Navigating the complexities of healthcare regulations is a critical aspect of medical practice, especially concerning federal healthcare programs. Physicians must be acutely aware of the primary federal fraud and abuse laws, which include the False Claims Act (FCA), the Anti-Kickback Statute (AKS), the Physician Self-Referral Law (Stark law), Exclusion Authorities, and the Civil Monetary Penalties Law (CMPL). Enforcement of these laws falls under the purview of government bodies such as the Department of Justice, the Department of Health & Human Services Office of Inspector General (OIG), and the Centers for Medicare & Medicaid Services (CMS). As you progress in your medical career, grasping these legal frameworks is not merely about compliance—it’s about upholding ethical standards and avoiding severe repercussions. Violations can lead to criminal charges, substantial civil penalties, exclusion from federal health care programs like Medicare and Medicaid, and even the revocation of your medical license by your State medical board. Understanding these laws is paramount for any physician participating in federal healthcare programs, which are some of the most common health coverage options in the United States.
False Claims Act (FCA) [31 U.S.C. § § 3729-3733]
The civil False Claims Act (FCA) serves as a safeguard for the government against fraudulent activities, ensuring fair pricing and quality in goods and services procured. It is explicitly illegal to knowingly submit, or cause to be submitted, false or fraudulent claims for payment to federal programs such as Medicare or Medicaid. This prohibition extends to instances where a physician “should know” about the falsity of a claim. Submitting false claims can trigger significant financial penalties, potentially reaching three times the program’s financial loss plus an additional $11,000 penalty for each claim filed. It’s important to note that each service or item billed to Medicare or Medicaid constitutes a separate claim, meaning penalties can accumulate rapidly. Furthermore, claims that originate from kickbacks or violate the Stark law are also considered false or fraudulent under the FCA, thus creating concurrent liability under the AKS or Stark law.
A key aspect of the civil FCA is that it does not necessitate proof of specific intent to defraud. The definition of “knowing” under the FCA is broad, encompassing not only actual knowledge but also situations where an individual acts with deliberate ignorance or reckless disregard for the truth or accuracy of the information provided. Adding another layer of enforcement, the FCA incorporates a whistleblower provision. This provision empowers private individuals to initiate lawsuits on behalf of the United States government, and these whistleblowers are entitled to a percentage of any financial recoveries obtained. Whistleblowers can range from current or former business associates, hospital or clinic staff, patients, to even competitors, highlighting the extensive reach of this provision.
In addition to the civil FCA, a criminal FCA (18 U.S.C. § 287) exists, carrying more severe consequences. Criminal penalties for submitting false claims can include imprisonment and criminal fines. There are documented cases of physicians facing prison sentences for health care fraud. The OIG also has the authority to impose administrative civil monetary penalties for false or fraudulent claims, further emphasizing the multifaceted enforcement approach.
Anti-Kickback Statute (AKS) [42 U.S.C. § 1320a-7b(b)]
The Anti-Kickback Statute (AKS) is a criminal law that specifically targets improper financial incentives in federal healthcare programs. It prohibits the knowing and willful offer, payment, solicitation, or receipt of any “remuneration” in exchange for patient referrals or the generation of business involving items or services payable by federal health care programs like Medicare and Medicaid. This includes a wide range of items and services, from pharmaceuticals and medical supplies to various health care services. “Remuneration” is defined broadly to include anything of value, extending beyond direct cash payments to encompass benefits like rent-free office space, lavish travel and accommodations, and inflated compensation for medical directorships or consulting agreements. While referral rewards might be acceptable in some commercial sectors, they are illegal within federal health care programs. The AKS applies both to those who offer or pay kickbacks and those who solicit or receive them. A crucial element for establishing liability under the AKS is proving the intent of each party involved.
Violations of the AKS carry serious criminal and administrative sanctions, including substantial fines, imprisonment, and exclusion from participation in federal health care programs. Under the CMPL, physicians involved in kickback schemes also face civil penalties of up to $50,000 per kickback, plus treble damages equal to three times the amount of the remuneration.
To provide clarity and protection for legitimate business arrangements, the AKS includes “safe harbors.” These safe harbors define specific payment and business practices that, if structured correctly, are protected from prosecution under the AKS. To qualify for safe harbor protection, an arrangement must strictly adhere to all requirements of a specific safe harbor. Examples of safe harbors include those covering personal services and rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees.
Physicians are often seen as attractive targets for kickback schemes due to their central role in patient care decisions. As a physician, you influence referrals to specialists, the selection of medications, and the utilization of various health care services and supplies. Many entities are eager to gain access to your patient base and might attempt to incentivize referrals through illegal kickbacks. It’s crucial to remember that both accepting kickbacks for referrals and offering kickbacks to induce referrals of Medicare and Medicaid patients are illegal.
Kickbacks in health care can lead to detrimental consequences, such as:
- Overutilization of services: Unnecessary services may be provided simply to generate revenue.
- Increased program costs: Artificial demand inflates healthcare expenditures.
- Compromised medical decision-making: Clinical judgments can be swayed by financial incentives rather than patient needs.
- Patient steering: Patients may be directed to certain providers or services not in their best interest.
- Unfair competition: Providers who refuse to engage in kickbacks are disadvantaged.
The AKS’s prohibition on kickbacks extends to all referral sources, including patients themselves. For instance, routinely waiving patient copayments required by Medicare and Medicaid could be construed as an illegal inducement under the AKS. Advertising the routine waiver of copayments is also prohibited. However, it is permissible to waive copayments based on individual patient financial hardship or after reasonable collection efforts have failed. Providing free or discounted services to uninsured individuals remains legal.
Beyond the AKS, the beneficiary inducement statute (42 U.S.C. § 1320a-7a(a)(5)) further penalizes physicians who offer inducements to Medicare and Medicaid beneficiaries to influence their choice of providers or services.
Significantly, government prosecutors do not need to demonstrate patient harm or financial losses to the federal programs to prove an AKS violation. A physician can be found guilty of violating the AKS even if the services provided were medically necessary and appropriately rendered. Accepting financial incentives from pharmaceutical companies, device manufacturers, or durable medical equipment (DME) suppliers is illegal, regardless of whether the prescribed drug or ordered equipment was medically justified.
Physician Self-Referral Law (Stark Law) [42 U.S.C. § 1395nn]
The Physician Self-Referral Law, widely known as the Stark Law, addresses conflicts of interest arising from physician referrals. It strictly prohibits physicians from referring patients for “designated health services” (DHS) payable by Medicare or Medicaid to entities with which the physician or an immediate family member has a financial relationship, unless a specific exception applies. Financial relationships are broadly defined to include both ownership or investment interests and compensation arrangements. For example, if a physician invests in an imaging center, the Stark law necessitates that this financial relationship must fall within a recognized exception. Without an applicable exception, the physician is barred from referring patients to the imaging center, and the entity is prohibited from billing Medicare or Medicaid for any services resulting from such prohibited referrals.
“Designated health services” (DHS) encompass a comprehensive range of healthcare services:
- 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 (DME) and supplies
- Parenteral and enteral nutrients, equipment, and supplies
- Prosthetics, orthotics, and prosthetic devices and supplies
- Home health services
- Outpatient prescription drugs
- Inpatient and outpatient hospital services
For detailed information, refer to CMS’s Stark law Website
The Stark Law operates as a strict liability statute, meaning that proof of specific intent to violate the law is not a prerequisite for a violation. The law prohibits both the submission of claims and causing the submission of claims that violate its referral restrictions. Physicians found in violation of the Stark Law face penalties including substantial fines and exclusion from participation in federal health care programs.
Exclusion Statute [42 U.S.C. § 1320a-7]
The OIG is mandated by law to exclude individuals and entities from participating in all federal health care programs if they have been convicted of certain criminal offenses. These mandatory exclusions apply to convictions related to: (1) Medicare or Medicaid fraud, and any offenses connected to the delivery of items or services under these programs; (2) patient abuse or neglect; (3) felony convictions for other health-care-related fraud, theft, or financial misconduct; and (4) felony convictions for the unlawful manufacture, distribution, prescription, or dispensing of controlled substances.
The OIG also possesses discretionary authority to exclude individuals and entities based on various other grounds. These discretionary exclusions can be based on: misdemeanor convictions related to health care fraud outside of Medicare or Medicaid, or misdemeanor convictions tied to unlawful activities involving controlled substances; suspension, revocation, or surrender of a health care license due to concerns about professional competence, performance, or financial integrity; provision of unnecessary or substandard services; submission of false or fraudulent claims to a federal health care program; involvement in illegal kickback arrangements; and defaulting on health education loan or scholarship obligations.
Exclusion from federal health care programs by the OIG has profound implications. Excluded physicians are barred from receiving payment from Medicare, Medicaid, TRICARE, the Veterans Health Administration, and other federal programs for services they furnish, order, or prescribe. This means an excluded physician cannot bill federal programs directly for treating patients, nor can their services be billed indirectly through an employer or group practice. Furthermore, even if an excluded physician provides services on a private-pay basis, any orders or prescriptions they issue will not be reimbursable by any federal health care program.
For further details, consult the Special Advisory Bulletin: The Effect of Exclusion From Participation in Federal Health Care Programs
Physicians bear the responsibility to ensure they do not employ or contract with excluded individuals or entities. This responsibility extends across all practice settings, including physician practices and clinics, and any situation where federal health care programs might reimburse for services provided by employees or contractors. Compliance necessitates screening all current and prospective employees and contractors against the OIG’s List of Excluded Individuals and Entities (LEIE), an online database accessible through the OIG’s Exclusion Website. Employing or contracting with an excluded individual or entity that results in federal health care program payments for furnished services, whether directly or indirectly, can lead to civil monetary penalties and the obligation to repay any amounts linked to the services provided by the excluded party.
For more information, visit OIG’s exclusion Website.
Civil Monetary Penalties Law (CMPL) [42 U.S.C. § 1320a-7a]
The OIG is empowered to pursue civil monetary penalties (CMPs) and, in some cases, exclusion for a broad spectrum of misconduct. The CMPL authorizes varying penalty amounts depending on the nature of the violation, with penalties ranging from $10,000 to $50,000 per violation. Examples of CMPL violations include:
- Presenting a claim for an item or service that the person knows or should know was not actually provided as claimed, or is false or fraudulent.
- Presenting a claim for an item or service for which payment may not be made under federal health care programs.
- Violating the Anti-Kickback Statute (AKS).
- Violating Medicare assignment provisions.
- Violating the Medicare physician agreement.
- Providing false or misleading information intended to influence a decision about patient discharge from a hospital.
- Failing to provide an adequate medical screening examination for patients presenting to a hospital emergency department with an emergency medical condition or in labor, as required by EMTALA.
- Making false statements or misrepresentations on applications or contracts to participate in federal health care programs.
