All healthcare providers and other businesses in the healthcare industry need to comply with the Anti-Kickback Statute (AKS). The AKS imposes criminal penalties for knowing and willful violations, and even inadvertent violations can expose practitioners, business owners, and others to substantial civil monetary penalties and even expose liabilities under the False Claims Act. The Anti-Kickback Statute is extremely broad in scope; and, while there are “safe harbors” that authorize certain specific types of financial relationships and transactions, providers and other businesses must strictly comply with these safe harbors in order to avoid civil or criminal liability.

This Ultimate Guide to the Anti-Kickback Statute provides an in-depth introduction to what practitioners and business owners need to know about AKS compliance. After reading it, you should have a good understanding of what it takes to manage an effective Anti-Kickback Statute compliance program as well as what you can do to minimize your risk of facing AKS-related penalties in the event of a federal healthcare audit or investigation.

“All entities involved in the U.S. healthcare industry need to comply with the Anti-Kickback Statute. In most cases, this requires a proactive approach based on a clear understanding of the statute’s prohibitions and the regulatory ‘safe harbors’ that exempt certain types of financial relationships and transactions.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

The Anti-Kickback Statute: What It Covers (and What It Doesn’t)

The Anti-Kickback Statute prohibits referral fees in the federally funded healthcare industry. As the Department of Health and Human Services’ Office of Inspector General (HHS OIG) plainly states, “in the Federal health care programs, paying for referrals is a crime.”

Crucially, however, it isn’t a crime in all cases. In some cases, violations of the Anti-Kickback Statute carry civil (rather than criminal) penalties; and, as discussed in detail below, certain financial relationships and transactions are exempt from punishment by the federal government under the Anti-Kickback Statute’s safe harbor regulations.

With that said, the Anti-Kickback Statute is extremely broad as far as federal laws go. For this reason, healthcare providers and other entities cannot safely assume that any individual financial transaction or relationship with government healthcare programs falls outside of its scope. Under the plain language of the statute, both individuals and businesses can face prosecution for engaging in financial transactions or relationships that involve any form of remuneration offered, solicited, paid, or accepted for:

• “[R]eferring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or
• “[P]urchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program . . . .”

The Anti-Kickback Statute’s definition “remuneration” covers essentially all forms of compensation—both financial and non-financial—and includes “transfers of items or services for free or for other than fair market value.” While there are exceptions, these exceptions are fairly limited; and, as a result, they will only provide protection in limited circumstances.

While the Anti-Kickback Statute is extremely broad in scope, it does not cover all referral fees (and other forms of remuneration) paid between entities and individuals in the healthcare industry. Notably, however, if a financial transaction or relationship isn’t covered under the Anti Kickback Law, it may be covered under another federal statute. For example, the Stark Law governs referral arrangements between physicians and related entities that provide designated health services, and the Eliminating Kickbacks in Recovery Act (AKRA) imposes additional prohibitions on referral arrangements involving clinical treatment facilities, laboratories, and recovery homes.

Two Options for Managing Anti-Kickback Statute Compliance

Given the Anti-Kickback Statute’s broad applicability within the healthcare industry, entities and individuals in the industry essentially have two options for managing compliance: (i) they can avoid financial relationships and transactions that fall under the AKS altogether; or, (ii) they can focus on ensuring compliance with applicable AKS safe harbors.

Option #1: Avoid Transactions that Fall Under the Anti-Kickback Statute’s Prohibitions

The first option is simply to avoid transactions that fall under the Anti-Kickback Statute’s prohibition on remuneration paid in exchange for federally funded healthcare services, items, or supplies. However, from a practical perspective, this option won’t be feasible for the vast majority of providers and other businesses that rely on reimbursements from Medicare, Medicaid, Tricare, or any other federal healthcare benefit program. The Anti-Kickback Statute is simply too broad, and there are too many scenarios in which managing a profitable business or practice will require use of the AKS’s regulatory safe harbors.

Option #2: Establish Compliance with Applicable Anti-Kickback Statute Safe Harbors

The second option, and the only practical option for most entities, is to establish compliance with all applicable Anti-Kickback Statute safe harbors. While the AKS broadly prohibits referral fees paid for federally reimbursed healthcare business, the statute’s safe harbors exempt many types of transactions—including transactions that are essential to day-to-day business for most entities. For example, there are safe harbors that allow financial transactions and relationships involving:

• Investment interests and payments to investors
• Facility and equipment rentals and leasing
• Personal services and management agreements
• Employee compensation agreements
• Vendor agreements
• Sale of physician practices
• Practitioner recruitment
• Discounts and price reductions
• Group purchasing organizations
• Referral agreements for specialty services
• Electronic health records and other nonmonetary electronic items and services

However, establishing Anti-Kickback Statute compliance is not simply a matter of identifying a relevant safe harbor. Each of the safe harbors has specific requirements that healthcare providers and other entities must meet—and that they must be prepared to prove they have met when necessary. In many cases, this includes entering into a written agreement that clearly establishes compliance with the relevant substantive requirements. As a result, establishing Anti-Kickback Statute compliance through the use of the statute’s regulatory safe harbors requires a proactive approach based on a clear and comprehensive understanding of the law.

Understanding the Risks of Non-Compliance

At this point, you might be wondering about the risks of non-compliance. What happens if your practice or business enters into a financial transaction or relationship (or you personally enter into a financial transaction or relationship) that violates the Anti-Kickback Statute?

The short answer is, “It depends.”

As noted earlier in this Ultimate Guide to the Anti-Kickback Statute, violations present risks for both civil and criminal enforcement. To pursue criminal penalties, federal prosecutors must be able to prove that a defendant acted “knowingly and willfully.” Crucially, this does not mean that the defendant must have known that the transaction or relationship at issue violated the AKS. Rather, the statute provides that knowingly and willfully offering, paying, soliciting, or accepting unlawful remuneration on its own can be enough to sustain criminal charges in appropriate cases. When criminal prosecution is warranted, violations of the Anti-Kickback Statute carry:

• Up to a $100,000 fine, and
• Up to 10 years of federal imprisonment.

If a violation of the Anti-Kickback Statute is inadvertent, the statute’s criminal penalties do not apply. However, each of the parties involved can still face civil penalties in the event of an HHS OIG audit or federal law enforcement investigation. Under the federal Civil Monetary Penalties Law (CMPL), non-willful violations of the Anti-Kickback Statute can carry penalties including:

• Fines of up to $50,000 per violation
• Liability for restitution (repayment of improperly obtained federal funds)
• Treble damages (three times the amount of the government’s losses)

Violations of the Anti-Kickback Statute can lead to scrutiny of entities’ other Medicare, Medicaid, and Tricare-related practices as well; and, if an audit or investigation reveals billing violations or other issues, this could lead to additional civil or criminal charges. Additionally, licensed healthcare providers found liable for AKS violations can face professional disciplinary action—up to and including license revocation in some cases.

Taking a Proactive Approach to Anti-Kickback Statute Compliance

With all of this in mind, a proactive approach to Anti-Kickback Statute compliance is critical. To get started, healthcare providers and others in the healthcare industry should:

1. Create an Inventory of All Relevant Transactions and Relationships (Both Documented and Undocumented)

Medical providers and other entities should begin by creating an inventory of all transactions and relationships with potential federal Anti-Kickback Statute implications. Due to the statute’s breadth, it is important to work with legal counsel during this process to ensure that no relevant transactions or relationships involving government health care programs go overlooked.

2. Assess the Current State of Anti-Kickback Statute Compliance Within Their Practice or Organization

After identifying all relevant existing transactions and relationships, a key next step is to assess the organization’s current state of Anti-Kickback Statute compliance. If any covered transactions or relationships do not fall within an AKS safe harbor, it will be essential to remedy this issue as soon as possible.

3. Work with Their Counsel to Implement an Effective AKS Compliance Program

Once compliance has been confirmed for all existing transactions and relationships, healthcare providers and other entities will need to work with their counsel to maintain compliance on an ongoing basis. This itself is a multi-step process that involves internal monitoring, internal auditing, and structuring all new covered transactions and relationships with a specific safe harbor in mind. In the event of an external audit or investigation, having clear documentation of compliance readily available will be one of the keys to avoiding unnecessary consequences.