I n an ideal world, doctors would be paid equitably for their services, they would refer patients to other physicians based on the consultant’s competence and appositeness, and, lastly, they would enter relationships with other physicians and medical suppliers founded on the optimization of medical and societal value. However, in the real world, some physicians and suppliers expect bribes, kickbacks and compensation to refer patients, to buy supplies and to perform medical services already paid for by insurance reimbursement. In my March column, which was the first of a four-part series on federal legislation to combat health care fraud and abuse, I offered an explanation of the False Claims Act and discussed how it applies to healthcare claims. This article will discuss the Anti-Kickback Statute (AKS) that prohibits kickbacks by Medicare and Medicaid service providers. The Stark Law will be covered in the next two articles. Exploring the Anti-Kickback Statute The False Claims Act and the Anti-Kickback Statute differ in important fashions. See Table 1, “Three Laws at a Glance” for specific distinctions. Importantly, while the False Claims Act refers to reimbursements for services that are billed to the government, the Anti-Kickback Statute applies to transactions between private parties. Although neither the Anti-Kickback Statute nor the Stark Law contains a private right of action, some courts nonetheless have permitted qui tam plaintiff/relators to base qui tam actions on alleged violations of these provisions. The Anti-Kickback Statute is a federal statute that makes it illegal to knowingly and willfully pay, solicit or receive any remuneration, directly or indirectly, in return for furnishing or arranging for any healthcare services for which payment may be made by Medicare or Medicaid. In contrast, criminal violation of the Anti-Kickback Statute is a felony, punishable by up to 5 years in prison and a fine of up to $25,000. Alternatively, the government has the authority to impose a fine of up to $50,000 for each AKS violation, plus not more than three times the remuneration. As a criminal law, the Anti-Kickback Statute requires the defendant’s solicitation or receipt of prohibited remuneration to be done in a knowing and willful manner — a stringent mens rea (intent) standard. The Anti-Kickback Statute broadly defines “remuneration” and applies to any kickback, bribe, discount, or rebate, in cash or in kind. The AKS covers direct and indirect remuneration so that any benefit conferred on one party by another constitutes “remuneration.” This expansiveness enjoins a full analysis of the entire financial web of a financial transaction. Even if only one party receives federal reimbursement and one other party makes referrals, orders goods or services or generate businesses, the AKS can apply. What Constitutes Reimbursement? Reimbursement can cover discounts for volume and offers of preferential pricing on prepackaged or bundled goods and services. Courts have interpreted the Anti-Kickback Statute to prohibit any otherwise legitimate remuneration for goods or services rendered if “one purpose” of the payment is to induce the referral, furnishing, leasing or similar activities of goods or services paid by the Medicare or Medicaid programs. It is possible that with the Medicare drug benefit, dermatologists will no longer be able to attend meetings as paid consultants with payment for travel and lump sums for lost practice time because such payments might be deemed remuneration for writing prescriptions. When the remuneration between the parties is not fair market value, this raises flags for AKS prosecutors that the reimbursement compensates for referrals. Fair market value under the Anti-Kickback Statute is generally defined as that remuneration in an arms’ length transaction that is not determined in a manner that takes into account the volume or value of Medicare or Medicaid services generated between the parties. So, for example, if a dermatologist sent out his dermatopathology work and received a $1 rebate for every slide sent, the AKS would come into play. If a Mohs surgeon gave free biopsy kits to a general dermatologist, the AKS would come into play. The AKS does not per se prohibit a compensation scheme. Per procedure, per order, per purchase and percentage of revenue compensation methodologies can transgress the AKS because these schemes inherently vary with volume or value. So, if for example a dermatologist paid $100 a dose of a drug used for photodynamic therapy if he or she bought one PDT light unit, and $80 a dose for the same drug if he or she bought two PDT light units, and $60 a dose for the same drug if he or she bought four light units, then the AKS might apply. There are regulatory “safe harbors,” i.e. payment practices that are excluded from the definition of “remuneration.” However, even if a scheme evades definition in a “safe harbors” it does not inherently violate the law — only that the AKS will interpret it on its merits. Safe harbors cover a few payment practices, are narrowly drawn and require arrangements to be in writing and remuneration to be fair market value. Under the AKS, the entire transaction must be “commercially reasonable” and possess a reasonable commercial purpose besides referral exchange. Nevertheless, laws are not black and white and the more reasonable and objective a practice, the less it will come in the AKS ambit. Identifying Practices in Violation of the AKS The Office of Inspector General (OIG) of the Department of Health and Human Services has issued fraud alerts, advisory opinions and statements that identify practices and arrangements that it considers potentially in violation of the Anti-Kickback Statute. Fraud alerts are the government’s enforcement positions on practices, but the government still has the right to examine an individual practice. The OIG forbids any payment, prize, reward, including any gift, or any offer of free goods or services if it is: • made to a person in a position to generate business for the paying party • related to the volume of business generated for the paying party • is more than nominal in value and/or exceeds fair market value of any legitimate service rendered to the paying party • is unrelated to any service at all other than generation of business for the paying party. Because of the central role of physicians under Medicare reimbursement rules, the OIG has also issued fraud alerts on the paying of incentives to physicians including: • providing physicians with: free or significantly discounted office space, equipment or staff, or free training for physician’s office staff • discounted loans or loan forgiveness tied to patient referrals; conference and/or continuing education expense reimbursement; insurance coverage at a below-standard cost • payment for services requiring few actual duties • a discounted price or a gift, coupon, bonus or cash payment to physicians in exchange for or based on prescribing or ordering specific products • cash or other benefits in exchange for performing sales-oriented, educational or patient outreach marketing • in-office technicians, computers and/or fax machines at no charge, unless it can be shown that the staff or equipment is integral to the service being provided by the supplier • limits are placed and monitored to assure staff and equipment are used by physicians only for the purposes of using or ordering the supplier’s product. Avoiding a Problem There are ways to avoid the strictures of the AKS. As I stated in my last article (Skin & Aging March 2005;(13)3: 26-28), dermatologists should assess their practices using a public knowledge test. For example, would a question of bribery arise if a practice was known by the federal authorities? Anything free and substantial (not pens or Post-It Notes) that you receive from another party should provoke self-scrutiny. The guidelines this article provides are a good way to start to apply in a self-assessment test. If you try to follow governmental guidelines and published opinions, it will be difficult for the government to make a case for fraudulent intent. If you have major questions query an attorney knowledgeable on the AKS.
Applying the Anti-Kickback Statute
I n an ideal world, doctors would be paid equitably for their services, they would refer patients to other physicians based on the consultant’s competence and appositeness, and, lastly, they would enter relationships with other physicians and medical suppliers founded on the optimization of medical and societal value. However, in the real world, some physicians and suppliers expect bribes, kickbacks and compensation to refer patients, to buy supplies and to perform medical services already paid for by insurance reimbursement. In my March column, which was the first of a four-part series on federal legislation to combat health care fraud and abuse, I offered an explanation of the False Claims Act and discussed how it applies to healthcare claims. This article will discuss the Anti-Kickback Statute (AKS) that prohibits kickbacks by Medicare and Medicaid service providers. The Stark Law will be covered in the next two articles. Exploring the Anti-Kickback Statute The False Claims Act and the Anti-Kickback Statute differ in important fashions. See Table 1, “Three Laws at a Glance” for specific distinctions. Importantly, while the False Claims Act refers to reimbursements for services that are billed to the government, the Anti-Kickback Statute applies to transactions between private parties. Although neither the Anti-Kickback Statute nor the Stark Law contains a private right of action, some courts nonetheless have permitted qui tam plaintiff/relators to base qui tam actions on alleged violations of these provisions. The Anti-Kickback Statute is a federal statute that makes it illegal to knowingly and willfully pay, solicit or receive any remuneration, directly or indirectly, in return for furnishing or arranging for any healthcare services for which payment may be made by Medicare or Medicaid. In contrast, criminal violation of the Anti-Kickback Statute is a felony, punishable by up to 5 years in prison and a fine of up to $25,000. Alternatively, the government has the authority to impose a fine of up to $50,000 for each AKS violation, plus not more than three times the remuneration. As a criminal law, the Anti-Kickback Statute requires the defendant’s solicitation or receipt of prohibited remuneration to be done in a knowing and willful manner — a stringent mens rea (intent) standard. The Anti-Kickback Statute broadly defines “remuneration” and applies to any kickback, bribe, discount, or rebate, in cash or in kind. The AKS covers direct and indirect remuneration so that any benefit conferred on one party by another constitutes “remuneration.” This expansiveness enjoins a full analysis of the entire financial web of a financial transaction. Even if only one party receives federal reimbursement and one other party makes referrals, orders goods or services or generate businesses, the AKS can apply. What Constitutes Reimbursement? Reimbursement can cover discounts for volume and offers of preferential pricing on prepackaged or bundled goods and services. Courts have interpreted the Anti-Kickback Statute to prohibit any otherwise legitimate remuneration for goods or services rendered if “one purpose” of the payment is to induce the referral, furnishing, leasing or similar activities of goods or services paid by the Medicare or Medicaid programs. It is possible that with the Medicare drug benefit, dermatologists will no longer be able to attend meetings as paid consultants with payment for travel and lump sums for lost practice time because such payments might be deemed remuneration for writing prescriptions. When the remuneration between the parties is not fair market value, this raises flags for AKS prosecutors that the reimbursement compensates for referrals. Fair market value under the Anti-Kickback Statute is generally defined as that remuneration in an arms’ length transaction that is not determined in a manner that takes into account the volume or value of Medicare or Medicaid services generated between the parties. So, for example, if a dermatologist sent out his dermatopathology work and received a $1 rebate for every slide sent, the AKS would come into play. If a Mohs surgeon gave free biopsy kits to a general dermatologist, the AKS would come into play. The AKS does not per se prohibit a compensation scheme. Per procedure, per order, per purchase and percentage of revenue compensation methodologies can transgress the AKS because these schemes inherently vary with volume or value. So, if for example a dermatologist paid $100 a dose of a drug used for photodynamic therapy if he or she bought one PDT light unit, and $80 a dose for the same drug if he or she bought two PDT light units, and $60 a dose for the same drug if he or she bought four light units, then the AKS might apply. There are regulatory “safe harbors,” i.e. payment practices that are excluded from the definition of “remuneration.” However, even if a scheme evades definition in a “safe harbors” it does not inherently violate the law — only that the AKS will interpret it on its merits. Safe harbors cover a few payment practices, are narrowly drawn and require arrangements to be in writing and remuneration to be fair market value. Under the AKS, the entire transaction must be “commercially reasonable” and possess a reasonable commercial purpose besides referral exchange. Nevertheless, laws are not black and white and the more reasonable and objective a practice, the less it will come in the AKS ambit. Identifying Practices in Violation of the AKS The Office of Inspector General (OIG) of the Department of Health and Human Services has issued fraud alerts, advisory opinions and statements that identify practices and arrangements that it considers potentially in violation of the Anti-Kickback Statute. Fraud alerts are the government’s enforcement positions on practices, but the government still has the right to examine an individual practice. The OIG forbids any payment, prize, reward, including any gift, or any offer of free goods or services if it is: • made to a person in a position to generate business for the paying party • related to the volume of business generated for the paying party • is more than nominal in value and/or exceeds fair market value of any legitimate service rendered to the paying party • is unrelated to any service at all other than generation of business for the paying party. Because of the central role of physicians under Medicare reimbursement rules, the OIG has also issued fraud alerts on the paying of incentives to physicians including: • providing physicians with: free or significantly discounted office space, equipment or staff, or free training for physician’s office staff • discounted loans or loan forgiveness tied to patient referrals; conference and/or continuing education expense reimbursement; insurance coverage at a below-standard cost • payment for services requiring few actual duties • a discounted price or a gift, coupon, bonus or cash payment to physicians in exchange for or based on prescribing or ordering specific products • cash or other benefits in exchange for performing sales-oriented, educational or patient outreach marketing • in-office technicians, computers and/or fax machines at no charge, unless it can be shown that the staff or equipment is integral to the service being provided by the supplier • limits are placed and monitored to assure staff and equipment are used by physicians only for the purposes of using or ordering the supplier’s product. Avoiding a Problem There are ways to avoid the strictures of the AKS. As I stated in my last article (Skin & Aging March 2005;(13)3: 26-28), dermatologists should assess their practices using a public knowledge test. For example, would a question of bribery arise if a practice was known by the federal authorities? Anything free and substantial (not pens or Post-It Notes) that you receive from another party should provoke self-scrutiny. The guidelines this article provides are a good way to start to apply in a self-assessment test. If you try to follow governmental guidelines and published opinions, it will be difficult for the government to make a case for fraudulent intent. If you have major questions query an attorney knowledgeable on the AKS.
I n an ideal world, doctors would be paid equitably for their services, they would refer patients to other physicians based on the consultant’s competence and appositeness, and, lastly, they would enter relationships with other physicians and medical suppliers founded on the optimization of medical and societal value. However, in the real world, some physicians and suppliers expect bribes, kickbacks and compensation to refer patients, to buy supplies and to perform medical services already paid for by insurance reimbursement. In my March column, which was the first of a four-part series on federal legislation to combat health care fraud and abuse, I offered an explanation of the False Claims Act and discussed how it applies to healthcare claims. This article will discuss the Anti-Kickback Statute (AKS) that prohibits kickbacks by Medicare and Medicaid service providers. The Stark Law will be covered in the next two articles. Exploring the Anti-Kickback Statute The False Claims Act and the Anti-Kickback Statute differ in important fashions. See Table 1, “Three Laws at a Glance” for specific distinctions. Importantly, while the False Claims Act refers to reimbursements for services that are billed to the government, the Anti-Kickback Statute applies to transactions between private parties. Although neither the Anti-Kickback Statute nor the Stark Law contains a private right of action, some courts nonetheless have permitted qui tam plaintiff/relators to base qui tam actions on alleged violations of these provisions. The Anti-Kickback Statute is a federal statute that makes it illegal to knowingly and willfully pay, solicit or receive any remuneration, directly or indirectly, in return for furnishing or arranging for any healthcare services for which payment may be made by Medicare or Medicaid. In contrast, criminal violation of the Anti-Kickback Statute is a felony, punishable by up to 5 years in prison and a fine of up to $25,000. Alternatively, the government has the authority to impose a fine of up to $50,000 for each AKS violation, plus not more than three times the remuneration. As a criminal law, the Anti-Kickback Statute requires the defendant’s solicitation or receipt of prohibited remuneration to be done in a knowing and willful manner — a stringent mens rea (intent) standard. The Anti-Kickback Statute broadly defines “remuneration” and applies to any kickback, bribe, discount, or rebate, in cash or in kind. The AKS covers direct and indirect remuneration so that any benefit conferred on one party by another constitutes “remuneration.” This expansiveness enjoins a full analysis of the entire financial web of a financial transaction. Even if only one party receives federal reimbursement and one other party makes referrals, orders goods or services or generate businesses, the AKS can apply. What Constitutes Reimbursement? Reimbursement can cover discounts for volume and offers of preferential pricing on prepackaged or bundled goods and services. Courts have interpreted the Anti-Kickback Statute to prohibit any otherwise legitimate remuneration for goods or services rendered if “one purpose” of the payment is to induce the referral, furnishing, leasing or similar activities of goods or services paid by the Medicare or Medicaid programs. It is possible that with the Medicare drug benefit, dermatologists will no longer be able to attend meetings as paid consultants with payment for travel and lump sums for lost practice time because such payments might be deemed remuneration for writing prescriptions. When the remuneration between the parties is not fair market value, this raises flags for AKS prosecutors that the reimbursement compensates for referrals. Fair market value under the Anti-Kickback Statute is generally defined as that remuneration in an arms’ length transaction that is not determined in a manner that takes into account the volume or value of Medicare or Medicaid services generated between the parties. So, for example, if a dermatologist sent out his dermatopathology work and received a $1 rebate for every slide sent, the AKS would come into play. If a Mohs surgeon gave free biopsy kits to a general dermatologist, the AKS would come into play. The AKS does not per se prohibit a compensation scheme. Per procedure, per order, per purchase and percentage of revenue compensation methodologies can transgress the AKS because these schemes inherently vary with volume or value. So, if for example a dermatologist paid $100 a dose of a drug used for photodynamic therapy if he or she bought one PDT light unit, and $80 a dose for the same drug if he or she bought two PDT light units, and $60 a dose for the same drug if he or she bought four light units, then the AKS might apply. There are regulatory “safe harbors,” i.e. payment practices that are excluded from the definition of “remuneration.” However, even if a scheme evades definition in a “safe harbors” it does not inherently violate the law — only that the AKS will interpret it on its merits. Safe harbors cover a few payment practices, are narrowly drawn and require arrangements to be in writing and remuneration to be fair market value. Under the AKS, the entire transaction must be “commercially reasonable” and possess a reasonable commercial purpose besides referral exchange. Nevertheless, laws are not black and white and the more reasonable and objective a practice, the less it will come in the AKS ambit. Identifying Practices in Violation of the AKS The Office of Inspector General (OIG) of the Department of Health and Human Services has issued fraud alerts, advisory opinions and statements that identify practices and arrangements that it considers potentially in violation of the Anti-Kickback Statute. Fraud alerts are the government’s enforcement positions on practices, but the government still has the right to examine an individual practice. The OIG forbids any payment, prize, reward, including any gift, or any offer of free goods or services if it is: • made to a person in a position to generate business for the paying party • related to the volume of business generated for the paying party • is more than nominal in value and/or exceeds fair market value of any legitimate service rendered to the paying party • is unrelated to any service at all other than generation of business for the paying party. Because of the central role of physicians under Medicare reimbursement rules, the OIG has also issued fraud alerts on the paying of incentives to physicians including: • providing physicians with: free or significantly discounted office space, equipment or staff, or free training for physician’s office staff • discounted loans or loan forgiveness tied to patient referrals; conference and/or continuing education expense reimbursement; insurance coverage at a below-standard cost • payment for services requiring few actual duties • a discounted price or a gift, coupon, bonus or cash payment to physicians in exchange for or based on prescribing or ordering specific products • cash or other benefits in exchange for performing sales-oriented, educational or patient outreach marketing • in-office technicians, computers and/or fax machines at no charge, unless it can be shown that the staff or equipment is integral to the service being provided by the supplier • limits are placed and monitored to assure staff and equipment are used by physicians only for the purposes of using or ordering the supplier’s product. Avoiding a Problem There are ways to avoid the strictures of the AKS. As I stated in my last article (Skin & Aging March 2005;(13)3: 26-28), dermatologists should assess their practices using a public knowledge test. For example, would a question of bribery arise if a practice was known by the federal authorities? Anything free and substantial (not pens or Post-It Notes) that you receive from another party should provoke self-scrutiny. The guidelines this article provides are a good way to start to apply in a self-assessment test. If you try to follow governmental guidelines and published opinions, it will be difficult for the government to make a case for fraudulent intent. If you have major questions query an attorney knowledgeable on the AKS.
