Defending against an alleged violation of the Anti-Kickback Statute
The Anti-Kickback Statute (AKS) is a foundational federal law combatting fraud and abuse in the U.S. healthcare system. Violations can result in big fines, exclusion from federal healthcare programs and even prison.
This guide will break down the AKS, provide real-world examples of violations, and highlight defense strategies.
What is the Anti-Kickback Statute?
The Anti-Kickback Statute is a federal law to prevent fraudulent practices in healthcare.
The statutory language for the Anti-Kickback Statute (AKS) is found in 42 U.S.C. § 1320a-7b(b). The AKS aims to protect patients and federal healthcare programs, like Medicare and Medicaid, from exploitation and corruption.
What is a Violation?
The AKS prohibits offering, paying, soliciting or receiving anything of value to influence referrals for items or services covered by federal healthcare programs. This includes kickbacks, hidden discounts or improperly structured contracts even if the connection to the payment is indirect.
Important: Violations don’t require proof of financial harm. Wrongful intent alone—the goal of inducing referrals—is enough to trigger liability. If even “one purpose” of a payment arrangement is to influence referrals, the AKS is violated.
Core Elements of the AKS
To understand the AKS, one needs to know its key components:
Intent: The AKS focuses on the intent behind a payment or arrangement. Even if there are legitimate purposes behind a payment, the law is violated if one of the purposes is to influence referrals or generate business for which payment may be made under federal healthcare programs.
Remuneration: This means anything of value, not just direct cash payments. It can include gifts, entertainment, trips or even free services, as long as it is tied to influencing referrals or business generation.
Referrals: The AKS specifically targets arrangements tied to referrals made to a party for items or services covered by federal healthcare programs. This element includes direct referrals and situations where financial incentives are disguised within seemingly unrelated transactions.
Federal Healthcare Program Payments: The AKS applies to any payment received under federal healthcare programs like Medicare or Medicaid. It ensures that patient care decisions are not influenced by improper financial motives.
Who does the AKS apply to?
The Anti-Kickback Statute (AKS) applies to individuals and entities involved in federal healthcare programs. Specifically it applies to:
Healthcare Providers: Physicians, nurses and other medical professionals who refer patients for services or items covered by federal healthcare programs, like Medicare or Medicaid.
Healthcare Organizations: Hospitals, clinics, and other healthcare facilities that provide services reimbursed by federal programs.
Pharmaceutical and Medical Device Companies: Manufacturers and suppliers of drugs, devices and medical equipment that interact with healthcare providers or organizations.
Laboratories: Diagnostic labs that perform tests reimbursed by federal healthcare programs.
Third-Party Vendors: Any entity or individual offering goods or services to healthcare providers or organizations like billing companies or consultants.
Anyone Offering or Receiving Remuneration: The AKS applies to anyone who knowingly and willfully offers, pays, solicits or receives remuneration to induce or reward referrals for services or items covered by federal healthcare programs.
Real-Life Examples of AKS Violations
The “One Purpose Test” under the Anti-Kickback Statute (AKS) is a legal principle used to determine if a payment or arrangement violates the statute. According to this test:
If one purpose of a payment or remuneration is to induce or reward referrals for services or items covered by federal healthcare programs, the arrangement may violate the AKS, even if there are other legitimate purposes for the payment.
Intent Matters: The AKS is an intent-based statute, meaning the government must prove that at least one purpose of the payment was to improperly influence referrals.
No Need for Sole Purpose: The payment does not need to be solely for the purpose of inducing referrals. Even if the payment serves multiple legitimate purposes, the presence of an improper intent can trigger a violation.
Broad Application: This test makes the AKS particularly broad and strict, as it captures arrangements where improper intent is just one factor among many.
Examples of Anti-Kickback Statute Violations
1. Cash Payments for Referrals
A medical device company offers cash bonuses to physicians for each Medicare or Medicaid patient they refer for devices supplied by the company. This payment is a direct financial incentive for referrals, violating the Anti-Kickback Statute.
2. Free Services to Induce Referrals
A laboratory provides free medical testing services to healthcare providers’ offices, with the expectation that the providers will refer Medicare patients to the lab for future paid services. Offering free services to gain referrals breaches the statute.
3. Sham Consulting Agreements
A pharmaceutical company enters into a consulting agreement with a physician. The physician receives significant payments, but there are no legitimate consulting duties performed. The agreement is a disguise for kickbacks to drive future prescriptions for the company’s medications, making it an AKS violation.
4. Overpriced Rent to Gain Network Access
A hospital rents office space to local physicians at a rate well above fair market value. The inflated rent is intended to incentivize the physicians to refer patients to the hospital for federally reimbursable services, violating federal regulations.
5. Lavish Gifts for Referrals
A medical supplier provides lavish entertainment, such as all-expense-paid trips, to doctors who agree to exclusively order their products for Medicare patients. This indirect form of remuneration creates a prohibited quid pro quo arrangement.
6. Improper Discounts on Products and Services
A durable medical equipment provider offers steep discounts on products sold to a physician practice, contingent upon the practice referring a set number of Medicare patients. Conditional discounts tied to referrals are not protected and breach the statute.
These scenarios illustrate typical behaviors prohibited under the Anti-Kickback Statute. Each example involves offering or receiving something of value to improperly influence decisions regarding federally funded healthcare programs.
Defense Strategies
When facing an AKS allegation, a solid defense strategy is essential. Here are initial pointers:
1. Carefully Analyze the Indictment’s Allegations
Review the indictment in detail to understand the alleged violations. Look at the alleged transactions or arrangements to determine if they fall under the definition of remuneration under the AKS. Analyze how the government is interpreting the wrongful intent behind the alleged actions. Understanding how the government intends to prove wrongful intent is key to building a strong defense.
2. Undercut Lack of Intent
Since intent is at the heart of AKS violations, a defense should aim to show that any financial arrangements were legitimate and not related to referrals. Defense evidence of lawful intent can weaken the prosecution’s case.
Proving Lack of Intent at Trial
Proving lack of intent at trial requires a strategic presentation of evidence and arguments to show no willful misconduct. Start by introducing exhibits that support the transparency of financial arrangements, such as contracts or compliance audits done before the allegations. Testimony from credible witnesses, including compliance officers or percipient witnesses, can reinforce that all actions were done in good faith and in line with regulatory standards. Expert testimony on industry-standard practices or precedents can also show that the arrangements in question were common and not indicative of illegal intent.
4. Use Expert Testimony
Get industry experts to testify as a defense witness. Expert testimony can explain in simple terms the general legitimacy of the at-issue financial arrangements. Such testimony can support the argument that no wrongful intent existed to violate the AKS.
3. Use Safe Harbor Protections
The AKS has “safe harbor” provisions that shield certain transactions from liability if they meet specific criteria. Examples include:
Fair Market Value Exceptions: Payments for legitimate services (e.g. consulting) made at fair market value.
Investment Interests: Properly structured healthcare venture investments.
Personal Services Agreements: Long-term, well-documented agreements.
The defense’s goal should be to prove that the charged transactions fall within a safe harbor. Evidence on this point can include detailed records of all transactions, agreements and communications related to the activity in question. For example, in a fair market value exception, contracts should spell out the scope of services, payment terms and ensure the compensation is in line with industry standards (and not for referrals).
4. Attack the Evidence
Examine the prosecution’s evidence, including financial records, contracts and witness testimony. Highlighting inconsistencies, circumstantial evidence or weak links can undermine the case.
Conclusion
Violating the Anti-Kickback Statute comes with severe penalties, from big fines to exclusion from federal healthcare programs. An excellent defense starts with knowledge of the law, uncovering favorable facts to the defense, and exploiting holes in the government’s proof. The stakes are high. But with the right legal team and a solid strategy, favorable outcomes are more likely.
Need help? Scott Armstrong, an experienced healthcare fraud attorney. Scott is a defense attorney for medical professionals in federal healthcare cases involving healthcare fraud and violations of the Anti-Kickback Statute. To defend individuals in these cases, Scott relies on his litigation experience in Miami, Chicago, Houston, Denver, DC, Alexandria, Newark, Nashville, Knoxville, Detroit, Columbus, Los Angeles, and New York.
