The Federal Anti-Kickback Statute: A Building Block of the Health Care Fraud & Abuse Landscape

The Anti-Kickback Statute in a Nutshell

The Federal Anti-Kickback Statute (AKS) is a civil and criminal statute that broadly regulates financial relationships within the health care sector. The AKS prohibits conduct that is engaged every day, at all levels, and throughout the industry. Although the AKS may be difficult to understand and is often not well understood within health care, the government adopts an uncompromising approach with the mantra, "ignorance is no excuse." Even the Department of Health and Human Services (DHHS) admits that the AKS reaches "many harmless or efficient arrangements."

So, that’s great and all, but what specifically does the AKS prohibit? It prohibits the knowing and willful solicitation, offer, payment, or acceptance of any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash, or in kind for:

referring an individual for a service or item covered by a federal health care program; or
purchasing, leasing, ordering, arranging for, or recommending the purchase, lease, or order of any good, facility, service, or item reimbursable under a federal health care program.

Basically, what this means is that the AKS prohibits payments for referrals or acts that induce or reward referrals of Medicare or Medicaid patient services or items. Unlike the Stark Law, the AKS is not limited to designated health services (DHS). Like the Stark law, though, the general prohibition is accompanied by carve-outs. The AKS contains several safe harbors, which, when adhered to, protect parties from violating the AKS. Due to its intent-based nature, arrangements that fall outside of a safe harbor are not necessarily illegal. Instead, such arrangements are analyzed on a case-by-case basis to determine if one purpose of the arrangement is prohibited conduct under the AKS. This intent element is discussed in more detail below.

To truly understand the inner workings of the AKS, it’s helpful to lay out the prima facie case which details all the necessary components that the government must prove: the defendant knowingly and willfully gave, received, or solicited remuneration in return for patient referrals or other business in connection with a federal health care program. Notably, although the AKS applies to federal health care programs, many states have their own versions like the mini-Stark laws. Let’s break down the key components in even greater detail.

"Knowingly and Willfully” Inducing Referrals

Under the AKS, for a violation to occur, remuneration must be offered or solicited with the intent to induce a referral even if no money changes hands. The offer or solicitation itself is enough. Also, both sides of a transaction can be in violation of the Statute.

Unlike the Stark Law, which is largely based on strict liability, the AKS requires acting knowingly and willfully. This is further explained through the "one purpose test" where, if even one purpose of the remuneration is to induce or reward patient referrals, the intent element of the AKS is satisfied. This standard is contrasted with the “primary purpose” standard, which requires a higher degree of intent–not just one purpose. You should note though that the intent standard varies considerably based on where you are. For example, the Seventh Circuit along with many others has adopted the one purpose test but not all circuits have adopted it.

Understanding Remuneration

Remuneration within the context of the AKS is broad in scope and can include "anything of value." Other than fair market value–whether paid directly, indirectly, overtly, or covertly, in cash or in kind–there is an inference that some part of the payment is intended to influence referrals. Examples of items and services that the Department of Health and Human Services Office of Inspector General (OIG) has concluded are not remuneration include:

In-office Phlebotomists
Billing and reimbursement support services
Providing patient health care information
Written radiology reports
Pharmaceuticals to free clinics
Electronic questionnaire kiosks
Vaccination reminders (to patients and parents of patients)

Similarly, the following are examples of items and services that OIG has concluded may constitute remuneration depending on the facts and circumstances:

Free computers
Free biopsy needles
Pharmacy employees
Hospice services in a nursing home
Reimbursement consulting services
Labeling of test tubes and collection containers
Vaccine reminders (to physicians)
Lodging and transportation assistance

Statutory Exceptions and Safe Harbors

The AKS provides statutory exceptions for certain types of payments, which are excluded from consideration by statute. These include bona fide payments to W-2 employees, discounts, payments to purchasing agents, certain transactions that fit within “safe harbors” established by the Secretary of DHHS, specific risk-sharing arrangements, and prescription drug discounts for certain beneficiaries in the “coverage gap.” Importantly, even where there are statutory exceptions, OIG has adopted safe harbors to “define innocuous arrangements that should not be prosecuted, which include statutory exceptions.”

OIG has established a set of "safe harbors" under the AKS. These are specifically defined business and payment practices that, despite having the potential to implicate the AKS, are not treated as offenses under the statute. They provide immunity from prosecution for certain kinds of activities that could otherwise be viewed as kickbacks. It's worth noting that complying with these safe harbors is voluntary. Healthcare providers are not required to structure their business practices to fit within a safe harbor. However, it's generally recommended to do so as compliance provides protection against AKS liability.

Meeting the requirements of these safe harbors can often be challenging due to their narrow and detailed nature. An arrangement only secures safe harbor protection when it fully complies with all the elements of a particular safe harbor. Partial compliance does not result in the same protection. However, as indicated above, failure to fit within a safe harbor does not automatically mean liability under the AKS. If a specific arrangement doesn't fall within a safe harbor, it doesn't necessarily imply that it's unlawful. Instead, such an arrangement is evaluated based on the totality of its circumstances. It's also crucial that an arrangement not fitting within a safe harbor doesn't inherently subject it to heightened scrutiny.

So, while safe harbors can provide protection from AKS liability, they are not the be-all and end-all. Compliance with all the elements of a safe harbor is voluntary but is generally recommended. Not fitting within a safe harbor doesn't equate to illegality or intensified examination. It's the overall intent and nature of the arrangement that ultimately determines its compliance with the AKS. Keep in mind that while this Article doesn’t get into specific AKS safe harbors, those too will come.

Comparing AKS Safe Harbors with Stark Exceptions

Generally, AKS safe harbors are narrower than Stark exceptions, meaning that there are stricter criteria and fewer circumstances under which certain transactions can be deemed legal under the AKS compared to Stark Law. The American Hospital Association (AHA) has expressed disappointment over this discrepancy due to the potentially limiting impact it could have on hospital and physician transactions. Nonetheless, it's essential to note the fundamental differences between the two laws' operational frameworks.

An arrangement that does not fit within an AKS safe harbor is not automatically considered illegal. Provided that the transaction isn't intended to induce or reward referrals, a hospital can engage in a legal transaction even in the absence of a directly applicable safe harbor under the AKS. On the other hand, the Stark Law, which governs self-referrals, has a stricter rule. If the Stark Law applies to an arrangement, the arrangement must fit into a recognized Stark exception to be considered legal. There's no similar leeway as in the AKS safe harbors. It emphasizes the importance of understanding the distinctions and requirements of both laws when structuring healthcare transactions to ensure compliance and mitigate potential legal risks.

Basic AKS Analysis: Step-by-step Framework

To evaluate a potential violation of the AKS, take a look at the following steps. These steps can help in determining whether a specific transaction or arrangement might violate the AKS, and what steps might be taken to mitigate that risk.

Identify if there is a payment or kickback: Look for an exchange of money, gift, benefit, profit opportunity, or any other form of value.
Determine the intention behind the transaction: Is the payment meant to induce or reward the referral of a service or a good?
Identify the payor: Is the payment made by a "federal health care program" such as Medicare, Medicaid, or Tricare? Note that the Federal Employee Health Benefits Program is excluded, and there is no set list of covered programs.
Who is involved: Unlike the Stark Law, AKS applies to anyone, not just physicians.
Search for an applicable statutory exception or regulatory safe harbor: If a safe harbor or statutory exception applies, the arrangement may not violate the AKS.
If no safe harbor applies, how close is the arrangement to one: Analyze the characteristics of the arrangement to determine if it resembles an existing safe harbor
Assess the facts and circumstances of the proposed arrangement: Do they indicate an AKS violation? Consider if any of OIG’s compliance risk factors are present.
Consider potential modifications: Could the arrangement be restructured, or could compliance safeguards be implemented to mitigate or eliminate the enforcement risk?
Evaluate the purpose of the deal: Is "one purpose" (or another applicable standard) of the deal to induce or reward referrals? If so, it may signal a violation of the AKS.
Place the arrangement on the risk continuum: Finally, evaluate the overall risk level of the arrangement. It's important to note that enforcement risk exists on a continuum, and not all arrangements will fall clearly into categories of "legal" or "illegal."

Compliance Program Basics

To ensure compliance with the AKS and avoid potential violations, health care organizations should have robust compliance programs in place. Generally, such programs should incorporate the following key components:

Written policies and procedures: Well-documented rules outlining expected conduct, safeguards against fraudulent activities, and protocols to handle potential violations.
Compliance professionals: Designated individuals with relevant expertise to manage and monitor the program's effectiveness.
Effective training: Regular and thorough training sessions to ensure all members of the organization understand their obligations under the AKS.
Effective communication: Clear and open communication channels to discuss compliance concerns and report potential violations.
Internal monitoring and audits: Regular internal checks and formal audits to identify potential areas of noncompliance (more on this below).
Enforcement of requirements within the organization: Consistent application of compliance rules and penalties for noncompliance.
Prompt response when problems are identified: Swift internal and external responses to address identified issues and mitigate further noncompliance.

Compliance audits, a key component of an effective compliance program, should specifically target three main areas. Firstly, coding and billing practices need to be meticulously reviewed to ascertain alignment with all legal requirements. This ensures that the claims submitted to federal health care programs are legitimate and accurately represent the services provided. Secondly, audits should evaluate contracts between the organization and those positioned to refer or receive referrals. This evaluation is crucial for ensuring compliance with the AKS, thus avoiding any arrangements that might inappropriately influence health care decisions. Finally, patient care should not be overlooked; audits must confirm that all care provided is not only medically necessary but also properly documented, supporting the integrity of patient care and the validity of associated billings. Understanding and effectively implementing these compliance program fundamentals enable healthcare organizations to proactively prevent violations of the AKS.

Uncovering the Noncompliance Veil

The process of detecting potential noncompliance often involves several mechanisms. The government typically learns of such issues through self-disclosure, where providers voluntarily report any noncompliance. The government may also be alerted through complaints against the provider, which can come from various sources, including patients, whistleblowers, other organizations, and watchdog agencies. In addition to these channels, government surveys and audits conducted as part of its "program integrity" initiatives also serve as vital tools in identifying compliance-related irregularities.

On the flip side, providers may discover they are under investigation in a few ways. One common method is through a government subpoena, whereby entities like the OIG, Department of Justice (DOJ), US Attorney, State Attorney General, or State fraud control unit might issue a demand for documents. In the case of criminal investigations, the process generally advances through a grand jury subpoena that requests documents, testimony, or both. Another possibility is an unannounced visit or call from an agent of the DOJ or another agency bearing a search warrant and subpoena/demand.

Federal AKS Penalties

Federal penalties for violations of the Anti-Kickback Statute (AKS) are severe and multifaceted. Criminal penalties for such violations can result in felony convictions, up to 5 years in prison, and fines of $25,000 per violation. Civil penalties can be as much as $50,000 and also may include treble damages for each violation.

There are also consequences involving exclusion from federal health care programs. Conviction of a violation leads to mandatory exclusion from participation. Even without a conviction, the Secretary of the Department of Health and Human Services (DHHS) has the discretion to exclude individuals or organizations who violate the AKS from these programs. Moreover, OIG can exclude individuals or organizations from participation in Medicare as a penalty for noncompliance, fraud, or abuse.

Organizations are required to routinely check governmental lists of excluded individuals and organizations (for example, on a monthly basis) to ensure they are not doing business with an excluded party. It's important to note that Medicare and Medicaid will not pay for services or items provided by an excluded individual or organization. Providers have the option to voluntarily opt out of these programs in order to avoid compliance burdens.

However, unlike the False Claims Act (FCA), the AKS does not provide for a private right of action. Nonetheless, violations of the AKS can serve as a predicate for an action under the FCA.

When imposing penalties for violations of the Anti-Kickback Statute (AKS), several considerations come into play. Firstly, authorities must discern the spectrum of intent behind the violation. Was it merely a mistake or a result of inefficiency or poor policy and monitoring? Could it have been due to negligence, a deliberate bending of rules, or was there an intentional deception?

Other key considerations include whether the violation was self-disclosed by the provider, if steps were taken to mitigate the issue, and importantly, whether corrective measures were implemented to prevent similar issues in the future. These factors will significantly influence the severity of penalties imposed.

OIG Provider Self-Disclosure Protocol

OIG established the Provider Self-Disclosure Protocol (SDP) in 1998. This is not to be confused with the CMS SRDP for Stark. The SDP set forth a procedure for healthcare providers to voluntarily identify, disclose, and resolve instances of potential fraud involving Federal health care programs. The protocol offers guidance on how to investigate fraudulent behavior, quantify the resulting damages, and report the behavior to the OIG.

In the SDP's first 15 years, it successfully resolved over 800 disclosures, leading to recoveries exceeding $280 million for Federal health care programs. Health care providers wishing to voluntarily disclose potential evidence of fraud to the OIG can use the SDP.

However, the SDP is not available in all situations. It cannot be used for matters not involving potential violations of Federal criminal, civil, or administrative laws where civil monetary penalties (CMPs) could be applied, such as cases exclusively involving overpayments or errors. Additionally, it cannot be used to request an opinion from the OIG on whether a violation has actually or potentially occurred. The SDP is also not applicable for disclosing an arrangement that only involves liability under the Stark Law, for which a different self-disclosure protocol exists.

When utilizing the SDP, the OIG expects the disclosing provider to carry out an internal investigation and report the findings to the OIG as part of the disclosure.

Recent Developments & Onwards, We Go!

In response to the transition from fee-for-service to value-based care models, the DHHS introduced new exceptions and safe harbors to the AKS and Stark Law in November 2020. These modifications are designed to facilitate better patient care, improve health outcomes, and reduce costs by removing legal barriers to innovative arrangements among healthcare providers. However, providers need to carefully structure their arrangements to fit within these exceptions and safe harbors as failing to do so can lead to severe penalties.

The Anti-Kickback Statute is a far-reaching piece of legislation with a critical role in regulating financial relationships in health care. It is designed to preserve the integrity of the healthcare system by preventing undue influence on care decisions. All healthcare providers participating in federal healthcare programs should be knowledgeable of the Statute's requirements to avoid substantial civil and criminal penalties. As health care continues to evolve, so too will the interpretation and application of the AKS. Understanding this complex law is not just about avoiding penalties but about contributing to a healthcare system that truly serves the best interests of the patients. You should reach out to your preferred health care lawyer with any questions. As always, I’m here to help.

For additional resources on the Anti-Kickback Statute, consider exploring the OIG website and focusing on the Compliance tab. Here, you will find OIG Advisory Opinions, Special Alerts and Bulletins, Open Letters, Special Fraud Alerts, Model Compliance Programs, and Compliance 101 which includes webcasts and related materials.

OIG also offers comprehensive guidance. The Compliance Guidance section is particularly helpful, as it contains a series of voluntary compliance program guidance documents designed for various sectors of the health care industry. These resources are developed with the aim of encouraging the creation and use of internal controls to monitor adherence to relevant statutes, regulations, and program requirements.

Furthermore, the OIG's Compliance 101 web page is another rich resource. The page contains free educational materials that help healthcare providers, practitioners, and suppliers to better understand health care fraud and abuse laws and the consequences of violating them. These compliance education materials also offer ideas on how to foster a culture of compliance within a health care organization.