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The federal government heavily regulates healthcare, pharmaceutical, and medical device industries. Regulation involves several complex laws. Many of these laws target fraud and abuse by healthcare providers and industry players. They are designed to prevent bribes and kickbacks in federal healthcare programs. One of them is the Anti-Kickback Statute.

The Anti-Kickback Statute, or AKS for short, is a criminal statute that prohibits transactions meant to induce or reward referrals for healthcare items and services. The statute aims to penalize the knowing and willful solicitation of remuneration, also known as kickbacks. While fancy dinners, contributions to a client’s favorite charity, or other luxury perks may be acceptable in other fields, they can trigger violations of the statute in the healthcare context.

Prohibited Actions under the Anti-Kickback Statute

Because the Anti-Kickback Statute is an intent-based statute, the government must establish knowing and willful solicitation of kickbacks to impose penalties. But the government need not demonstrate that the defendant specifically intended to violate the statute.

Remuneration can include inducing the recipient to refer a patient for treatment paid for by a federal healthcare program. Remuneration also includes paying to induce ordering or recommending certain items or services payable by a federal healthcare program.

The Anti-Kickback Statute applies to all sources of referrals. It can implicate a variety of players, including physicians, hospitals, health benefits plans, manufacturers, equipment suppliers, medical device companies, and consultants.

Penalties under the Statute

To promote patient safety and deter corruption in the healthcare, pharmaceutical, and medical device industries, the statute imposes severe penalties. The Anti-Kickback Statute limits fines to a maximum of $100,000 per count and imprisonment to a maximum of 10 years.

A consequence of a conviction for violation of the statute is automatic exclusion from participation in federally funded healthcare programs such as Medicare and Medicaid.

Relationship between the Anti-Kickback Statute and the False Claims Act

Similar to the Anti-Kickback Statute, the purpose of the False Claims Act (FCA) is to prosecute fraud, waste, and abuse in the healthcare system. Under the Affordable Care Act, an Anti-Kickback Statute violation is also a False Claims Act violation. One of the main differences is that the Anti-Kickback Statute is a criminal statute whereas the False Claims Act is a civil statute.

The False Claims Act is the basis for civil enforcement actions. Either the government or private plaintiffs may file lawsuits against healthcare providers for submitting fraudulent claims to Medicare, Medicaid, or another federal healthcare program.

Civil penalties under the False Claims Act can range from $10,781 to $21,563 for each fraudulent claim. It is also possible to for a court to award treble damages because the statute permits tripling of actual damages in certain circumstances.

The government frequently calculates actual damages in a False Claims Act case involving the Anti-Kickback Statute by approximating the losses incurred to the federal healthcare program. Often, the government argues that it is entitled to recover the full amount billed for items or services stemming from the bribes or kickbacks. Since the Anti-Kickback Statute broadly prohibits kickbacks, the government can often obtain large settlements from Anti-Kickback Statute violators.

Statutory Exceptions to the Anti-Kickback Statute

Certain transactions and arrangements are statutorily exempt from the Anti-Kickback Statute. There are currently ten main exceptions. These arrangements are not illegal remuneration:

1. Compensation paid pursuant to a bona fide employment relationship.
2. Price discounts obtained by a healthcare provider that are properly disclosed by the provider under the federal healthcare program.
3. Payments by a vendor to an agent for a group of individuals or entities. Commonly called a group purchasing organization (GPO) (GPO), the federal healthcare program will reimburse the vendor’s goods or services.
4. Coinsurance waivers for Medicare patients who qualify for certain subsidized services.
5. Payments for hardware, software, and information technology intended to handle electronic prescriptions.
6. Payments in certain risk-sharing transactions involving a health maintenance organization (HMO).
7. Certain waivers or reductions by pharmacies on behalf of an individual eligible for subsidies under Medicare.
8. Certain payments between a federally qualified health center (FQHC) and a Medicare Advantage organization pursuant to a written contract.
9. Price discounts of certain prescription drugs when a there is a coverage gap in certain circumstances.
10. Incentive payments made pursuant to a beneficiary incentive program by an Accountable Care Organization under Medicare.