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Know The Law: Anti-Kickback Statute

Written by: Steven J. Dutton

Published in the Union Leader

Q: I am a medical device manufacturer’s representative doing business with hospital employed physicians, and procedures involving my company’s medical devices are often covered by Medicare and other federal health care programs.  What is the Anti-Kickback Statute and does it apply to me?

A: The Anti-Kickback Statute is a federal law meant to protect patients and federal health care programs like Medicare from fraud and abuse. Congress passed the federal Anti-Kickback Statute in 1972. The aim of the Anti-Kickback Statute was to eliminate the potential for fraud and abuse that resulted in situations where a health care professional’s medical judgment could be improperly influenced by a “kickback,” a broad definition encompassing anything of value. Specifically, the Anti-Kickback Statute makes it a criminal offense for a company to exchange (or offer to exchange) anything of value to induce or reward the referral of federal health care program business. While the Anti-Kickback Statute obviously prevents cash-for-referral payments, the breadth of the conduct it reaches is exponentially more expansive. The Anti-Kickback Statute is broadly drafted, and prohibits both the receipt and the offering to pay or payment of the kickback.

To prove a violation of the Anti-Kickback Statute, the government need only show that a health care provider willfully gave or received something of value in exchange for the referral of a Medicare/Medicaid patient. It does not matter if the exchange of remuneration was primarily motivated by sound business or other reasons; if “one purpose” of the exchange was to induce a referral, then the Anti-Kickback Statute has been triggered. The penalties for violating the statute are severe. Conviction for a single violation of the Anti-Kickback Statute may result in a fine of up to $25,000 and imprisonment for up to five years. In addition, conviction results in mandatory exclusion from participation in federal health care programs.  Parties who are uncertain as to whether they fit into a safe harbor or are otherwise compliant with the statute may request an advisory opinion from the Department of Health and Human Service’s Office of Inspector General.

Because the Anti-Kickback Statute is so broad, Congress and the Department of Health and Human Services have provided a number of safe harbors which immunize certain payment and business practices that are otherwise implicated by the Anti-Kickback Statute from criminal and civil prosecution under the state.  Many of the exceptions are designed to exclude certain arrangements or transfers from the definition of payment under the statute. To be protected by a safe harbor, an arrangement must fit squarely within the safe harbor. Arrangements that do not correspond to any of the established safe harbors must be analyzed on a case-by-case basis for compliance with the Anti-Kickback Statute.

As in other areas of health care law, however, the regulatory scheme governing the Anti-Kickback Statute is complex and lengthy, with costly consequences for non-compliance. Recently, physician-vendor relationships have come under increased scrutiny by federal and state regulators. To avoid becoming entangled in the complexities of the Anti-Kickback Statute, medical directors, hospitals, administrators, doctors, hospice care centers, nursing homes and any other entity that accepts federal funds for medical services should carefully plan their relationships with one another and seek legal assistance in determining compliance with the statute.

Steven Dutton can be reached at [email protected]

Know the Law is a bi-weekly column sponsored by The McLane Law Firm.
We invite your questions of business law. Questions and ideas for future columns should be addressed to: Know the Law, McLane Law Firm P.O. Box 888, Manchester, NH 03101 or emailed to [email protected] Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.

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