Call it a bad dream. Called a nightmare. Just don’t sleepwalk into a violation of the federal anti-kickback statute (“AKS”).
The AKS, a criminal statute, makes it illegal to knowingly and willfully offer, pay, solicit or receive any remuneration to induce a person:
(1) to refer an individual to a person for the furnishing of any item or service covered under a federal health care program; or
(2) to purchase, lease, order, arrange for or recommend any good, facility, service, or item covered under a Federal health care program.
Although violation of the AKS can lead to fines and penalties, including imprisonment, the law can also be enforced civilly by way of a federal False Claims Act (i.e., “whistleblower”) lawsuit.
Even though the AKS has been in existence since the early 1970’s, many subject to it appear to be prone to violate it. In part that’s because it’s possible to sleepwalk into some less than completely obvious violations of the law. Note, though, that these sorts of violations are neither secret nor esoteric; they just don’t rise to the attention-getting level of bags of cash, phony marketing agreements, and payments for “educational presentations” that last fewer than 29 seconds.
A recently settled whistleblower action alleging an underlying violation of the AKS provides an illustration of the type of arrangement that is perfectly legal in many industries and professions, but which was alleged to be illegal in the healthcare context.
The settlement involves the agreement of Philips RS North America LLC, formerly known as Respironics, Inc. (“Respironics”), a nationwide manufacturer of sleep and respiratory durable medical equipment (“DME”), to pay $1,283,825.40 to settle allegations that it unlawfully induced referrals for its equipment in violation of the AKS and the False Claims Act. In addition, Respironics entered into a five-year Corporate Integrity Agreement (“CIA”) with the Department of Health & Human Services’ Office of Inspector General (“OIG”). The CIA requires Respironics to implement and maintain a robust compliance program that includes, among other things, review of arrangements with referral sources and monitoring of Respironics’ sales force. The CIA also requires Respironics to retain an independent monitor, selected by the OIG, to assess the effectiveness of Respironics’ compliance systems.
Note that the settled allegations were just allegations – Respironics did not admit to any wrongdoing, none was proved, and Respironics was never criminally charged.
Specifically, the government alleged that Respironics helped a customer DME supplier procure a twelve-month, interest-free loan that was fully guaranteed by Respironics. Under the arrangement, Respironics bore the full financial risk of non-collection on the loan in the event the DME supplier defaulted on the loan. The United States contended this arrangement violated the Anti-Kickback Statute and, in turn, the False Claims Act. Note that it wasn’t alleged that Respironics made good on the customer’s loan.
The takeaway here is that although it’s relatively easy for physicians, medical group leaders, facility administrators, and others subject to the AKS to quicky understand that outright bribes and kickbacks of the cash-in-the-envelope variety are illegal, it’s another thing for many to think carefully enough to realize that they need to very carefully vet, through experienced counsel, what appear to be routine transactions.
Examples of arrangements of this sort, those into which one could sleepwalk, include providing commercially unreasonable free rent under lease arrangements, providing financing for facility investments, entering into credit enhancement arrangements, or providing simple marketing support, can lead to criminal and civil liability.
Make obtaining an AKS analysis as much a part of a deal as you make putting on a seatbelt part of driving. Be safe out there.
