What the Law Says About Referral Kickbacks in Health Care

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, kickbacks are a much more serious affair when it comes to healthcare fraud. Indeed, there are both federal laws and state laws that expressly forbid healthcare providers from accepting or soliciting kickbacks.

“The laws, combined with related regulations, are comprehensive and have made health care providers more attentive to the nature of their referral relationships with others,” says Kari Hershey, a health law attorney at Hershey Decker Drake in Lone Tree, Colorado.

The Federal Anti-Kickback Statute on Referring Physicians

Congress adopted the first comprehensive federal Anti-Kickback Statute (AKS) 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 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 illustrate what the AKS 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 of 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.

Under Civil Monetary Penalty (CMP) authorities, the U.S. Department of Health and Human Services (HHS) can seek civil penalties of up to $50,000 per kickback violation, plus additional damages equal to three times the government’s losses. Medicare and Medicaid may also expel the offending healthcare 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 physician self-referral law known as the Stark Law.

First adopted by Congress in 1989, the Stark Law deals with “self-referrals” by physicians and other health care services. 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.

Find an Experienced Healthcare Attorney

Although Stark violations can result in heavy fines and sanctions—including possible expulsion from Medicare or Medicaid—there are a number of exceptions that may protect an individual healthcare provider from liability. It is important to consult with a qualified healthcare attorney before assuming these exceptions apply to your situation.

For general information on laws governing the healthcare system, see our overview of healthcare law.