False Healthcare Claims Submitted in Violation of the Anti-Kickback Statute and Stark Law

A common form of healthcare fraud actionable under the False Claims Act comes from violations of the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) and Stark Law (42 U.S.C. § 1395nn). Broadly speaking, the Anti-Kickback and Stark laws collectively prohibit hospitals, physicians, pharmacies, nursing homes, durable medical equipment (DME) companies, pharmaceutical (drug) companies, medical device manufacturers, and other medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare and Medicaid.

There are important distinctions between the two laws. Generally, the Anti-Kickback Statute covers a broader range of activity than the Stark Law. For example, “referrals” under the Anti-Kickback Statute include “any item or service for which payment may be made in whole or in part under a Federal health care program.” Under the Stark Law, covered referrals are limited to certain types of medical services, such as lab testing, hospital services, prescription drugs, and durable medical equipment, defined as “designated health services.” Additionally, the Anti-Kickback statute extends to all medical providers in a position to arrange or recommend medical services, while the Stark Law applies only to relationships with physicians.

While the Anti-Kickback Statute covers a broader range of activity than the Stark Law, it also requires a higher showing of intent to induce referrals. The Anti-Kickback Statute is violated where something of value is “knowingly and willfully” provided with a purpose to induce referrals. Whereas the Stark Law flatly prohibits a broad range of financial relationships without requiring intent to induce referrals. Determining whether a particular financial relationship runs afoul of the Stark Law, however, can be more technically complicated.

The differences between the Anti-Kickback and Stark laws and their nuances require significant experience with both statutes to understand, analyze, and develop a False Claims Act case involving these issues. The core analysis, however, looks at the same fundamental question: was something of value provided to induce federal and/or state health care referrals? This “thing of value” can be as simple as cash, or as complex as a carefully constructed physician employment agreement or the right to invest in a profitable joint venture. Basically, anything of value to a person in a position to refer, such as cheap office space, patients referred to him/her, a free employee, or a fat bonus, can classify as an illegal inducement under the Anti-Kickback and Stark laws.

Both laws are designed to keep medical treatment decisions free from the influence of potential monetary gain. As the Department of Justice has explained, “[p]atients are entitled to be sure that the care they receive is based on their actual medical needs rather than the financial interests of their physician.”

Classic examples of violations of the Anti-Kickback Statute and/or Stark Law include:

  • Hospitals, nursing homes, labs, dialysis centers, drug or DME companies paying kickbacks to doctors through big salaries or “consulting” fees to serve as Medical Directors, Proctors, or “consultants,” where the doctors do little actual, useful work;
  • Hospitals, nursing homes, labs, dialysis centers, drug or DME companies offering doctors in a position to make referrals the opportunity to buy into surgical centers, distributorships, joint ventures, or other investment opportunities on favorable financial terms — especially if those terms depend on the amount of business the doctor will refer;
  • Hospitals paying their employed physicians salaries or “performance bonuses” tied directly or indirectly to the number of x-rays, lab tests, or procedures ordered at the hospital;
  • Hospitals, dialysis companies, or other providers buying physician practices for inflated prices, with a requirement that the physician continue to work at the practice and refer business to the hospital or dialysis company;
  • Hospitals offering physicians below-market-rate rent for office space, free access to clinical or administrative support staff, or other special deals on overhead expenses;
  • Drug companies, DME companies, and providers of skilled therapy paying nursing homes for long term contracts to provide services to nursing home patients, or giving the nursing homes free or low cost access to consulting pharmacists, therapists, or other clinical or support staff to access their patient populations;
  • Drug companies paying kickbacks to pharmacies (retail or specialty) to get them to switch patients’ prescriptions;
  • Drug companies paying kickbacks to insurers to get on their formularies;
  • Payments by specialty pharmacies, DME suppliers, therapy centers, nursing homes, etc. to patient recruiters or to patients directly.

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