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Anti-Kickback Statute Reminder

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Anti-Kickback Statute Reminder

The Office of Inspector General of Department of Health and Human Services (OIG) has issued a Fraud Alert, warning physicians to avoid agreements implicating the Anti-Kickback Statute (AKS). The OIG’s alert reminds providers:

“Physicians who enter into compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of Federal healthcare program business. OIG encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.”

The AKS prosecution discussed in the Fraud Alert involved an affiliated health care entity paying the salaries of a group of physicians’ front office staff. By paying salaries the physicians otherwise would have incurred, the OIG alleged that the salary payments constituted improper remuneration to the physicians.

It is not uncommon to see major cases involving the Anti-Kickback Statute headlining hospital and health system news. The violation could trigger costly criminal penalties and administrative sanctions. The following provides a general review of the AKS with examples and recent cases of Anti-Kickback settlements:

The AKS is a law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal healthcare programs (e.g., drugs, supplies, or healthcare services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies.

Criminal penalties and administrative sanctions for violating the AKS include fines, jail, and exclusion from participation in the Federal healthcare programs. Under the Civil Monetary Penalties Law (CMPL), physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.

The Government does not need to prove patient harm or financial loss to the programs to show that a physician violated the AKS. A physician can be guilty of violating the AKS even if the physician actually rendered the service and the service was medically necessary. Accepting remuneration is not justified by the argument that you would have prescribed the drug or ordered the DME regardless of the “gift” the vendor provided.

The kickback prohibition applies to all sources of referrals, including patients. For example, where the Medicare and Medicaid programs require collection of patient co-payments for services, waiving these copays can potentially violate AKS. One cannot waive co-payments unless an individual determination is made that the patient cannot afford to pay or if reasonable collection efforts fail.

Nursing homes and hospices specifically have experienced increased scrutiny for allegedly violating the Anti-Kickback Statute. Such violations include the free provision of services such as discharge planning and giving free gifts to staff in order to induce referrals.

There are “safe harbors” which serve to protect certain payment and business practices that could otherwise implicate the AKS from criminal and civil prosecution, but the compensation must satisfy all of the specific safe harbor requirements. Safe harbors protect practices such as personal services and rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees.

Besides the AKS, the beneficiary inducement statute (42 U.S.C. § 1320a-7a(a)(5)) also imposes civil monetary penalties on physicians who offer remuneration to Medicare and Medicaid beneficiaries to influence them to use their services.

Examples of other recent high-profile AKS settlements:

  • Amedisys, L.A.-based provider of home health services, settled for $150 million for engagement in improper financial relationships with referring physicians, including providing below market value patient care coordination services, among other false claims.
  • Cincinnati-based Omnicare, the nation’s largest provider of pharmaceuticals to nursing homes, allegedly offered nursing facilities illegal monetary incentives in exchange for the facilities’ selection of Omnicare drug supplies for elderly Medicare recipients. The nursing home pharmacy company settled for $124.24 million.
  • 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.

Given the complexity of AKS and its safe harbors, healthcare providers must closely consider proposed arrangements to ensure they are compliant with all applicable laws and regulations.

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