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Anti-Kickback Statute and Stark Law

Whistleblowers can report violations of the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) and Stark Law (42 U.S.C. § 1395nn) using the False Claims Act. Broadly speaking, the Anti-Kickback and Stark laws prohibit 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.

Both laws are designed to keep medical treatment decisions free from the influence of potential monetary gain. Kickbacks and other unlawful financial arrangements give providers reasons to send patients for services they might not actually need.  They can lead to overutilization, increased program costs, and poor medical decision-making.  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.”

While both laws cover unlawful financial arrangements, there are important distinctions between them.

The Anti-Kickback Statute

The Anti-Kickback Statute covers a broader range of activity than the Stark Law, and extends to all medical providers in a position to arrange or recommend medical services. “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.”  While the Anti-Kickback Statute covers a broad range of activity, it also requires a showing of an “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.

The Stark Law

Under the Stark Law, “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.” In addition, the Stark Law applies only to relationships with physicians.  Unlike the Anti-Kickback Statute, however, the Stark Law flatly prohibits a broad range of financial relationships, and does not require proof of an intent to induce referrals.  Determining whether a particular financial relationship runs afoul of the Stark Law, however, can be more technically complicated.

What is a kickback or unlawful financial arrangement?

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.

Blowing the whistle on unlawful financial arrangements and kickbacks

Whistleblowers play a critical role in exposing violations of the Anti-Kickback Statue and Stark laws.  Classic examples of violations of these laws 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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