The Scope of Federal Kickback Compliance Expands

The Scope of Federal Kickback Compliance Expands

Re-evaluate your kickback compliance to include EKRA and the Travel Act’s racketeering statute for bribery.

If a relationship with physicians or other referral sources has been structured to carve out Medicare and Medicaid patients to avoid triggering Anti-kickback Statute and Stark Law requirements, it’s time to review its compliance.

Define Kickback and Self-referral Laws

Federal law compliance of relationships with physicians and other referral sources has historically focused on the Anti-kickback Statute and Stark Law.

Section 1128B of the Social Security Act, commonly referred to as the “Anti-kickback Statute,” prohibits the payment, receipt, solicitation, or offer of remuneration in exchange for the referral of a service or item reimbursed by a federal healthcare program.

Section 1877 of the Social Security Act, also known as the physician self-referral law, and commonly referred to as the “Stark Law,” prohibits a physician (i.e., doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor) from referring a Medicare patient for designated health service (DHS*) to an entity with which their immediate family member* has a financial relationship, unless an exception is met (42 U.S.C. 1395nn(a)(1)).

Most healthcare organizations carefully structure arrangements between referring parties to comply with a Stark Law exception and/or Anti-kickback Statute safe harbor. If the arrangements are not structured to comply with these requirements, the parties may be prevented from providing or billing for services rendered to patients of federal healthcare programs. Because both the Anti-kickback Statute and Stark Law only apply to items and services reimbursed by a federal healthcare program, failing to satisfy their requirements does not automatically prevent the services provision to cash-paying or privately-insured patients. As such, instead of structuring an arrangement to comply with the Anti-kickback Statute and Stark Law, some organizations instead carve out federal healthcare patients to avoid triggering the prohibitions.

According to the Social Security Act, Section 1877, 42 C.F.R. 411.351:

*DHS include clinical laboratory services; physical therapy, occupational therapy, and outpatient speech-language pathology services; radiology and certain other imaging services; radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment, and supplies; prosthetics, orthotics, and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services.

*Immediate family member is defined to include husband or wife; birth or adoptive parent, child, or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild.

Carve-outs May No Longer Protect You

Carve out compliance strategies may no longer be sufficient because the federal obligations, scrutiny, and enforcement of financial relationships between healthcare organizations is no longer limited to the Anti-kickback Statute and Stark Law. If the arrangement involves a recovery home, clinical treatment facility, or laboratory, the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) now imposes requirements on the financial arrangements — including those involving private payers and federal payers. The Department of Justice (DOJ) is now using the decades-old Travel Act to prosecute kickbacks in the healthcare industry. The Travel Act is a federal racketeering statute implemented in 1961 that prohibits the use of interstate commerce in the commission of “unlawful activity,” including bribery in violation of the laws of the state where committed (18 USC 1952).

For more information on EKRA, see “New Anti-kickback Provisions Affect Labs and Physicians” in the April issue of Healthcare Business Monthly or in the Knowledge Center.

DOJ Prosecutes for Kickbacks Using Travel Act

A recent federal kickback case (U.S. v. Beauchamp, et. Al, 3:16-cr-00516-JJZ) involving physicians and investors of a physician-owned Texas hospital system, Forest Park Medical Center, resulted in 10 guilty pleas and seven guilty verdicts despite the absence of claims to Medicare or Medicaid.

The conduct of the individuals in the case included consulting agreements, marketing arrangements, waiver of out-of-network co-payments, and other arrangements that would likely be subject to scrutiny under the Anti-kickback Statute and Stark Law if federal healthcare claims were involved. Because of the Stark Law’s restriction on physician ownership of hospitals, however, the hospital was not enrolled in Medicare or Medicaid, and multiple defendants asserted in the litigation that they obtained legal opinions as to the compliance of the arrangements based on the absence of federal healthcare dollars.

The Forest Park case is the second use of the Travel Act by the DOJ to exercise jurisdiction in a healthcare-related indictment. The Travel Act was also used in 2016 to indict Bernard Greenspan, DO, for an alleged laboratory bribery scheme. The indictment of Dr. Greenspan involved claims to Medicare, and he was convicted in 2017 of violations of both the Travel Act and Anti-kickback Statute (2017 WL 894809). Most of the guilty verdicts were for conspiracy, bribery, and paying kickbacks.

In the Forest Park case, the Travel Act’s application was based on the Texas commercial bribery statute that prohibits the intentional or knowing solicitation or acceptance of a benefit by a fiduciary, including a physician, where that benefit will influence the conduct of the physician in relation to the affairs of his or her patient (Texas Penal Code 32.43).

Most states, such as Texas, have some form of commercial bribery statute that focuses on the acceptance of value in exchange for violating a fiduciary relationship owed to an individual. Many of these statutes specifically include a physician or other professional adviser as a fiduciary. The Forest Park case is evidence of a new willingness of the federal government to pursue physician financial relationships that potentially violate these state laws, even if they do not involve federal healthcare dollars.

Stay Compliant with the Kickback Expansion

For physicians and other healthcare providers who want to structure collaborative arrangements, focusing on compliance with the Anti-kickback Statute and Stark Law is no longer sufficient. The parties must now consider the applicable state laws and the extent to which the relationship may influence the physician or other provider’s fiduciary obligations to the patient. Be sure your healthcare organization re-evaluates arrangements for compliance with the Travel Act that were previously structured to comply with the Anti-kickback Statute and Stark Law by avoiding federal healthcare programs.


Resources

Social Security Act, Section 1128B, 42 U.S.C. 1320a-7b(b)

Social Security Act, Section 1877, 42 C.F.R. 411.351

42 U.S.C. 1395nn(a)(1)

U.S. v. Beauchamp, et. Al, 3:16-cr-00516-JJZ, filed Nov. 16, 2016

U.S. v. Bernard Greenspan, DO. 2017 WL 894809

18 USC 1952

Texas Penal Code 32.43. Commercial Bribery

Stacy Harper

Stacy Harper, JD, MHSA, CPC is healthcare attorney with Lathrop & Gage LLP. Stacy currently serves on the National Advisory Board and Legal Advisory Board for AAPC. She works with healthcare providers around the country to navigate regulatory requirements such as HIPAA, data privacy and security, Stark, Anti-Kickback, state licence-sure, and Medicare conditions of payment and participation.

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Stacy Harper, JD, MHSA, CPC is healthcare attorney with Lathrop & Gage LLP. Stacy currently serves on the National Advisory Board and Legal Advisory Board for AAPC. She works with healthcare providers around the country to navigate regulatory requirements such as HIPAA, data privacy and security, Stark, Anti-Kickback, state licence-sure, and Medicare conditions of payment and participation.

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