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Anti-Kickback Statute
Chris Esseltine(January 2015)
Overview
Anti-Kickback Statute (“AKS”)– Prohibitions– Penalties– Safe harbors
Applying AKS to common situations Responding to potential AKS problems Action items Questions?
Preliminaries
Written materials.– .ppt slides– Anti-Kickback Statute, 42 USC 1320a-7b.– Regulations, 42 CFR 1001.952 et seq.– OIG Supplemental Compliance Program Guidance for
Hospitals (70 FR 4858).– OIG, Roadmap for Physicians: Avoiding Fraud and Abuse.
Presentation will be recorded and available for download at www.hhhealthlawblog.com.
If you have questions, please submit them using chat line or e-mail me at [email protected].
Preliminaries
This program provides an overview of the relevant law. Read the law, regulations and advisory opinions or consult
with qualified expert when applying the law to facts. Consider other applicable laws, e.g.,
– Ethics in Patient Referrals Act (“Stark”)– Civil Monetary Penalties Law (“CMP”)– State laws
This program does not establish an attorney-client relationship.
This program does not constitute the giving of legal advice.
Anti-Kickback Statute
Anti-Kickback Statute
Prohibits knowingly and willfully soliciting, receiving, offering or paying any remuneration directly or indirectly, overtly or covertly, in cash or in kind to any person to induce referrals for items or services for which payment may be made in whole or in part under a Federal health care program unless transaction fits within regulatory exception.
(42 USC 1320a-7b(b))
Violated if “one purpose” of the remuneration is to induce or reward referrals unless transaction fits within regulatory exception.
(U.S. v. Greber (3d Cir. 1985))
Anti-Kickback Statute
Anytime you want to:• Give anything to induce or reward
referrals, or• Do any deal with a referral source.
Anti-Kickback Statute:Penalties CRIMINAL offense – Felony 5 years in prison $25,000 fine(42 USC 1320a-7b(b)) AKS violation = Civil Monetary Penalties Law violation
– $50,000 civil administrative penalty– 3x damages– Exclusion from Medicare/Medicaid
(42 USC1320a-7a(a)(7)) AKS violation = False Claims Act violation
– Preponderance of evidence standard– $5,500 to $11,000 per violation– 3x damages– Qui tam lawsuit
U.S. v. Anderson (10th Cir. 2001).
Clinic paid two physicians who were substantial referral sources $75,000/year to serve as co-directors and consultants for geriatric department, but physicians performed few documented services.
Jury found AKS violations.– Physician 1: 6 years + $75,000 fine + $142,000
restitution.– Physician 2: 3 years + $25,000 fine.– Clinic CEO: 4 years + $75,000 fine.– Clinic CFO: acquittal reversed.– Clinic attorney: acquitted.
Anti-Kickback Statute
Intent to induce referral for services or items paid by government health program unless transaction is structured to fit within regulatory safe harbor.
Referrals
Remuneration
Affected Entities
Applies to anyone who solicits, receives, offers or pays with intent to induce or reward referrals for federal program business.– Providers– Vendors– Managers or administrators– Marketing personnel– Patients– Attorneys– Anyone else
Applies to participants on both sides of the transaction.
Remuneration
Applies to any form of remuneration in exchange for referrals for federal program business.– Money– Contracts for services– Leases– Free or discounted items or services (e.g., perks, gifts,
meals, insurance, trips, CME, etc.)– Overpayments or underpayments (e.g., not fair market
value)– Payments if no services provided or required– Waivers of copays or deductibles– Low interest loans– Business opportunities– Anything else of value…
Referrals
Applies to referrals for items or services covered by federal health care program.– Medicare– Medicaid– Other federal programs
Limiting a financial arrangement to non-Medicare/Medicaid patients does not necessarily insulate the arrangement from AKS scrutiny.
(Adv. Op. 12-06)
Caution: state anti-kickback statutes may apply to any payor source.
Intent
Must “knowingly and willfully” solicit, receive, offer or pay remuneration in exchange for referrals.– Do not need actual knowledge of the law or specific
intent to commit a violation of the law.– Ignorance of the law is not an excuse.
(42 USC 1320a-7b(b) and (h)).
Violated if “one purpose” of the remuneration is to induce or reward referrals unless transaction fits within regulatory exception.
(U.S. v. Greber (3d Cir. 1985))
Difficult to disprove intent…
Safe Harbors
No liability if satisfy all the requirements of a safe harbor.
Not required to fit within safe harbor since ultimate question is whether “one purpose” of remuneration was to induce referrals.– May comply with AKS even if do not fit within safe
harbor.
The closer you come to satisfying regulatory requirements, the safer you will be.
Safe Harbors
Exceptions and safe harbors– Bona fide employment– Personal services contracts– Leases for space or equipment– Investments in group practice– Investments in ASCs– Sale of practice– Recruitment– Certain investment interests– Waiver of beneficiary coinsurance and deductible
amounts.(42 CFR 1001.952)
Safe Harbors
Exceptions and safe harbors (cont.)– OB malpractice insurance subsidies– Referral services– Referral arrangements for specialty services– Warranties– Discounts– Group purchasing organizations– Price reductions offered to health plans and MCOs– Ambulance replenishing– Health centers– Electronic health record items or services
(42 CFR 1001.952)
Unsafe Harbors
No de minimus safe harbor.– But not too much risk if remuneration is negligible.
No substantial risk of federal program abuse.– Due to nature of transaction.– Incorporate safeguards to protect against abuse.
No “fair market value” safe harbor.– “Fair market value” payment does not legitimize a
payment if there is an illegal purpose. (70 FR 4864)– But fairly safe if remuneration represents fair market
value for legitimate, needed services or items.– Does not factor in continuing or future referrals from
seller.
Fair Market Value
“When considering the question of fair market value, … the traditional or common methods of economic valuation do not comport with the prescriptions of the anti-kickback statute. Items ordinarily considered in determining the fair market value may be expressly barred by the anti-kickback statute's prohibition against payments for referrals…. The fact that a buyer in a position to benefit from referrals is willing to pay a particular price may only be a reflection of the value of the referral stream that is likely to result from the purchase. Accordingly, when attempting to assess the fair market value (as that term is used in an anti-kickback analysis) …, it may be necessary to exclude from consideration any amounts which reflect, facilitate or otherwise relate to [payment for referrals].”
(OIG Letter dated 12/22/92)
Advisory Opinions
OIG may issue advisory opinions.– Listed on OIG fraud and abuse website,
www.oig.hhs.gov/fraud.
Not binding on anyone other than participants to the opinion.
But you are probably fairly safe if act consistently with favorable advisory opinion.
https://oig.hhs.gov/compliance/advisory-opinions/index.asp
Advisory Opinions
Published advisory opinions cover such things as:– On-call coverage arrangements– Waiving copays or deductibles– Prompt pay discounts– Gainsharing arrangements– Recruitment arrangements– Joint venture arrangements– Free screenings or tests– Free transportation or other services for patients– Free services to other providers– Free IT to physician offices– Support for financially needy patients
Opinions are fact-specific, but offer guidance.
Fraud Alerts, Bulletins, etc.
OIG periodically publishes other:– Special Fraud Alerts– Bulletins– Open Letters– Listed on OIG fraud and abuse website,
www.oig.hhs.gov/fraud. Provide guidance concerning OIG’s enforcement
position.
https://oig.hhs.gov/compliance/alerts/index.asp
Fraud Alerts, Bulletins, etc.
Offering gifts or inducements to program beneficiaries Hospital incentives to referring physicians Routine wavier of copayments/deductibles Discounts to financially needy patients Joint venture relationships Contractual joint ventures Gainsharing Vendor marketing practices Rental of space in physician offices Fraud and abuse in nursing home arrangements Exclusion from participation in federal programs
Anti-Kickback Statute:Analysis
1. Is there remuneration to or from a potential referral source?
2. Do any of the parties to the arrangement make referrals for items or services covered by federal healthcare programs?
3. Is “one purpose” of the arrangement to induce or reward referrals for federal healthcare programs?
4. Does the transaction fit within a regulatory safe harbor?
5. Is there an applicable advisory opinion, fraud alert or other published guidance that provides some protection?
Applying Anti-Kickback Statute to Common Situations
Applying AKS to Common Relationships
As we consider these situations, ask yourself:– Do we have such relationships?– Do our relationships fit the requirements of the
applicable safe harbor? Remember Stark.
– If transaction involves physician or a physician’s family member, likely need to comply with Stark.
– Stark safe harbors have additional requirements.
Employment Agreements
Compensation paid by employer to employee. Bona fide employment relationship.(42 CFR 1001.952(i))
What is bona fide employment relationship?– Compensation represents fair market value for
services provided, not based on referrals?– Employment for legitimate, needed services?
Services Agreements (Independent Contractors) Written agreement signed by the parties. Agreement specifies the services to be provided. If services provided on periodic basis rather than fulltime,
agreement specifies schedule, precise length, and charges. Term is not less than one year. Aggregate compensation is:
– set in advance– consistent with fair market value– not determined in a manner that takes into account the
volume or value of referrals for federal program business Aggregate services do not exceed those that are reasonable
to accomplish commercially reasonable purpose.(42 CFR 1001.952(d))
Kosenske v. Carlisle HMA (E. Dist. Pa. 2010)
Hospital contracted with anesthesiologists to provide anesthesiology services. Hospital provided free space, equipment and personnel. Years later, physician services were expanded to affiliated pain clinic, but no new contract executed. Physician brought qui tam case based on Stark and AKS violation.
Court denied motions for summary judgment, holding that fact issues remained concerning Stark and AKS violations.– No written contract covering pain clinic
services.– Hospital provided free space, equipment, and
personnel.
Leases for Space or Equipment
Written lease signed by parties. Lease specifies space or equipment. If leased on periodic basis, lease specifies the exact
schedule, precise length, and exact rent. Term is not less than one year. Aggregate rent is:
– set in advance– consistent with fair market value– not determined in a manner that takes into account the
volume or value of referrals for federal program business Aggregate space or equipment does not exceed that which is
reasonable to accomplish commercially reasonable purpose.
(42 CFR 1001.952(b)-(c))
Leases for Space or Equipment(cont.)“Fair market value” = For space: “value of rental property for general commercial
purposes, but shall not be adjusted to reflect the additional value that one party (either the prospective lessee or lessor) would attribute to the property as a result of its proximity or convenience to sources of referrals or business otherwise generated for which payment may be made in whole or in part under Medicare, Medicaid and all other Federal health care programs.”
For equipment: “value of equipment when obtained from a manufacturer or professional distributor, but shall not be adjusted to reflect the additional value that one party (either the prospective lessee or lessor) would attribute to the equipment as a result of its proximity or convenience to sources of referrals or business otherwise generated for which payment may be made in whole or in part under Medicare, Medicaid and all other Federal health care programs.”
(42 CFR 1001.952(b)(6) and (c)(6))
U.S. ex rel. Singh v. Bradford Reg. Med. Ctr. (W. Dist. Pa. 2010)
Physicians leased their own nuclear camera. Hospital subleased the camera. Based on accountant’s fair market valuation which considered anticipated referrals from the physicians, hospital paid $6500/month to sublease the camera; $24,000/month for a non-compete; and $2500/month to rent space even though agreement required camera to be located at hospital.
Physicians brought qui tam lawsuit alleging Stark and Anti-Kickback Statute violations.
In 2010, court held the arrangement took into consideration anticipated referrals and violated Stark; jury to decide violations of the Anti-Kickback Statute.
Investment in Group Practice
Equity interests in group must be held by licensed health care professionals who practice in the group.
Equity interests must be in group itself, not some subdivision of the group.
Qualify as a “group practice” under the Stark rules, 42 CFR 411.352.
Be a unified business with centralized decision-making, pooling of expenses and revenues, and compensation/profit distribution system that is not based on satellite offices operating as separate enterprises or profit centers.
Revenues from ancillary services, if any, must be derived from in-office ancillary services that meet definition in Stark.
(42 CFR 1001.952(p))
Ambulatory Surgery Centers
Investments in ASC. Operating and recovery room space is dedicated
exclusively to the ASC. Patients referred by an investor are informed of investor’s
interest. Satisfy specific requirements depending on:
– Surgeon-owned ASCs– Single-specialty ASCs– Multi-specialty ASCs– Hospital/physician ASCs
(42 CFR 1001.952(r))
Investment Interests
No more than 40% of investment interests during prior year may be held by investors who are in a position to refer or generate business for entity.
No more than 40% of revenues during prior year come from investor referrals.
Same terms offered to passive investors whether or not they can refer business to entity.
Terms are not related to previous or expected volume of referrals or other business generated for entity.
No requirement to refer or generate business for entity. Cannot loan funds to investor to acquire investment. Returns directly proportional to capital investment.
(42 CFR 1001.952(a)(2))
Investment Interests(cont.)
Several Advisory Opinions have approved investment interests in joint venture by referral sources where certain safeguards are in place, e.g., – Employees are prohibited from making or are not
required or encouraged to make referrals to joint venture entity.
– Parties do not track referrals.– Compensation does not take into account referrals.– Employees are informed of the limits on periodic basis.
(See, e.g., Adv. Ops. 01-21, 03-2) No guarantee of protection!
Recruitment
Recruit into a HPSA. Written agreement signed by parties. At least 75% of revenues come from new patients. Benefits provided for no more than 3 years. Terms not renegotiated during the 3-year term. Cannot require referrals to entity, but can require that recruit
maintain medical staff membership. Cannot restrict practitioner from establishing privileges at or
making referrals to any other entity. Compensation does not vary based on referrals. Cannot discriminate against federal program beneficiaries. At least 75% of revenues come from HPSA, MUA or MUP. Cannot benefit another entity in a position to make referrals.
(42 CFR 1001.952(n))
Recruitment
It is difficult to satisfy recruitment safe harbor.– Limited to HPSA.– Limited to primary care.– Cannot recruit into existing group.
Very important to document legitimate reasons for joint recruitment arrangement, e.g., community need.
U.S. v. Tenet Health (S. Dist. Cal. 2003)
Government alleged that over a 10 year period, hospital improperly paid excessive amounts to recruit 100 physicians, many of whom joined existing practices. For example, in some cases, the practices were paid for remodels which never occurred.
After two mistrials, Tenet agreed to pay $21 million and sell the hospital.
Additional Safe Harbors
Waiver of beneficiary coinsurance or deductible amounts. Obstetrical malpractice insurance. Referral services. Warranties. Discounts. Group purchasing organizations. Price reductions to MCOs. Community-wide health information systems. Electronic prescribing items and services. Electronic health records items and services. Health centers. Others.(42 CFR 1001.952)
State Anti-Kickback Statutes
Most states have their own anti-kickback statutes, e.g.,– Medicaid fraud statutes– Medical practices acts– Fee splitting / rebating statutes– Others
May be broader than federal AKS– May extend to private payors– May not contain safe harbors
Check state laws!
Responding to a Potential AKS Problem
Anytime you want to:• Give anything to induce or reward
referrals, or• Do any deal with a referral source.
If you think you have an AKS problem… Don’t ignore it or attempt to sweep under rug.
– Remember the False Claims Act penalties? Don’t submit claims to Medicare or Medicaid until situation
resolved. If possible, suspend arrangement until questions resolved. Evaluate the situation carefully.
– Confirm facts.– Review AKS for possible exceptions.– As necessary, seek qualified expert advice.– May consider or seek Advisory Opinion, but rare...
As necessary, revise the arrangement going forward. If necessary, repay CMS…
Repayment Obligation
CMS: “[W]e note the following with regard to overpayments that arise due to a violation of the anti-kickback statute. Compliance with the anti-kickback statute is a condition of payment. Claims that include items and services resulting from a violation of this law are not payable and constitute false or fraudulent claims for purposes of the False Claims Act.”
(77 FR 9183-84)
Payments received in violation of the AKS are overpayments and subject to the ACA’s new report and repayment rule.
Repayment Obligation
False Claims Act: – Must report and repay “overpayment” within 60 days.– Overpayment = payment to which you are not entitled,
including payment in violation of Anti-Kickback Statute. Knowing failure to repay =
– Violation of False Claims Act $5,500 to $11,000 per claim 3x damages
– Violation of Civil Monetary Penalties Law $10,000 per claim
See CMS’s Proposed Repayment Rule, 77 FR 9179 (2/16/12)
Repayment Obligation
“To the extent that a provider or supplier who is not a party to a kickback arrangement has sufficient knowledge of the arrangement to have identified the resulting overpayment, the provider or supplier must report the overpayment to CMS … [If] the provider has not identified the kickback or if it reported it when it did identify the kickback, our expectation is that only the parties to the kickback scheme would be required to repay the overpayment that was received by the innocent provider or supplier, except in the most extraordinary circumstances.”
(77 FR 9183-84)
OIG Self-Disclosure Protocol
Voluntary program to self-report violations. SDP should only be used to resolve matters that
“potentially violat[e] Federal, criminal or civil or administrative laws. Matters exclusively involving overpayments or errors that do not suggest that violations of law have occurred should be brought directly to the attention of the [contractor].” (63 FR 58400)– Generally, SDP applies to violations that involve:
Actual knowledge Reckless disregard Deliberate ignorance
– Not honest mistakes or errors.(63 FR 58399; Letters dated 4/15/08 and 3/24/09)
AKS requires “knowing and willful” misconduct
OIG Self-Disclosure Protocol
Benefits OIG may reduce penalties if
fully disclose and cooperate. Probably no corporate integrity
agreement. May preclude qui tam lawsuits. Suspends repayment under
Proposed Repayment Rule.
Risks Minimum $50,000 settlement for
AKS violations. OIG may broaden investigation. New matters discovered by OIG
are outside protocol. Failure to fully disclose or
cooperate may result in additional penalties.
OIG may report to other government agencies.
Participation is burdensome. Likely will waive of privilege.
https://oig.hhs.gov/compliance/self-disclosure-info/index.asp
Action Items
Action Items
Identify existing remunerative relationships with referral sources (e.g., providers, facilities, vendors, beneficiaries).– Contracts (employment, independent contractors,
purchasing, management, etc.).– Leases (space, equipment, etc.).– Subsidies or loans.– Joint ventures or partnerships.– Free or discounted items or services (e.g., use of space,
equipment, personnel or resources; professional courtesies; insurance; gifts or perks; advertising; etc.).
– Marketing programs.– Others?
Action Items
Review relationships for compliance, including:– No improper intent.– Written contract that is current and signed by parties.– Compliance with terms of contract.
Parties providing required services. Documentation confirming that services provided.
– Fair market value.– Compensation not based on volume or value of
referrals.– Arrangement is commercially reasonable and serves
legitimate business purpose.
Action Items
Implement method to track and monitor relationships with referral sources for compliance.– Central repository for contracts or deals.– Method to track contract termination dates.– Process for confirming compliance before payments to
or receipt of payments from referral sources.– Require review and approval by compliance officer,
attorney or other qualified individual. Contracts. Joint transactions with referral sources. Benefits or perks to referral sources. Marketing or advertising.
Action Items
Ensure your compliance policies address AKS.– See, e.g., OIG Supplemental Hospital Compliance
Program Guidance, 70 FR 4858 (2005). Train key personnel regarding AKS compliance.
– Administration.– Compliance officers and committees.– Human resources.– Physician relations and medical staff officers.– Marketing / public relations.– Governing board members.– Purchasing.– Accounts payable.
Document training.
Action Items
If you think you have a problem:– See comments above….
Additional Resources
https://oig.hhs.gov/compliance/
OIG Website
Compliance 101 series OIG Compliance Program Guidance
– OIG Supplemental Compliance Program Guidance for Hospitals, 70 FR at 4863-69
– OIG Compliance Program Guidance for Physicians
Advisory Opinions Special Fraud Alerts Fraud Bulletins Letters Other materials
Additional Holland & Hart Resources
Future webinars– Health Law Basics monthly webinar series– 2/28 Civil Monetary Penalties Law– 3/14 Physician Contracts– 4/11 HIPAA– 5/9 EMTALA
Healthcare Update and Health Law Blog– Under “Publications” at www.hollandhart.com.– E-mail me at [email protected].
Questions?
Chris Esseltine
Holland & Hart LLP
(801) 799-5848
