Anti Kickback Statute (AKS)
The federal False Claims Act (31 U.S.C. § 3729 et seq.) is America’s oldest and most successful whistleblower reward program. The law allows individuals to sue government contractors who overcharge or otherwise defraud the government and share in 15-30% of the recovery. Tens of billions of dollars have been recovered under the law.
History of the Program
One of the most common forms of healthcare fraud occurs when providers submit claims induced by unlawful kickback arrangements. For example, if a hospital agrees to compensate a doctor based on his ability to steer patients to that hospital, such compensation would constitute an illegal kickback. If the hospital then bills a government program for patients referred by the doctor, the claims billed for those patients would violate the False Claims Act (“FCA”).
The basic purpose of the Anti-Kickback Statute (“AKS”) is to ensure that medical providers make patient referrals based on their best medical judgment. When the provider has a financial motive to refer a patient one place rather than another, it erodes trust in the entire health care system and runs the risk of patients receiving care that is low quality or perhaps unnecessary.
The AKS is drafted broadly to prohibit all forms of “remuneration” paid or offered in exchange for referrals. These prohibited forms of payment can include free or below-market rent, discounts not available to non-referring providers, profit-share agreements, consulting fees for minimal or non-existent work, and reimbursement for expenses that the providers would otherwise have to pay themselves.
AKS Basics and Its Interaction With the FCA
The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), is actually a criminal law, designed to criminalize both soliciting and receiving kickbacks. The law only applies in the health care setting and only when payment is made by a “Federal health care program” such as Medicare or Medicaid. A whistleblower pursuing an AKS-based action must be able to show that the defendants acted “knowingly and willfully”—though the law makes clear that a defendant does not need to know about the AKS or specifically intend to violate the statute in order to be liable.
One thing that makes kickback cases different from other types of FCA cases is that the focus is less on the specific services being provided and more on the financial ties between the treating and the referring providers. For example, if a whistleblower alleges that a hospital has paid kickbacks to a doctor to refer patients for cardiac surgery, the whistleblower does not have to prove that there was anything else wrong with any specific surgery (e.g., that it was medically unnecessary, that the hospital charged too much for it). In a kickback case, once the whistleblower can establish that the scheme as a whole violates the AKS, the claims resulting from that unlawful relationship that were billed to the Government are false claims.
AKS: A Complex Web of “Safe Harbors”
The basic rules established by the AKS are simple: do not pay kickbacks and do not demand kickbacks in exchange for healthcare referrals. But these straightforward rules are complicated by a number of different “safe harbors” that protect certain types of financial arrangements that might otherwise violate the statute.
Some common examples of safe harbors include:
- Payments from an employer to an employee (as compared to an independent contractor).
- Personal service agreements with compensation set in advance and not based upon actual or expected volume of referrals.
- Written lease agreements that are not based on actual or expected volumes of referrals.
- Co-pay waivers made on a good faith determination of financial need.
Safe harbors almost all have strict criteria, and because safe harbors are exceptions to the law, they are generally interpreted narrowly against those who assert them. At the same time, the fact that a financial relationship falls outside of any safe harbor does not mean that it automatically violates the AKS and FCA—it simply means that the relationship is susceptible to AKS and FCA liability.
Common Types of Kickback Schemes That Implicate the FCA
Kickback arrangements can take numerous different forms. Some common financial arrangements that have resulted in AKS and FCA liability include:
- Health care entities (such as a hospital, nursing home, clinic, etc.) paying a referring doctor to serve as a “medical director.”
- Pharmaceutical companies or medical device suppliers offering discounts that are specifically tied to the volume of products ordered.
- Offering to waive patients’ deductibles or co-pays on a routine basis and without any showing of financial hardship from the patients.
Kickback-based FCA cases can be quite complex, can often overlap with Stark Law allegations, and can involve numerous potential safe-harbor defenses. It is therefore important for whistleblowers looking to pursue AKS cases to have experienced FCA counsel on their side like the national leaders in health care fraud at Barrett Johnston Martin & Garrison, PLLC.