Healthcare marketing arrangements that violate the Anti-Kickback Statute (AKS) can lead to serious financial and criminal consequences. Understanding the types of marketing arrangements that courts have found to be in violation of the statute and the potential implications are critical for marketers to know in order to operate in the healthcare industry.
Under the AKS, it is a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce referrals of items or services reimbursable by the Federal health care programs. Where remuneration is paid purposefully to induce referrals of items or services paid for by a Federal health care program, the AKS is violated. By its terms, the AKS ascribes criminal liability to parties on both sides of an impermissible transaction. An example of a highly scrutinized arrangement involves percentage compensation. For regulators, percentage compensation arrangements provide financial incentives that may encourage overutilization and increase program costs.
Monty Ray Grow was a defensive back on the Florida Gators’ football team from 1990 until 1993. He contracted to play for the Kansas City Chiefs in 1994 and then for the Jacksonville Jaguars in 1995 and 1996. On February 5, 2018, he was convicted by a federal jury in Miami for his chief role in a massive healthcare marketing scheme designed to defraud Tricare.
Tricare is a health benefit program that provides civilian benefits for U.S Armed Forces military personnel, retirees, their dependents, and some military reservists. Tricare is a Department of Defense Program.
In September 2014, Grow entered into an agreement with a compounding pharmacy in Pompano Beach, Florida, wherein the pharmacy would pay Grow’s marketing company a commission equal to fifty percent (50%) of what the pharmacy netted in Tricare reimbursement from Grow’s referral of Tricare beneficiaries to the pharmacy. (Later on, Grow became an employee of the pharmacy.) Grow then used his commission to offer and pay recruiters to convince Tricare beneficiaries to use this pharmacy. Additionally, Grow offered and paid Tricare beneficiaries themselves to use this pharmacy.
Less than a year ago that medical device developer, Olympus Corp, agreed to pay a $646 million settlement to resolve claims of illegal kickbacks to physicians and hospitals. This is considered to be the largest settlement amount in the history of violations to the Anti-kickback Statute. The federal Anti-Kickback Statute (“Anti-Kickback Statute”) is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce or reward the referral of federal health care program business. Conviction for a single violation under the Anti-Kickback Statute may result in a fine of up to $25,000 and imprisonment for up to five (5) years. In addition, a conviction will result in mandatory exclusion from participation in federal health care programs. The government may also assess civil money penalties, which could result in treble damages plus $50,000 for each violation of the Anti-Kickback Statute.
Between 2006 and 2011, Olympus offered consulting deals among many other bribes to influence physicians to order and prescribe Olympus medical devices. These consulting agreements provided for large up-front payments to physicians under the guise of medical device development. Olympus failed to focus on compliance and didn’t have policies and procedures in place to prevent illegal arrangements such as these. These physicians were retained as consultants, but most provided very little consulting services; they were utilized as device promoters. Physicians have a duty to order medical devices solely on the traditional standards of quality, price, and appropriateness for the medical conditions treated. Moreover, the ordering of medical devices by a physician must never be influenced by personal financial gain.
The amount of regulation imposed upon those entering into the healthcare business arena can be staggering even for a highly experienced businessman. In the business world, buying and selling businesses is often accompanied by lawyers, documents and consultants. In the healthcare business world, buying into and selling healthcare businesses, or any portion of health care businesses, requires all of that support and much more.
Diving into a healthcare business requires many considerations that are unique to other areas of business. First, appropriate licensing bodies must be notified and/or approve any such purchase or sale. For instance, in the State of Florida:
the Department of Children and Families must be notified every time a new owner becomes a part of a licensed substance abuse treatment center and prior to taking ownership, must either submit to a level 2 background screen or provide proof of compliance with the level 2 background screening requirements.
the Agency for Health Care Administration must be notified sixty days prior to any change in ownership and will run a background check on new owners.
the Agency for Health Care Administration must be notified every time a new owner is added to an entity holding a Health Care Clinic License. Additionally, AHCA must approve any owner of more than 5% of the Health Care Clinic prior to such person becoming an owner.
Healthcare professionals and businesses are aware of the term “fee splitting,” but rarely understand what that means, and for good reason. Is there some federal law against that? No. Is there a state law? Yes, but definitions are elusive and confusing.
Florida law prohibits licensed healthcare professionals engaging in any split-fee, rebate, commission or bonus in exchange for referral of any patient. In particular, Section 456.054 states it is a violation of a state criminal statute for a “healthcare provider” to “offer, pay, solicit, or receive a kickback, directly or indirectly, overtly or covertly, in cash or in kind, for referring or soliciting patients.”
Is there a court in Florida that has interpreted that law or opined on the concept? Not exactly. The closest thing we have is the Crow decision, where the 5th District Court of Appeals affirmed a Board of Medicine handling an issue involving the concept.
The issue of whether a medical provider can provide free patient transport is one that we are asked to look into a few times every year. Aside from the liability issues that it raises, it is one that we have never been able to justify from an Anti-Kickback and Patient Brokering perspective. The fact is, even given the good intentions of most providers to allow their patients easier access to healthcare, transporting patients to and from your facility or practice is providing them with something of value in return for coming to see you. However, under slightly different facts than we are usually asked to consider the question, last week, the Department of Health and Human Services Office of the Inspector General (“OIG”) came to a different conclusion.
The OIG issued an advisory opinion upon the request of a hospital system who had asked whether it could provide free transportation to persons who had limited access to public transportation to access the hospital’s facilities. The hospital system offered that the town had inadequate and infrequent public transportation services which would act as a barrier to healthcare for local residents. The hospital system offered the following facts for consideration:
March 25, 2015 Advisory Opinion No. 15-04 addresses a proposed arrangement involving a clinical/anatomic lab’s desire to position itself as the single lab recommended by practices.
The proposal arises in the context of the OIG Advisory Opinion process, which allows the OIG to opine on its view of how the federal anti-kickback statute might view a proposed arrangement. Though Advisory Opinions are not “law,” they do provide good insight into prosecutorial intent.
The clinical/anatomic lab (“Lab”) wanted to have agreements with physician practices to provide all their lab services. To deal with the fact that some commercial insurers have exclusive arrangements with labs, the Lab proposed that if a practice patient’s insurer required the patient to use another lab, the Lab would waive all fees for the affected practice patients and would not bill the patient, the medical practice or the patient. The Lab would provide its services to these “exclusive patients” for free, while billing all other patients (and/or their insurers, including governmental payers) its fee scheduled or contracted rates. The proposed arrangement would allegedly simplify things for the practices and keep lab results uniform. A practice patient would be required to use the Lab. The Lab’s services would simply be offered by the practices to their patients. The Lab stated that the provision of free services to certain practice patients would not provide any financial benefit to the practices, although the lab would provide the practice a limited-use interface. Samples would not be drawn in physician offices.
The Office of Inspector General of the Department of Health and Human Services today issued a Special Fraud Alert pertaining to relationships between laboratories and referring physicians. Payments from labs to physicians who refer were targeted in the Alert. The Alert also reiterates their suspicion of so-called “carve out” compensation relationships where state and federal healthcare program dollars are removed from the payment formula (which was previously addressed last year in Advisory Opinion 13-03). While the Alert does not add anything new to the government’s view of such relationships, it does underscore the very suspect view the OIG has of payment relationships between labs and the physicians who refer to them. Careful compliance with the Personal Services and Management Contracts Safe Harbor continues to be a core concern.
Health law is the federal, state, and local law, rules, regulations and other jurisprudence among providers, payers and vendors to the healthcare industry and its patient and delivery of health care services; all with an emphasis on operations, regulatory and transactional legal issues.