How to Convict Yourself of Violating the Anti-Kickback Statute

February 17, 2020

Oh, what a tangled web we weave
when first we practice to deceive!

I doubt that Sir Walter Scott was envisioning the future of American healthcare when he wrote those lines in his epic poem Marmion.

But he could have been.

They apply to kickback avoidance schemes all the time. Eventually, the web folds in on itself and someone ends up stuck.

Take for instance the highly instructive case of William Choi, M.D., a Colorado neurosurgeon.

To be fair to Choi, the case against him, at least so far, was civil only – a federal False Claims Act (“FCA”) lawsuit brought on behalf of the United States government by whistleblower Mark Rahe, a former employee of Dr. Choi’s medical practice and, later, of one of the medical device distributorships at the heart of the allegations.

On February 12, 2020, the United States Attorney for the District of Colorado announced that Choi and companies he owned paid the government $2.35 million to resolve whistleblower case allegations that Choi violated the federal Anti-Kickback Statute (the “AKS”) by receiving illegal kickbacks from distributors of spinal implant devices used in surgeries he performed.

The AKS prohibits any person or entity from knowingly and willfully offering, paying, soliciting, or receiving any remuneration, directly or indirectly, to induce or reward a person for, among other things, purchasing, ordering, arranging for, or recommending the purchase or ordering of any goods or services for which payment may be made, in whole or in part, under a federal health care program.

The AKS is criminal statute, violation of which can lead to prison time and significant fines. Proving a violation requires proving intent.

However, intent that can be inferred from the facts. 

Additionally, a violation of the AKS results in a violation of the FCA, a civil statute that permits whistleblowers to file suit on behalf of the government and share in any resulting settlement or judgment. The FCA provides for treble damages and significant civil penalties.

The FCA, and related AKS, allegations against Choi were that he arranged to receive unlawful kickbacks through the creation of spinal equipment distributorships purportedly owned by third parties. However, the claims were that Choi himself secretly maintained the true ownership and control of those distributorships and the money they made. Those distributorships provided spinal implants to hospitals for use in surgeries that Choi himself performed.

As a result, the government alleged that Choi solicited and received, through those distributorships, improper payments and other benefits that induced him to use the distributorships’ products. Furthermore, the government alleged that that conduct resulted in false claims for payments to federal health care programs in violation of the FCA.

Note that a civil settlement is just that – a settlement. It is not a conviction nor is it an admission by Choi of actual liability.

That said, the allegations in the Choi case read like a roadmap of what any physician should not do, that is, if he or she wants to avoid AKS/FCA allegations.

It doesn’t help any physician, whether or not you are involved in connection with a so-called POD, a “physician owned distributorship,” to participate in a scheme in which you insert a “straw man” owner to disguise your actual ownership and control of an entity with which you deal in the course of your practice.

A POD can’t be turned into a “non-POD,” nor any other owned entity turned into a non-owned-entity, by using a phony owner any more than can “salary” paid to a referring physician’s spouse who never shows up for “work” fit into the AKS’s employment agreement safe harbor.

In fact, it’s the equivalent of a red, blinking, neon sign that reads, “I have actual, specific, intent to violate the law.” And, sooner or later, someone will see it.

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