned taxpayer money.
Paying and receiving unlawful kickbacks and fraudulent financial arrangements are planned and put into practice at all different levels of the healthcare system – ranging from sole practitioner medical offices to the executive offices of global drug manufacturers – and the government has long viewed aggressive enforcement of the Anti-Kickback and Stark laws as essential to preventing healthcare fraud, waste, and abuse.
If you or someone you know has received a grand jury subpoena, a target letter, been served with a search warrant, or has been contacted by law enforcement before speaking to anyone, call me to arrange a confidential consultation.