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False Claims Act and Anti-Kickback Statute

The False Claims Act (FCA) and Anti-Kickback Statute (AKS) stand among the top five most important federal regulations for healthcare and pharma businesses. Enforced by the Department of Justice, the Department of Health and Human Services (HHS) and other federal agencies, these regulations set specific requirements for healthcare businesses to prevent fraud, imposing severe criminal and civil penalties.

HHS emphasizes the importance of understanding these laws by the healthcare providers and related businesses to ensure compliance and avoid penalties and exclusion from Federal healthcare programs. Below is a brief overview of the FCA and AKS regulations and their legal framework, as well as the list of exceptions provided by the Department of Health and Human Services to reflect changing business practices and technologies and improve the coordination of patient care in the industry.

False Claims Act

The False Claims Act (31 U.S.C.  §§ 3729-3733), known among America’s first qui tam or whistleblower laws, dates back to the Civil War. The regulation is designed to protect the federal government from false claims and fraudulent practices, for example, submitting inflated bills, receiving kickbacks, manipulating the bidding process and other deceptive representations.

With respect to the healthcare and pharma businesses, the False Claims Act is often mentioned in connection with submitting false claims for payment to Medicare or Medicaid programs. In a typical scenario, the action under the FCA is initiated by whistleblowers who file lawsuits on behalf of the US government to recover allegedly defrauded funds. If successful, such whistleblowers, who could be anyone, for example, a patient, existing or former employee, a partner or a hospital, can be entitled to 15% to 30% of recovered funds.

According to the regulation, if someone knowingly submits false claims or wilfully overlooks certain requirements of the law, they may be found in violation of the FCA, facing civil and criminal consequences. The monetary penalties can amount to three times the sum of defrauded funds plus $11,000 per claim. It is important to know that each billed item or service counts as an individual claim, which results in a quick build-up of fines. Meanwhile, criminal penalties under the FCA, as outlined in 18 U.S.C § 287, include fines and imprisonment, applying to physicians as well as C-Suite management and employees of the companies involved in fraudulent schemes.

Anti-Kickback Statute

The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) applies specifically to healthcare and related industries and is designed to prevent payment and other forms of remuneration to induce or reward referrals of patients. While many industries allow kickbacks, paying for referrals in all federal care programs is prohibited and constitutes a criminal violation. The Statute outlaws various types of rewards for referrals, including cash, discounts, free hotel stays and meals, excessive remuneration or renting arrangements.

Similarly to the legal actions under the False Claims Act, the cases under the Anti-Kickback Statute are often initiated by whistleblower lawsuits and individual complaints, as well as during government audits and reviews. Importantly, claims for Medicare or Medicaid that violate the Anti-Kickback Statute are considered as violating the False Claims Act, which triggers penalties under both regulations. Unlike the FCA, the violation of the Anti-Kickback Statute presumes the presence of intent when someone “knowingly and willfully” provided something of value to obtain referrals.

As a criminal law, the AKS sets criminal and administrative penalties, including prison time and fines. Moreover, violating the Anti-Kickback Statute can lead to losing the right to participate in Medicare, Medicaid and other federal care programs. At the same time, the criminal fines can amount to $25,000 per violation, and the accused may additionally face a prison time of up to 5 years.

Exceptions to Anti-Kickback Statute

While the Anti-Kickback Statute prohibits paid referrals in connection with federal care, there are several important exceptions to it. Recognizing the broad reach of the AKS and its inhibiting role in certain aspects for healthcare businesses and patients, the Department of Health and Human Services (HHS) has provided specific exceptions from the regulation known as safe-harbors.

The HHS has been introducing safe harbors to the Anti-Kickback Statute since 1991, adding new exceptions and modifying the previous ones. The list of safe harbors for healthcare providers contains exclusions for:

• holding small investment interests in private or publicly traded companies by HCP,

• renting and leasing of space or equipment under specified conditions,

• provision of personal services, management contracts and outcome-based arrangements,

• sale of a medical practice,

• referral services that meet specific criteria, for example, vendor agreements,

• certain types of warranties,

• discount for buyers, sellers and offerors,

• remuneration to employees,

• payments by vendors to a group purchasing organization,

• other business practices specified in the regulation, which would otherwise trigger penalties under the AKS Statute in the absence of exceptions.

The full list of safe harbor regulations with detailed criteria for each exception can be found in Title 42, Para 1001.952 of the Code of Federal Regulations.

Learn More With MedCompli

The healthcare industry is characterized by multiple relationships among healthcare providers, pharmaceutical companies, vendors and other entities established for the advancement of healthcare and the benefit of patients. Meanwhile, building business relationships in healthcare must be done in compliance with legislation to avoid allegations of kickbacks, illegal incentives and fraud under the Anti-Kickback Statute, False Claims Act and other regulations.

Being on the mission to offer turnkey solutions to streamline compliance in healthcare, MedCompli is dedicated to ensuring comprehensive and compliant HCP engagement, automating HCP HCO and patient interactions and providing easy-to-use pharma reporting. For more information on our solutions for compliance with the Anti-Kickback Statute, the False Claims Act, and other healthcare industry regulations, please don’t hesitate to contact the MedCompli team for a free initial consultation.

Disclaimer**: This article is intended for general information purposes only and does not constitute legal advice. Please consult your lawyer to address your individual or company circumstances and legal questions.