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Provision of Staff, Payment of Expenses Leads to Federal Anti-Kickback Statute Violation

February 29, 2016

The federal Anti-Kickback Statute (the “AKS”) makes it a crime to pay remuneration to induce a referral of a federal health care program patient.

Many mistakenly believe that the AKS focuses only on cash remuneration, as in “here’s $100 for the case.” They believe that it’s somehow okay for a referral-receiving physician or group to contribute toward, or pay the cost of, an “expense” relating to the referred service. This could take many forms, such as payment for the referring party’s expenses, or providing staff to work in the referring party’s office or facility.

In a classic example, an anesthesia group is asked to provide personnel to help move patients from the OR to post-op in an ASC. Or, the anesthesia group is asked to contribute toward the cost of anesthesia drugs. Or, a pathologist is asked to pay rent for the use of space in an ASC in connection with Mohs surgery.

From time to time, the Office of Inspector General of the U.S. Department of Health & Human Services (the “OIG”), the agency charged with enforcing the AKS, issues Fraud Alerts to warn providers of commonly seen compliance lapses. A June 2015 Fraud Alert aims directly at physician compensation arrangements.

The Fraud Alert grew out of a spate of OIG settlements with physicians concerning alleged illegal compensation arrangements.

The Fraud Alert reminded that compensation must be at fair market value for bona fide services the physician actually provides. The arrangement can’t take into account the volume or value of referrals.

The OIG also restated its long held position that an otherwise legitimate compensation arrangement may violate the AKS if even one purpose is to violate the AKS, that is to compensate for past or future referrals. In other words, fitting completely into a safe harbor might not be sufficient to protect you.

In addition to other schemes, the OIG focused on the non-cash bribe scenario discussed above: The instance in which the referral recipient or an affiliate pays expenses which are actually those of the referring physician or medical group. The cited example was payment for the physician’s front office staff. Relief from overhead is equivalent to a payment of like amount.

Penalties for violation of the AKS include jail time, criminal fines, civil monetary penalties and debarment from participation in federally funded health care programs.

What passes as common knowledge in this area does not come close to comprehending the complexity of AKS compliance.

In my experience, the other party to one of these deals often claims, rightly or wrongly, that the deal has been “approved by our healthcare counsel.” Maybe they’re lying. Maybe they’re telling the truth and their lawyers are clueless; the lawyers certainly won’t go to jail for their client.

Be very careful when entering into any arrangement with a referral source or a recipient of your referrals. Get experienced healthcare counsel involved at the earliest point.

What often looks like a great business opportunity for you can actually be a wonderful opportunity for a whistleblower.

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