Anti-Kickback Statute

The Federal Anti-Kickback Statute (AKS) is a critical piece of legislation aimed at preventing fraud and abuse in federal healthcare programs. Enacted as part of the Social Security Act, the AKS prohibits the exchange of anything of value to induce or reward referrals for services covered by Medicare, Medicaid, and other federally funded healthcare programs. This statute is designed to maintain the integrity of the healthcare system by ensuring that clinical decisions are made based on patient needs rather than financial incentives.

Under the AKS, both the offeror and the recipient of kickbacks can face significant legal consequences. Violating the statute can result in hefty fines, imprisonment, and exclusion from participation in federal healthcare programs. Importantly, the law applies broadly to various parties within the healthcare sector, including physicians, hospitals, pharmacies, and other healthcare providers. This broad application serves to deter unethical practices across the entire spectrum of healthcare services, reinforcing the importance of ethical conduct in patient care.

The AKS also includes certain safe harbors that provide protections for specific payment practices that might otherwise be considered illegal under the statute. For example, properly structured discounts, payment for bona fide services, and certain arrangements involving investment interests may qualify for safe harbor protection. However, to benefit from these protections, parties must ensure that their arrangements adhere strictly to the criteria outlined in the safe harbors. This complexity underscores the importance of legal compliance and the need for healthcare providers to be well-informed about both the risks and safe practices under the AKS.

The Federal anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing of, or arranging for the furnishing of, any item or service reimbursable under a Federal health care program.

The statute’s prohibition also extends to remuneration, defined as a transfer of anything of value, directly or indirectly, in cash or otherwise. This covers conduct that is intended to induce, or in return for, the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by a Federal health care program.

The regulations are intended to protect against conduct that would induce referrals for items or services that would be reimbursable by a Federal Health Care Program.

If convicted, the punishment may be a felony punishable by a maximum fine of $100,000, imprisonment up to 10 years, or both. Conviction also will lead to exclusion from Federal health care programs, including Medicare and Medicaid.

There may also be administrative consequences such as exclusion from Federal Health Care Programs under 1128 (b)(7) of the Act and civil monetary penalties.

EXCEPTIONS TO THE RULE: SAFE HARBOR PROVISIONS UNDER 42 C.F.R. § 1001.952

(i) Investor Test: no more than 40 percent of an entity’s investment interests are held by investors in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity

(ii) Revenue Test: no more than 40 percent of an entity’s gross revenues come from referrals or business otherwise generated from investors (the “Revenue Test”); and

(iii) Investment Offer Test: the terms on which an investment interest is offered to an investor who is in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity are not related to the previous or expected volume of referrals, items or services furnished, or the amount of business otherwise generated from that investor to the entity

WHO DOES THIS IMPACT?

Medical Providers such as a DME (“durable medical equipment”) company, from forming a joint venture with referring physicians, giving them a 39 percent interest in the entity,” may not qualify to benefit from safe harbor protection because all of the owners would be doing business with the joint venture by either furnishing items or making referrals.

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