The attorneys at DiRuzzo & Company reviews potential transactions, proposed ownership arrangements, employment/independent contractor agreements, financial incentive programs, and referral systems for compliance with the Federal Anti-Kickback Statute. We obtain advisory opinions from the Office of the Inspector General, provide written opinion letters on potential transactions, and advise on how to structure transaction to ensure compliance with federal and state law.

The federal health care Anti-Kickback Statute, 42 U.S.C. § 1320a-7b, is a federal criminal statute imposing criminal penalties for acts involving federal health care programs. The Anti-Kickback Statute is a general intent criminal statute (i.e. “specific intent” is not needed). 42 U.S.C. § 1320a-7b(h). Violation of the statute is a felony that can also subject one to administrative sanctions, including exclusion from participation in federal health care programs and civil monetary penalties. See 42 U.S.C. § 1320a-7.

The genesis of Anti-Kickback Statute stemmed from congressional concern that payoffs to those who can influence decisions about the delivery of health care goods and services would result in goods and services being provided that are medically unnecessary, of poor quality, or even harmful to a vulnerable patient population. First enacted in 1972 as part of the Social Security Act, the statute was strengthened in 1977 and 1987 to ensure that kickbacks masquerading as legitimate transactions did not evade its reach.

The Anti-Kickback Statute prohibits any person from “knowingly and willfully” offering or paying “remuneration” in the form of a kickback, bribe, rebate, or anything of value, to induce the recipient to refer, arrange for, or recommend a health care item or service covered under a federal health care program. 42 U.S.C. § 1320a-7b(b)(2). The statute similarly prohibits solicitation and receipt of “remuneration” paid for those purposes. 42 U.S.C. § 1320a-7b(b)(1).

To prove a subsection (b)(2) violation, the Government must show that the party paying or offering the remuneration intended to induce a referral of health care business. The crux of the statute is inducement—the statute prohibits health care providers from generating business, i.e., sales or services for which it will bill federal health care programs, by making payments that Congress determined would compromise the professional judgment of referral sources. Courts construing the statute have determined that such conduct is sufficiently corrupting that the statute is violated if one purpose of the remuneration was to induce referrals; it need not be the sole or even the primary purpose for the transaction. The Government must also prove that the defendant engaged in the prohibited transaction “knowingly and willfully,” i.e., that he or she acted unjustifiably and with knowledge that such conduct was wrongful.

Because of the statute’s breadth, Congress created statutory exceptions for conduct deemed to be non-abusive, including certain discounts, bona fide wages, certain managed care risk arrangements and, most recently, dealings with federally qualified health centers. The Secretary of U.S. Department of Health and Human Services (“HHS”) was directed by Congress to promulgate regulations specifying payment practices that shall not be treated as a criminal offense. 42 U.S.C. § 1320a-7b(b)(3)(D). The Anti-Kickback Statute regulations identify non-abusive payment practices that will not be subject to criminal prosecution nor provide a basis for administrative exclusion. See 42 C.F.R. § 1001.952. These “safe harbor” regulations list specific criteria for certain financial relationships between a provider and a referral source that, if met, protect the participants from prosecution regardless of their intent.

Congress has provided a mechanism to seek advisory opinions. The only parties to the proposed arrangement are entitled to seek an Office of Inspector General Advisory Opinion. 42 C.F.R. § 1008.11. Each request must specifically identify all actual parties to the transaction. 42 C.F.R. § 1008.36. Copies of all relevant agreements and operative documents must also be provided. 42 C.F.R. § 1008.36. Summaries of any oral agreements or understandings must also be provided. All the material submitted is subject to being made public. 42 C.F.R. § 1008.47. Advisory opinions can address whether the remuneration involved is a kickback, whether an arrangement satisfies the terms of a safe harbor or exception to the anti-kickback provision, or whether the activity is otherwise subject to sanction under the fraud and abuse laws. 42 C.F.R. § 1008.5(a). Office of Inspector General will not, however, render an opinion on whether fair market value has been paid or whether an individual is a bona fide employee. 42 C.F.R. § 1008.5(b).

Additionally, the Affordable Care Act amended the Anti-Kickback Statute so that a violation of the Anti-Kickback Statute automatically qualifies as a violation of the civil False Claims Act. 42 U.S.C. § 1320a-7b(g).