Understanding the Anti-Kickback Statute as a Healthcare Provider
Key takeaways:
In some industries, it’s become standard practice to incentivize business by means of offering a referral fee to would-be customers. This is known as a kickback, and it is illegal in healthcare.
There is a federal law that prohibits this exchange for referral of business for government health programs.
This law applies to any referral source, not just physicians.
This is not meant to serve as legal advice. If you need legal advice, contact an attorney in your state.
There are multiple federal civil and criminal laws that aim to prevent fraud and abuse in healthcare, including the Stark Law and False Claims Act. In this article, we’ll lay out the basics of the anti-kickback statute (AKS), what it is, the penalties for violating it, and the exceptions to the law.
What is a kickback, and why is it illegal in healthcare?
In some industries, such as the legal profession, it is acceptable to pay a percentage-based or flat referral fee in certain situations. This is not allowed in healthcare for federal programs such as Medicare, Medicaid, Tricare, and others.
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The anti-kickback statute prohibits any remuneration or payback for a referral. This makes any payment — direct or indirect — or any financial incentive for referrals of Medicare or Medicaid patients illegal. More specifically, it prohibits attempts to induce referrals, period.
If there is any intent to induce a referral, the element known as “willful intent” is met. Providers or hospitals cannot take actions that are intended to bring them referrals of Medicare and Medicaid patients. A very basic interpretation of these rules is that business arrangements are to be done at a fair-market value, so as to not give "sweetheart” deals to induce referrals of patients.
Below are a few examples of prohibited types of agreements or inducements:
It would be illegal for a hospital to have an agreement, whether formal or informal, with another payer or organization to send Medicare and Medicaid patients to that provider.
It would be illegal for a provider to routinely waive Medicare patient copays, as this could be seen as an inducement to get the patients to keep coming back. However, there can be determinations made on an individual basis for a certain patient that may allow for a copay to be waived (such as a person’s financial inability to pay).
Exceptions to anti-kickback laws known as "safe-harbor" provisions
So-called “safe-harbor” provisions are scenarios that are allowed by healthcare providers; in other words, they are exceptions to the normal AKS rules. Safe-harbor provisions in their entirety can be found here.
Space rental
Space rental is one of the exceptions to the AKS. Generally, payment to rent a space would not be a violation of the AKS. However, renting at below market rate or renting more space than commercially necessary could be seen as a "kickback."
To meet this exception, all of the elements of a lease or rental agreement must be met:
1) A signed lease agreement in writing by both parties.
2) The lease covers all the premises leased.
3) The lease specifies any access right to the lessor.
4) The term of lease is not less than 1 year.
5) The total rental charge is set forth and is consistent with fair market value.
6) The total space rented correlates to what is necessary for the business purpose of the rental.
If a space is rented out at market value, in writing, for a year and for a legitimate business purpose, then this would not be a violation of the AKS.
If a space is rented out for 6 months at below market rate to a physician group or a hospital, this would be a violation of the AKS.
Equipment rental
Equipment rental is another exception, or safe harbor, from the AKS. Renting equipment at a below market rate can also be seen as a kickback if certain factors are not met. The elements that must be met are very similar to space rental as discussed above. Space and equipment rental are allowed when the specific rules laid out in the safe-harbor provisions are met.
If equipment is rented out at fair-market value and the rental agreement is in writing, this generally would not be a violation of the AKS.
If equipment is rented out at below market rate or for free to a physician group or hospital, this would be a violation of the AKS.
Investment interests
Investment interests are another large exception with many factors at play. Generally, a payment from a return on an investment would not be a violation if certain criteria are met. The purpose of these investment-interest rules is to avoid the entity being a mechanism to induce referrals, and, instead, the business must have a legitimate business interest.
If the investment terms offered to an investor in a position to induce referrals of Medicare and Medicaid patients are offered on equal terms to those in the public, then this would not be a violation of the AKS. If an investor who can induce referrals is offered more favorable investment terms than the general public, then this would be seen as a "payment" and thus a violation of the AKS.
Penalties for violating the anti-kickback statute
Penalties for violating the AKS can include a $25,000 fine per violation, jail time of up to 5 years in prison, or both. It can also include potential exclusion from federal benefit programs.
Given the severity of the fines, make sure you have safeguards in place to avoid potential missteps that could lead to a violation of these laws.
Further, violations of the AKS can lead to violations of the False Claims Act if they involve claims from a federal benefit program. This can lead to further liability and penalties.
Below are a few examples of violations and settlements.
Examples cases of AKS violations
Athena Health agreed to pay $18.25 million to resolve charges of False Claims Act and AKS violations. The allegations included all-expense-paid sporting trips and referral agreements of patients that were successfully converted to Athena Health patients.
Collier and Tampa Pain Relief Center agreed to pay $1.665 million in 2021 for alleged violations relating to routinely waiving facility-fee copays to induce referrals to their facilities. Specifically, the fees were apparently being waived to induce patients to receive injections at their pain clinic.
Prime Healthcare Services and two doctors agreed to pay $37.5 million to settle claims related to the False Claims Act and the AKS. In addition, the parties had to reach an agreement for compliance with the U.S. Department of Health. A majority of the allegations were from overbilling. In addition to overbilling, according to the Department of Justice, Prime paid kickbacks when it overpaid to purchase one doctor's physician practice and surgery center because the company wanted to refer patients to another practice. The purchase price allegedly was substantially higher than fair-market value and was not commercially reasonable.
The bottom line
Healthcare providers are not allowed to receive anything of value to prompt a referral of Medicare and Medicaid patients. The AKS is meant to make certain that business actions are done at fair value and not for favors to get referrals.
There are exceptions as discussed above, but it is best to proceed with caution and speak with an attorney before entering into any formal or informal agreements that may potentially pertain to the anti-kickback statute.
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