federal anti kickback statute lawyersThe federal Anti Kickback Statute (AKS) (See 42 U.S.C. § 1320a-7b.) is a federal criminal statute that prohibits government contractors or government employees from engaging in the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of business reimbursable by federal health care or government contracting programs. The statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives.

In addition, anti-kickback law makes it illegal for contractors to bribe a government official. It also triggers liability under the Civil Monetary Penalties Law (CMPL).  The CMPL carries penalties of up to $50,000 per occurrence, in addition to three times the amount of the remuneration.  It also makes the resulting bills to the government false under the False Claims Act. As a result, the violator is responsible for treble the value of the bills and a Penalty of up to $23,000 per bill.

In the medical world, the government prosecution builds a case by suggesting that when medical equipment manufacturers provide kickbacks to referring providers, it can compromise the integrity of medical decision-making.  When the prosecution, DOJ or OIG decides to pursue a criminal case, a False Claims Act violation will develop. Sometimes, criminal defendants may be faced with conspiracy charges and or wire fraud. Having the right anti kickback defense attorney on your team can be a great benefit.

The Anti-Kickback Statute was also designed to ensure doctors make medical decisions with only their patients’ best interests in mind.

Examples of prohibited kickbacks include contracting officers or persons in positions of influence from receiving financial incentives for referrals, benefits from government contracts, awards or other kickbacks free or very low rent for office space, or excessive compensation for medical directorships. Possible penalties for violating the Anti-Kickback Statute include fines of up to $25,000, and up to five years in jail.

Federal anti-kickback law includes health care services, including Medicare in addition to traditional government service contracts.

Federal employees, especially those involved in the procurement process, should be well aware of this general statute.  There are harsh criminal penalties for violating the law. Contractors should also train their employees on the various nuances that can arise when dealing with federal employees

The US Anti kickback Statute of 1986 shows that it still has teeth as late as  November 2014 when the DOJ published a case where one company paid $350 Million to Resolve Allegations of Illegal Kickbacks. Companies that do not have their staff trained can be exposed to crippling litigation and penalties.

What is a Kickback in Government Contracting?

In Federal government contracting, a kickback is an illegal payment to a government employee or officer for transfer of money or something of value in exchange for receiving preferential treatment for the procurement of goods or services. In short, a kickback can originate from successful contractor bribes.  Kickbacks can be in the form of cash payments, gifts, inflated bills, or anything which has inherent value.

Under FAR 3.502-2 Subcontractor kickbacks.

The Anti-Kickback Act of 1986 (now codified at 41 U.S.C. chapter 87, Kickbacks,) was passed to deter subcontractors from making payments and contractors from accepting payments for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or a subcontract relating to a prime contract. The Kickbacks statute-

      (a) Prohibits any person from-

           (1) Providing, attempting to provide, or offering to provide any kickback;

           (2) Soliciting, accepting, or attempting to accept any kickback; or

           (3) Including, directly or indirectly, the amount of any kickback in the contract price charged by a subcontractor to a prime contractor or a higher tier subcontractor or in the contract price charged by a prime contractor to the United States.

      (b) Imposes criminal penalties on any person who knowingly and willfully engages in the prohibited conduct addressed in paragraph (a) of this section.

Purpose of the Federal Anti-Kickback Act of 1986

The Act requires that the purpose of the rules was to avoid illegal actions and improperly obtaining or rewarding favorable treatment. It is intended to embrace the full range of government contracting. Prior to 1986, the “kickback” was required to be for the inducement or acknowledgment of subcontracts.

General prohibited conduct–federal anti kickback law prohibits attempted as well as completed “kickbacks,” which include any money, fees, commission, credit, gift, gratuity, a thing of value, or compensation of any kind.

Covered class of  recipients–The Federal Anti-kickback Act prohibits “kickbacks” to prime contractors, prime contractor employees, subcontractors, and subcontractor employees. These terms are defined in the Act.

Type of contract–The Act defines kickbacks to include payments under any government contract. Prior to this legislation, the statutes’ applicability was limited to negotiated contracts.

Knowledge and willfulness –The Federal Anti Kickback Statute of 1986 requires one to knowingly and willfully engage in prohibited conduct for the imposition of criminal sanctions.

 Stark Act and the Anti-Kickback statute seek to avoid health care providers from submitting claims to Medicare based upon referrals from physicians who have a “financial relationship” with the health care entity, unless a statutory or regulatory exception or safe harbor applies. 42 U.S.C. §§ 1395nn(a)(1); 1320a-7b(b). 

The Stark Act prohibits “knowingly and willfully” offering or paying “any remuneration . . . to any person to induce such person . . . to refer an individual to a person for the furnishing . . . of any item or service for which payment may be made in whole or in part under a Federal health care program.” 42  USC 1320a-7b(b)(2)(A).  And it prohibits “knowingly and willfully solicit[ing] or receiv[ing]” kickbacks “in return” for such conduct.  Id. § 1320a-7b(b)(1)(A).

Anti kickback law Penalties and Liability

What is a possible penalty for violating the AKS? The Federal Anti Kickback law incurs a criminal violation charge because it requires a specific intent to induce referrals or orders for services. Federal Anti Kickback Statute violations are punishable by up to five years in prison, with the potential for more criminal fines up to $25,000, and administrative civil money penalties reaching as much as $50,000 .

Safe Harbor Exceptions to Federal Kickback Laws

The law is written so broadly. Congress has enacted “safe harbors” for a variety of circumstances that are exempt from prosecution under federal kickback laws. These “safe harbors” are found at 42 CRS 1001.952.

The general purpose of the safe harbor provisions is to insulate certain behavior that would otherwise be a felony under the Federal Anti-Kickback  statute provision from prosecution. Accordingly, conduct falling under a safe harbor exemption allows payment to be paid for statutorily enumerated circumstances. Failure to comply with a safe harbor provision, however, does not mean that an arrangement is per se illegal.

Which safe harbors in Federal Anti Kickback law apply to telemedicine?

Safe harbors which may apply to telemedicine arrangements typically involve the following:

  • Space Rental Safe Harbor
  • Equipment Rental Safe Harbor
  • Personal Services and Management Contracts Safe Harbor
  • Bona Fide Employees’ Safe Harbor

Other Laws and White Collar Crimes That May Implicate The Federal Anti Kickback Statute

There are also other general laws and white collar crimes that also create more liability when there is a violation of the US Anti Kickback Statute. They include:

Subcontractor Liability Under Federal Anti-KickBack Statute 

As a government contractor, prime or sub, you must be aware of the liabilities that the Federal Kickback Laws impose upon you. Subcontractors are just as liable under the federal statute. To minimize liability, prime contractors should make sure that they have internal controls in place to scrutinize subcontractor invoices before submitting them to the contracting agency.

Another common aspect of the Federal Anti-Kickback Act of 1986 involves gratuities as covered in FAR  3.202. As high-level management, you must make sure that all people and employees are careful not to get caught up in these issues. Marketing staff should be especially aware of getting a kickback from the government.

Sample Cases

The following are examples of companies that paid a heavy price for violations and Anti-kickback Act liability.

Texas-Based Fluor Corporation to Pay U.S. $4 Million to Resolve False Claims Act and Anti Kickback Act Liability

The Health Alliance of Greater Cincinnati and the Christ Hospital to Pay $108 Million for Violating the Federal Anti-Kickback Act and Defrauding Medicare and Medicaid

Colorado-Based CH2M Hill Agrees to Pay United States $1.5 Million to Resolve False Claims Act and Anti Kickback Act Liability

If your company is facing allegations under the US Anti kickback Statute, call our anti-kickback attorneys and white-collar criminal defense lawyers immediately for help at 1-866-601-5518. Free Consultation.