What the Law Says About Referral Kickbacks in Health Care

An overview of the Anti-Kickback Statute and Stark Law for physicians in Colorado

By S.M. Oliva | Last updated on January 26, 2023

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Have you ever offered the host or hostess at a restaurant a $20 bill to get you a good table? This is, essentially, a kickback. And while such behavior may go unnoticed in the food service industry, when it comes to health care, kickbacks are a much more serious affair. Indeed, there are federal and Colorado state laws that expressly forbid health care providers from accepting or soliciting kickbacks. The laws, combined with related regulations are certainly comprehensive and have made health care providers more attentive to the nature of their referral relationships with others,” says Kari Hershey, an attorney in Littleton.

The Federal Anti-Kickback Statute

Congress adopted the first comprehensive federal anti-kickback statute in 1972 as part of a broader reform of Social Security. In its current form, the statute prohibits asking for or receiving any kickback, bribe, or rebate: in exchange for either referring a patient to a health care provider who participates in a federal health care program such as Medicare or Medicaid; or purchasing, leasing, ordering, or recommending any service or item that is paid for—even in part—by a federal health care program. To give a simple illustration of what the anti-kickback statute forbids, consider a hypothetical patient named Mary Smith. Mary is seeing a counselor for help dealing with a substance abuse problem. The counselor refers Mary to a particular clinic for treatment. What Mary does not know is that the counselor gets a $500 “commission” from the clinic for each patient referral. This is an illegal kickback, since the clinic accepts Medicaid and Medicare patients. What are the consequences for violating the anti-kickback statute? Individuals involved in the kickback scheme can be criminally prosecuted and, if convicted, sentenced to a maximum jail term of 5 years and fined up to $25,000 for each violation. The government may also seek civil penalties of up to $50,000 per violation, plus additional damages equal to three times the government’s losses. Medicare and Medicaid may also expel the offending health care provider from their respective programs. “Some may not be aware of aspects of the laws, which is not surprising given the voluminous regulations,” says Hershey. “For example, a criminal attorney representing a physician may not be aware that certain crimes trigger mandatory exclusion, while others are permissive exclusion and offer the ability to advocate against exclusion. These considerations may be important for a physician’s future ability to practice medicine.”

The Stark Law and Physician Self-Referrals

A close cousin to the 1972 anti-kickback statute is the Stark Law. First adopted by Congress in 1989, the Stark Law deals with “self-referrals” by physicians and other health care providers. A self-referral means the provider refers a Medicare or Medicaid patient to a “designated health service” in which that provider, or an immediate family member, has a financial interest. For example, if a doctor refers a Medicare patient to a clinical laboratory that is co-owned by the doctor’s son, that would qualify as a Stark Law violation. Although Stark violations can result in heavy fines—as well as possible expulsion from Medicare or Medicaid—there are a number of exceptions that may protect an individual health care provider from liability. But it is important to consult with a qualified Colorado health care attorney before assuming these exceptions apply to your situation. For more information on this area of law, see our overview of health care law.

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