Anti-Kickback and Stark Law Issues

Two of the most important Federal fraud and abuse laws that apply to health care providers are the federal Anti-Kickback Statute (AKS) and the Physician Self-Referral Law (Stark law).

The federal Anti-Kickback Statute is a criminal statute that prohibits the exchange (or offer to exchange) of anything of value in an effort to induce (or reward) the referral of federal health care program business.  The Anti-Kickback Statute is broadly drafted and establishes penalties for individuals and entities on both sides of the prohibited transaction. Conviction for a single violation under the Anti-Kickback Statute may result in a fine of up to $25,000 and imprisonment for up to five (5) years. In addition, a conviction will lead to a mandatory exclusion from participation in federal health care programs, and can have significant negative professional licensure implications. Individuals who violate the Anti-Kickback Statute may also face administrative penalties, including large civil monetary penalties and exclusion from federal health care programs. The civil money penalties can include treble damages plus $50,000 for each violation of the Anti-Kickback Statute.  Furthermore, although the Anti-Kickback Statute does not directly afford a private right of action, the False Claims Act provides a vehicle whereby individuals may bring qui tam (whistleblower) actions alleging violations of the Anti-Kickback Statute.

In recognition of the broad range of transactions potentially implicated by the Anti-Kickback Statute, certain types of arrangements are excluded from prohibitions in the statute. Additionally, the HHS Office of Inspector General (OIG) has been given authority to adopt “safe harbors” to protect specifically identified business and financial arrangements from criminal and civil prosecution, provided they fall within parameters designed to minimize the risk for potential corruption.  Transactions not specifically excluded or granted safe harbor protection are not per se violations of the Anti-Kickback Statute, and have to be evaluated on a case-by-case basis to determine compliance. It is important to keep in mind that if any purpose of the transaction – even if it’s a secondary purpose — is to induce referrals, it may constitute a violation of the Anti-Kickback Statute. Thus, a compliance review should be a regular part of any contract negotiation between persons in a position to refer in the health care industry.

In addition to the federal AKS, the state of Florida has its own version of the AKS which has to be considered. Unlike the federal AKS which, only applies to federal health care programs, the Florida statutes apply to all payers, even self-pay. Thus, the Florida statute has broader reach. Also, the Florida version of the AKS has somewhat different exceptions than the federal AKS.

The “Stark Law” is the common industry name utilized in referring to the federal prohibition against physician self-referrals of Medicare patients.  The Stark law is designed to addresses the inherent conflicts of interest that exist when a physician stands to gain financially from making patient care referrals.  Broadly speaking, the Stark law prohibits physicians from making referrals to an entity for the furnishing of “designated health services” (DHS) payable by Medicare, if the physician (or an immediate family member of the physician) has a financial relationship with the entity.  Correspondingly, in addition to prohibiting the physician’s action in making the referral, the Stark Law prohibits any provider from submitting claims for payment to Medicare for services provided as the result of a prohibited referral.  The prohibition contained in the Stark Law is broad and sweeping in application.  However, numerous statutorily defined exceptions exist, permitting certain narrowly defined financial arrangements between providers.  Failure to comply with the Stark anti-referral prohibition can result in denial of payment, mandatory refunds, civil monetary penalties and/or exclusion from participation in the Medicare program.  Additionally, just as with the Anti-Kickback Statute, alleged Stark violations are frequently the basis for cases filed under the False Claims Act.

In addition to the federal Stark law, the state of Florida also has a statute that prohibits physician self-referrals. Like the Florida version of the AKS, the Florida physician self-referral statute applies to all payers. The Florida physician self-referral statute has its own list of exceptions, which in important respects, differ from the Stark exceptions. Thus, both statutes have to be considered when evaluating a potential self-referral scenario.

Government agencies, including the Department of Justice, HHS-OIG, and the Centers for Medicare & Medicaid Services (CMS), are charged with enforcing the federal laws.  It is crucial to understand and comply with these laws, not only because following them is the right thing to do, but also because (as discussed above) violating them could result in criminal penalties (in the case of the AKS), civil fines, exclusion from the Federal health care programs, and/or loss of license(s) from state licensing boards.  Indeed, there are myriad civil and criminal enforcement actions in recent history that aptly demonstrate that failure to comply with either or both the AKS and Stark will result in severe sanctions.

In this ever challenging regulatory and enforcement environment, Nicholson & Eastin, LLP provides compliance reviews to health care providers regarding their existing and proposed arrangements, and identify potential risk areas and compliance concerns.  We specifically review arrangements to determine their appropriateness under the Federal Anti-Kickback Statute, Stark Law, the Florida Patient Brokering Act, the Florida physician self-referral law, and other related legal authorities.

Please do not hesitate to contact us for a consultation to assess whether any of your existing or proposed arrangement are compliant.