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“Don’t Just Kick Back! Pay Attention To Health Care Compliance Laws (Even If You Are Not A Provider)”

Inside Counsel By Sarah E. Coyne

The federal Stark Law and the Anti-Kickback Statute (AKS) are designed to stop health care entities from essentially “paying for referrals.” You may think to yourself, “Haha, I will never need to worry about that because I would never pay for referrals.” If that is the case, think again because these laws are sweepingly broad, and it is far easier to violate them than one would think. In fact, we doubt very much that any health care provider doing an internal audit would come up with an entirely clean slate unless a prior audit was completed in the very recent past. It is especially important for in-house counsel to be keenly aware of the Stark and AKS parameters and to assist leadership in steering the ship to avoid these icebergs.

Brief refresher on the Stark Law and the Anti-Kickback Statute

The Stark Law prohibits physicians from referring patients to an entity (such as a hospital) for certain services payable by Medicare when the physician (or the physician's immediate family member) has a financial relationship with the entity, unless an exception to the Stark Law applies. The Stark Law also prohibits the entity from billing Medicare for the services provided as a result of a prohibited referral.

Those of you who have suffered through a Stark Law issue will know that the two hardest pills to swallow are that intent is irrelevant, and there is no de minimus exception. Missing signatures, missed expiration dates (without auto-renewal clauses) or failure to adjust for changes in market value can mean well-meaning hospital-physician ventures are illegal, and nobody may realize it. The parties then learn the hard way that it does not matter that nobody knew about the Stark Law, or the arrangement was a good one benefitting patients and the community. One tiny mistake can be very expensive if it renders the arrangement non-compliant with the Stark Law. To make matters worse, the potential repayment and penalties under the Stark Law can be financially and emotionally staggering, and very challenging to business relationships.

When an arrangement is not compliant with the Stark Law, there can be many unpleasant consequences. For example, if a hospital arrangement with a physician group involves improper compensation that is above fair market value, then all money paid by Medicare during the period of time during which there was no viable agreement (the “period of disallowance”) must be returned to Medicare; all excess compensation (over fair market value) paid to the physicians must be repaid to the hospital by the physician group; and both the hospital and the physician

group may face steep penalties or even (in egregious circumstances) exclusion from federal and state health care programs, and False Claims Act exposure.

The Anti-Kickback Statute makes it a criminal offense to exchange anything of value in order to induce or reward the referral of health care program business. One important distinction from the Stark Law is the fact that intent matters under the Anti-Kickback Statute. The Anti-Kickback Statute is violated only if the act was done “knowingly and willfully.” This does not mean that an entity must know of the Anti-Kickback Statute and intend to violate it, but there is no liability unless the entity has intent to induce or reward referrals.

The U.S. Department of Health and Human Services has identified certain payment practices that will not be subject to criminal prosecution or exclusion under the Anti-Kickback Statute, which are referred to as “Safe Harbors.” Unlike the Stark Law exceptions, if a payment practice fails to fully satisfy any of the Anti-Kickback Safe Harbors, it will not be deemed illegal per se. Rather, the arrangement will be further analyzed to determine whether it violates the Anti-Kickback Statute.

Penalties for violating the Anti-Kickback Statute may include civil money penalties, criminal fines, exclusion from federal and state health care programs or jail time. Did we mention jail time? While the Anti-Kickback Statute does not sneak up on providers to the same extent as the Stark Law, seemingly routine arrangements such as discounts and rebates and leases can go awry fairly easily in the health care industry.

Steps to take to avoid a Stark Law or Anti-Kickback Statute violation

Now that we have you sufficiently worried about violating the Stark Law or the Anti-Kickback Statute, what steps can be taken to avoid a violation?

  • Use checklists when reviewing agreements between providers and physicians or physician groups to ensure that relevant Stark Law exceptions or applicable Anti-Kickback Safe Harbors are satisfied.
  • Use contract management software to track expiration dates of agreements and to maintain contracts in one location for easy access.
  • Audit compliance with physician arrangement agreements and ensure there is sufficient proof of performance (e.g., use timecards).
  • Review physician compensation periodically to ensure that it is commercially reasonable and consistent with fair market value.
  • Proactively implement compliance programs including training and awareness raising on the common pitfalls that result in non-compliance.
  • Resist the temptation to sweep things under the rug — they only get worse under there.


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