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The Anti-Kickback Statute Basics: Enforcement and Safe Harbors

An Overview

1. What is the Anti-Kickback Statute?

The federal Anti-Kickback Statute is a healthcare fraud and abuse statute that prohibits the exchange of remuneration—which the statute defines broadly as anything of value—for referrals for services that are payable by a federal program, which, in the context of healthcare providers, is Medicare. Anti-Kickback violations also usually constitute violations of the False Claims Act, meaning that Anti-Kickback investigations can likewise result in fraud liability. However, there are far more criminal prosecutions of individual physicians under the Anti-Kickback Statute than the False Claims Act.

2. Anti-Kickback Statute Penalties

The Anti-Kickback Statute is a criminal statute, but it provides both criminal and civil penalties for violations. The criminal penalties include fines of up to $25,000 and five years’ imprisonment. In addition, the Office of the Inspector General (“OIG”) for the Department of Health and Human Services (“HHS”) can pursue civil penalties of up to $50,000 per violation plus three times the amount of any government overpayment. Notably, these penalties can be imposed on both parties involved in the illegal kickback arrangement—i.e., the party receiving the kickback and the party making the kickback—upon a showing that the violation was “knowing and willful.” Penalties for Anti-Kickback violations also frequently include a period of debarment or exclusion from participation in Medicare, Medicaid, and all other federal plans and programs that provide health benefits.


Representative Matter: DBS attorneys defended a physician group practice against allegations by the Department of Justice, the Office of the Inspector General, and the Centers for Medicare and Medicaid Services that the practice violated the Stark Law and the Anti-Kickback Statute, and negotiated a non-criminal settlement.


3. Anti-Kickback Statute “Safe Harbors”

Of course, healthcare providers make many referrals that do not violate the Anti-Kickback Statute by taking advantage of the “safe harbors” that are written into the Statute and exempt certain referral arrangements from its prohibitions. While healthcare providers often structure referral arrangements to fit within one or more of the “safe harbors” in an effort to avoid being investigated, the “safe harbors” also often provide some of the best legal refuge for providers who are accused of civil or criminal violations of the Statute. Some of the “safe harbors” that are most often used by accused providers exempt the following from prosecution under the Anti-Kickback Statute: (i) referrals made as part of an employment or professional services arrangement; (ii) payments made for the lease of equipment or of office space; and, (iii) certain payments made for the purposes of health practitioner recruitment. Because the legal requirements associated with these “safe harbors” can be complex and technical, a healthcare provider that has limited, or even moderate, experience in this area may wish to consider retaining counsel to evaluate a proposed referral or payment arrangement before it is put in place to determine whether it potentially violates the Anti-Kickback Statute and/or falls within a “safe harbor.”

4. Government Enforcement of the Anti-Kickback Statute

The federal government is aggressive and particularly active in pursuing suspected violations of the Anti-Kickback Statute against healthcare providers, in particular home health care companies and hospice care providers. This type of zealous prosecution often results in harsh penalties for healthcare providers found to have committed a violation. For example, a California-based medical center agreed to pay over $1.6 million to resolve self-disclosed Anti-Kickback violations stemming from improper payments to physicians who invested in a joint venture ambulatory surgical center. That penalty was dwarfed, however, by the $24.5 million settlement a group of clinics and physicians in Alabama paid to settle Anti-Kickback and Stark Law allegations that the clinics kicked back a percentage of Medicare reimbursements for tests and procedures the physician group referred. This trend toward stricter enforcement and larger penalties has been ongoing for years with no end in sight. In June 2014, HHS issued a Special Fraud Alert identifying arrangements between laboratories and physicians as presenting a substantial risk of fraud and abuse under the Anti-Kickback Statute.

5. The Anti-Kickback Statute vs. The Stark Law

The Anti-Kickback Statute is one of the two main federal statutes that deals with remuneration related to improper referrals, with the other being the Stark Law. Although these two laws are similar, there are several several important distinctions between the Anti-Kickback Statute versus the Stark Law.

  • First, unlike the Anti-Kickback Statute which includes civil and criminal penalties, the Stark Law is exclusively a civil enforcement statute.
  • Second, the Stark Law is narrower. Whereas the Anti-Kickback Statute applies to Medicare and any federal healthcare program, the Stark Law is limited only to Designate Health Services (DHS) paid for by Medicare.
  • Third, the element of intent is required for a violation of the Anti-Kickback Statute but not of the Stark Law which is a strict liability statute.
  • Fourth, the Anti-Kickback Statute applies to any referral source, i.e. not just physicians. However, a violation of the Stark Law must involve a referral relationship between a physician and an entity.

The complex legal landscape governing these Anti-Kickback Statute issues coupled with the federal government’s commitment to prosecuting violators, and levying significant penalties against them, represents a lethal combination for healthcare organizations and personnel. With so much at stake financially and professionally, healthcare providers who receive notice of an Anti-Kickback Statute investigation—usually by virtue of a governmental request for records such as a subpoena or civil investigate demand—should immediately engage legal counsel who has healthcare litigation and Anti-Kickback Statute experience. This is true even if the notice attempts to downplay the significance of the investigation by only requiring the production of documents or by suggesting another person or entity is the intended target. It is important to remember that regardless of what the notice says, it is being sent by a government agency or office that is tasked with criminally and civilly enforcing the laws and punishing all violators, regardless of the investigation’s initial scope or purpose.

This overview was prepared by Callan Stein, a partner in the firm’s litigation department. Please contact him for more information about the Anti-Kickback Statute or healthcare fraud and abuse, generally.

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You may also be interested in:
The Stark Law
The False Claims Act

From the Blog:
OIG Fraud Alert Warns Doctors That They Are Liable for Violations of Federal Anti-Kickback Statute