What is the Anti-Kickback statute and what does it prohibit?
The anti-kickback statute, enacted under the Medicare and Medicaid Patient and Program Protection Act of 1987, prohibits certain conduct involving improper payments in connection with the delivery of items or services covered by a number of federal and state health care programs. Among other things, the statute applies to anyone who knowingly and willfully solicits or receives any payment in return for referring an individual to another person for the furnishing, or arranging for the furnishing of any item or service that may be paid in whole or in part by the Medicare or Medicaid programs, or other federally funded health care programs. Similarly, the statute applies where an individual offers or makes payments to another person in order to induce referrals or other prohibited conduct. Illegal payments or solicitations of payments include those in cash or in kind (e.g. goods), those made directly or indirectly, and those made overtly or covertly.
What are the potential penalties for a violation of the Anti-Kickback statute?
Violations of the statute carry stiff criminal and civil penalties. A violation of the law constitutes a felony punishable by a maximum fine of $25,000, imprisonment up to five years, or both. Conviction will also lead to automatic exclusion from the Medicare, Medicaid, and other federally funded health care programs. Civil fines and exclusion from these programs may also be sought by the Department of Health and Human Services through an administrative proceeding, without the need to initiate a criminal prosecution. Responsibility for enforcement of the statute is delegated to the Department of Health and Human Services’ Office of the Inspector General (OIG).
To whom does the Anti-Kickback statute apply?
The Anti-Kickback statute applies to a variety of people who are involved with the Medicare and Medicaid programs, including providers and patients. Physicians and hospitals are the most obvious potential violators. However, individuals who are peripherally related can also violate the statute, such as hospital executives, attorneys and accountants. Significantly, the statute applies to both the referring/paying party and the receiving party, regardless of who initiates or benefits from the transaction. Thus, any individual or entity that participates in business arrangements, sales practices, marketing activities, promotional schemes, incentive programs, or joint ventures involving the above components, may be engaged in conduct that could fall within the scope of the statutory prohibitions.
What are the warning signs that an Anti-Kickback violation exists?
The Office of the Inspector General has identified activities occurring between hospitals and physicians it considers to be suspect. Those include: 1) payment of an incentive for each referral, 2) free or discounted equipment, office space or staff services, 3) free training for a physician's office staff, 4) physician compensation guarantees, 5) low interest or interest-free loans which may be forgiven based upon referral patterns, 6) payment of physician's travel and expenses for conferences or continuing education courses, 7) coverage on hospital's insurance plans at inappropriately low cost, or 8) payments for services not rendered or in any amount that exceeds fair market value.
Of course, these are not the only ways to violate the law, but these are some activities that the OIG has identified as problem areas. In sum, fair market value should be paid by a hospital or a physician for services, space, or equipment, and the price paid should not be related to the provider's income, billing, or referral patterns. If you have a concern about a particular contract or payment arrangement, we encourage you to seek legal advice.
What is a "Safe Harbor?"
The Office of Inspector General has established certain payment practices that are automatically exempt from the anti-kickback statute if they fully meet specified regulatory requirements called safe harbors. Safe harbors do not expand the scope of the statute, they provide protection from liability under the statute. The safe harbors set forth specific payment practices that, if fully met, will assure the entities involved of not being prosecuted criminally or civilly for the arrangement. Failure to comply with a safe harbor provision does not make the activity per se illegal. Some of the categories of safe harbors include:
Investment Interests
Space Rental
Equipment Rental
Personal Services and Management Contracts
Sale of Practice
Referral Services
Warranties
Discounts
Employment Arrangements
Group Purchasing Organizations
Waiver of Beneficiary Coinsurance and Deductible Amounts
Certain Payment Arrangements Involving Medically Underserved Areas or Populations
What is "Stark?"
The Stark law, named for the legislator who authored the bill, prohibits a physician from referring Medicare or Medicaid patients to an entity for certain designated health services if the physician or the physician's family member has a financial relationship with the entity, unless the relationship qualifies for one of several exceptions specified in the law.
What does "financial relationship" mean?
A financial relationship includes both ownership interests and compensation arrangements. Ownership or investment interests include arrangements through equity, debt, or other means, including an interest in an entity that holds an ownership or investment interest in any entity providing the service. Any loan or note held by a physician that is secured by the assets of an entity gives the physician an "ownership interest" in that entity for purposes of the Stark analysis.
What are designated health services?
Designated health services include:
clinical laboratory services
physical therapy services
occupational therapy services
radiology services, including magnetic resonance imaging, computerized axial tomography scans, ultrasound services, and radiation therapy services and supplies
durable medical equipment and supplies
parenteral and enteral nutrients, equipment and supplies
prosthetics, orthotics, and prosthetic devices
home health services
outpatient prescription drugs
inpatient hospital services
outpatient hospital services
What are the penalties for a Stark violation?
The penalties for a Stark violation can include denial of payment for the service which violated the statute, a mandatory refund of payments previously received for violative services, civil penalties up to $15,000 per referral, and exclusion from Medicare, Medicaid and other federally funded health care programs. There are also separate penalties up to $100,000 for each scheme to circumvent the statute.
What are the exceptions to the Stark law?
Unlike the anti-kickback safe harbors, failure to meet an exception contained in the Stark law constitutes an automatic violation of the statute. Some of the categories of exceptions include:
Exceptions to ownership/investment prohibition:
securities in a publicly-held corporation with stockholders' equity exceeding $50,000,000
rural providers furnishing substantially all of their services to individuals residing in rural areas and hospitals in Puerto Rico
ownership of a hospital where the physician has admitting privileges and interest is in the hospital as a whole
Rental Exception
Employment Arrangements
Personal Service Arrangements
Physician incentive plans to reduce services
Payments provided by hospitals to physicians unrelated to services
Recruitment incentives
Isolated transactions (e.g., one time sale of property if guidelines are met)
In-office Ancillary Exception
