9 Gifts that Violate the Anti-Kickback Statute

June 9, 2017

Receiving cash for a referral is the most obvious gift that violates the Anti-Kickback Statute. Here are eight more.

Like the False Claims Act, the Anti-Kickback Statute (AKS) remains a frequent tool used by the Department of Justice to investigate the healthcare industry. Unlike the False Claims Act, the AKS imposes criminal penalties on violators. This post will outline the basics of how the statute operates, the penalties permitted by law, and the most common ways physicians' practices violate it.

The Anti-Kickback Statute

The AKS prohibits offering, paying or receiving anything of value in return for referrals for which payments are made by a government program (including Medicaid, Medicare and Tricare). Specifically, you can be charged with a crime for:

1. Knowingly and willfully soliciting or receiving any "remuneration (including any kickback

bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind"

(A) in return for referring someone for "any item or service for which payment may be made in whole or in part under a Federal health care program" or

(B) in return for "purchasing, leasing, ordering, or arranging for" (or recommending) any goods or service that are paid for by a Federal health care program."

2. Knowingly and willfully offering or paying any remuneration

(A) to refer a person for an item or service paid for by a Federal health care program, or,

(B) to "purchase, lease, order, or arrange for" (or recommending) any goods or services that are paid for by a Federal health care program.

The statute is very broad. It covers both the person and company that offer or pays the kickback, and the person or company that solicits or receives the kickback.

Safe Harbors

There are certain "safe harbors" in the AKS and defined by regulations. These provisions describe certain conduct - such as payments to employees and discounts to customers. If you meet one of the safe harbors, you cannot be criminally prosecuted for the conduct. This sounds simple in theory, but there are many gray areas within them. You may think you meet a safe harbor, but if DOJ disagrees, you could be forced to defend your position during a criminal prosecution.

There are Department of Health and Human Services (HHS) Office of Inspector General Advisory Opinions that offer guidance about the safe harbors but an experienced healthcare regulatory attorney can help you navigate them.

Penalties

There are serious penalties for violating the AKS. The statute provides that violations are a felony and sets a maximum penalty of five years in prison and a $25,000 fine.

As though these penalties aren't severe enough, prosecutors often charge other criminal violations along with an AKS charge, such as wire fraud. The ultimate sentence could be even longer than the 5-year limit in the statute. Plus, many False Claims Act cases are based on violations of the AKS, so the parallel civil fines may increase dramatically above the $25,000 cap in the AKS.

Actions against Individual Executives

If your practice has a defined hierarchy - such as a CEO, CFO and COO - then your executives risk criminal liability under the AKS through what is known as the "responsible corporate officer" doctrine.

As the leading Supreme Court case explained, "a corporate agent, through whose act, default or omission the corporation committed a crime in violation of the [FDCA] may be held criminally liable for the wrongdoing of the corporation whether or not the crime required consciousness of wrongdoing by the agent." (United States v. Park (1975)).

In other words, the leaders of a physicians' practice may be held liable for what others in the practice do, even if the leader did not know precisely what was going on. It has been called the "crime of doing nothing."

In addition, in September 2015, DOJ issued what is known as the "Yates Memo." The Yates Memo offers guidance to criminal prosecutors and instructs them to seek "accountability from the individuals who perpetrated the wrongdoing." In every investigation, then, DOJ will seek to charge individual physicians (or executives), in addition to the practice itself.

Although it is not entirely clear whether the new administration will continue to follow the Yates Memo (it could be withdrawn or superseded at any time), for now it remains the guiding policy of DOJ.

Common Types of Kickbacks

Kickbacks can take many forms. The word "remuneration" in the AKS simply means "anything of value." So, if you give or accept anything of value in return for Medicare referrals, then you risk criminal prosecution.

Of course, cash payments for Medicare referrals are the most obvious violations. But there are many other types of kickbacks prosecuted by the DOJ, including:

1. Providing free dinners or lunches to physicians;

2. Travel expenses paid to physicians;

3. Entering into consulting or research agreements with physicians under which payments are made, but minimal (or zero) work is done in return;

4. Other gifts, such as tickets to sporting events or electronics;

5. Laboratory pays a specimen processing fee to physicians above the fair market value for those fees;

6. Physician retention or recruitment agreements by hospitals, when those agreement provide for payments above fair market value or are made with the intent to induce Medicare referrals;

7. Agreements for speaking or teaching, where the payments are above fair market value or made with the intent to induce referrals.

8. Discount schemes that do not meet the safe harbor requirements;

Be Careful Out There

As you can see, there are many ways to violate the AKS. Any one of them - if discovered by the government - can lead to a criminal investigation. Often, DOJ will find the entity who is paying the kickbacks and then seek to prosecute the physicians who accepted those kickbacks as well. If you intend to accept anything of value from someone to whom you could make Medicare referrals, you should consult an experienced health care regulatory lawyer to try to structure the transaction to comply with the law.