The Anti-Kickback Statute and Health Care Fraud

The Anti-Kickback Statute

The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), is a federal criminal law that prohibits the knowing and willful payment of any form of compensation (called “remuneration”) to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare/Medicaid or TRICARE patients).

Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal health care programs, paying for referrals is a crime. The statute covers the payers of kickbacks – those who offer or pay remuneration – as well as the recipients of kickbacks – those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the Anti-Kickback Statute.

According to the Centers for Medicare and Medicaid Services (CMS), Medicare pays $60 billion in fraudulent claims every year. This is roughly 10 percent of the annual Medicare budget. As a result, it is understandable why combating Medicare fraud is a top federal law enforcement priority, and this includes taking action against providers suspected of violating the Anti-Kickback Statute.

The kickback prohibition applies to all sources of referrals, even patients. For example, where the Medicare/Medicaid and TRICARE programs require patients to pay copays for services, the pharmacy is generally required to collect that money from patients. Routinely waiving these copays could implicate the Anti-Kickback Statute.

Potential Defenses to the Anti-Kickback Statute

Safe harbors protect certain payment and business practices that could otherwise implicate the Anit-Kickback Statute from criminal and civil prosecution. To be protected by a safe harbor, an arrangement must fit squarely in the safe harbor and satisfy all of its requirements. Some safe harbors address personal services and rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees.  The safe harbor that most pharmacists/doctors invoke is that the marketer to whom the doctor/pharmacist made payments is the doctor’s/pharmacist’s employee. To be an employee one must satisfy the requirements of federal tax laws.

In most cases, the government can conclusively establish that a pharmacist paid a marketer and that the marketer paid the doctor. Bank records show the money trail. Even in these situations, there may be a defense. The anti-kickback statute requires that the government show that a pharmacist acted “willfully.” In order to establish civil or criminal liability for a violation of the Anti-Kickback Statute, prosecutors must be able to prove that you knowingly and willfully gave, received, or solicited remuneration in exchange for a referral.

Recent Example in the Southern District of Florida

Recently, nine Florida residents were arrested after being charged by a federal grand jury in Miami with health care fraud and conspiracy to commit health care fraud. The fraud scheme allegedly involved approximately $37 million in fraudulent health care claims to Blue Cross Blue Shield by 30 South Florida physical therapy clinics.

According to the DOJ press release, from approximately 2018 to present, the defendants allegedly paid kickbacks to beneficiaries of health insurance plans managed by Blue Cross. They offered these kickbacks to employees of JetBlue Airways, AT&T Inc., and TJX Companies Inc. to induce the beneficiaries to serve as patients at various South Florida physical therapy clinics. The defendants who owned the clinics then submitted fraudulent health insurance claims to Blue Cross for health care benefits that were medically unnecessary and not even provided.

These defendants also allegedly paid kickbacks and bribes to their co-defendants in return for referring additional Blue Cross beneficiaries to the physical therapy clinics so more fraudulent health care claims could be submitted. These defendants also allegedly paid licensed massage therapists—who also were arrested this morning—to act as “nominee owners” and operators of the physical therapy clinics. This allowed the leaders of the scheme to avoid various medical clinic licensing requirements and attempt to evade criminal prosecution.

The indictments charge each defendant with multiple counts of conspiracy to commit health care fraud and health care fraud. If convicted, each defendant faces up to 10 years in prison per count. A federal district judge will determine any sentence after considering U.S. Sentencing Guidelines and other statutory factors.