Stark Law & Anti-Kickback Statute

The Federal Stark Law (Stark) and Anti-Kickback Statute (AKS) may be the most frequently referenced and contemplated Federal health care laws. This makes sense considering their impact upon the industry.

Examples of common health care relationships that can implicate Stark and AKS, and that need to be structured in accordance with these requirements, include, but are not limited to, physician employment and independent contractor agreements, equipment and space lease agreements, medical director agreements, hospital/physician recruitment agreements, physician-owned distributorships, ancillary health care businesses, joint ventures and their arrangements.

Generally, Stark prohibits physicians from referring Medicare beneficiaries to an entity in which they (or an immediate family member) have a financial relationship (including compensation and ownership relationships) for “designated health services” (DHS) unless an exception applies.

Although the Stark referral prohibition summarized is broad, numerous Stark exceptions cover a wide range of relationships. To qualify for an exception, every technical element of the exception must be satisfied and can be best analyzed and explained by a knowledgeable, competent Stark attorney. Penalties for violating these provisions can be severe, often resulting in multi-million dollar claims, further illustrating why having effective representation from a skilled Stark attorney is necessary. Stark penalties include denial of payment, refund of payment, imposition of civil monetary penalties. Health care providers should also remember that Stark violations can be raised in civil false claims suits brought by whistleblowers, making hiring an effective Stark attorney critical.

AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the AKS is violated. For the AKS, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. The AKS has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals. A person need not have actual acknowledge of the AKS or specific intent to violate of the AKS to do so.

The Department of Health and Human Services (HHS) has promulgated safe harbor regulations that define practices not subject to the AKS because such practices would be unlikely to result in fraud or abuse. The safe harbor regulations set forth specific conditions that, if met, assure entities involved of not being prosecuted or sanctioned for the arrangement qualifying for the safe harbor. However, safe harbor protection is afforded only to those arrangements that precisely meet the conditions outlined in the safe harbor.

By its terms, the AKS ascribes criminal liability to parties on both sides of an impermissible “kickback” transaction. Violation of the AKS constitutes a felony punishable by a maximum fine of $25,000, imprisonment up to five years, or both. A conviction will also lead to automatic exclusion from Federal health care programs, including Medicare and Medicaid. The Office of Inspector General (OIG) may initiate administrative proceedings to impose civil monetary penalties on any party that violates the AKS.

The attorneys at The Health Law Partners, P.C., provide counsel to clients, including planning and structuring transactions to comply with Stark and to minimize fraud and abuse implications. We also regularly assist health care providers and suppliers with analysis of arrangements already implemented by reviewing and opining on potential areas of concern or restructuring options. Several of our attorneys are nationally recognized authors with publications to legal and professional organizations regarding Stark, Anti-kickback, and fraud and abuse topics.