20 things to know about the Anti-Kickback Statute

It is not uncommon to see major cases involving the Anti-Kickback Statute headlining hospital and health system news. This federal regulation prohibits the offering, solicitation or acceptance of any type of gift or remuneration in exchange for rewarding referrals for federal healthcare program business. Below are 20 things to know about the Anti-Kickback Statute.

1. Congress originally enacted the Anti-Kickback Statute as part of the Social Security Amendments of 1972. Until then, only one provision sanctioned false claims and misrepresenting facts to the government, and the limited language impeded efforts to prosecute Medicare and Medicaid fraud, according to a Journal of Law and Health article.

2. Despite the addition of the Anti-Kickback Statute, Medicare and Medicaid fraud and abuse continued to rise, according to the Journal of Law and Health. In 1977, the Medicare-Medicaid Anti-Fraud and Abuse Amendments increased the penalty for violating the statute from a misdemeanor to a felony to discourage further fraudulent activity.

3. To cut down on Medicare and Medicaid fraud and abuse, including Anti-Kickback violations, HHS and the Department of Justice also created the Health Care Fraud Prevention and Enforcement Action Team, commonly referred to as HEAT, in 2009. Healthcare fraud became a Cabinet-level priority with the creation of HEAT.

4. As is stands today, the consequences for violating the Anti-Kickback Statute today are steep. Criminal penalties can include fines up to $25,000 and a five-year prison term per kickback while civil penalties can cost as much as $50,000 per kickback in addition to three times the amount of damages sustained by the government. Violators can also be excluded from federal healthcare programs.

5. The government contends that violating the Anti-Kickback Statute exploits the healthcare system, drives up program costs and hinders fair competition in the industry. Kickbacks may also compromise the medical decision-making processes of physicians and hospitals in the form of patient steering.

6. United States v. Greber in 1985 was the landmark case that established that paying referring physicians to use a laboratory's services — even if the remuneration was compensation for professional services — violated the Anti-Kickback Statute, according to the Journal of Health Law. The case also established the premise that if even one purpose of a payment made is for a referral of business, the payment is deemed to be illegal. The new ruling prohibited business transactions that were once fairly innocuous, leading to the creation of safe harbors.

7. There are some payment and business practices which may appear to violate the Anti-Kickback Statute but are actually protected under "safe harbor" regulations if the party in question meets various tests to qualify for the safe harbor. Just a few examples of protected practices include the following:

  • Space rental
  • Equipment rental
  • EHR items and services
  • Electronic prescribing items and services
  • Discounts
  • Health centers
  • Payments made to bona fide employees
  • Personal services and management contracts
  • Warranties
  • Investment interests
  • Referral services
  • Practitioner recruitment
  • Ambulatory surgical centers

8. Several updates to safe harbors from just last year include limiting the scope of protected safe harbor donors to exclude EHR items and services donated by laboratory companies and updating the provisions that protects certain donations of interoperable EHR items and services.

9. The Patient Protection and Affordable Care Act of 2010 expanded the liability of the False Claims Act to now definitively include Anti-Kickback claims as grounds for violation. Prior to the healthcare reform, it was unclear whether or not Anti-Kickback claims constituted a violation of the False Claims Act.

10. Prior to the PPACA, it was unclear whether or not the government had to prove that a defendant knew that their actions violated the Anti-Kickback Statute as part of the regulation's "willful" intent requirement. In 2010, the PPACA amended the intent requirement to clarify that the government no longer has to prove the defendant intended to violate the Anti-Kickback Statute itself, just that a defendant intended to violate the law and were paying for Medicare or Medicaid business.

11. Anti-Kickback Statute violations — as well as violations of the Stark Law — now make up most False Claims Act cases, whereas lawsuits involving fraudulent billing leading to overpayments by the government used to constitute the majority of FCA cases.

12. In one of the most costly Anti-Kickback settlements this year, Baton Rouge, La.-based provider of home health services, Amedisys, settled for $150 million. Of the full settlement amount, $26 million was awarded to the whistle-blower who alleged that Amedisys violated the Anti-Kickback Statute by engaging in improper financial relationships with referring physicians, including providing below market value patient care coordination services, among other false claims.

13. Another costly Anti-Kickback Statute settlement this summer took place between the DOJ and the nation's largest provider of pharmaceuticals and pharmacy services to nursing homes, Cincinnati-based Omnicare. Omnicare allegedly offered nursing facilities illegal monetary incentives in exchange for the facilities' selection of Omnicare drug supplies for elderly Medicare and Medicaid recipients. The nursing home pharmacy company settled for $124.24 million.

14. In another notable Anti-Kickback case early last month, U.S. District Judge Colleen McMahon in Manhattan ruled to allow the DOJ to continue its Anti-Kickback investigation into Swiss-owned, East Hanover, N.J.-based pharmaceutical giant Novartis, according to a Reuters report. The lawsuit alleges that Novartis gave kickbacks in order to increase sales of Myfortic and Exjade, two drugs covered by Medicare and Medicaid.

15. Walgreens was involved in a high-profile Anti-Kickback case back in 2012 in which it agreed to settle for $7.9 million. Even though the company denied any fault, the drugstore chain allegedly offered gift cards and other promotions to Medicare and Medicaid beneficiaries in exchange for transferring their prescriptions to Walgreens pharmacies.

16. Nursing homes and hospices specifically have experienced increased scrutiny lately for allegedly violating the Anti-Kickback Statute by requesting or providing illegal compensation to influence patient referrals. Such violations include hospices providing services, such as discharge planning, at no charge to nursing homes in exchange for referrals and hospices offering free gifts to nursing home staff.

17. More and more hospitals have been shutting down their ambulance medication and supplies restocking programs lately over concern that they may violate the Anti-Kickback Statute, the premise being that the hospital is restocking in exchange for the ambulance services bringing patients to the hospital. Even though safe harbors exist specifically to protect ambulance replenishing, some hospitals have ceased the practice anyway to cut costs, according to a recent Journal of Emergency Medical Services article.

18. The need to demonstrate the fair market value of payments so as to defend that they are not in exchange for referrals has led to an explosion in the need for valuation services. Thus there has been substantial growth in valuation firms that provide valuations in the healthcare sector and, also, law firms which provide legal guidance under the Anti-Kickback Statute.

19. As hospitals and health systems increasingly consider consolidating, it has become fairly common for affiliation partners to require potential sellers to self-disclose and/or resolve any past or ongoing Anti-Kickback cases, among other legal violations, prior to completing a transaction.

20. In addition to the federal Anti-Kickback Statute, approximately 36 states and the District of Columbia also have laws that prohibit paying remunerations for healthcare program business referrals, according to the National Conference of State Legislatures.

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