Navigating the complexities of healthcare regulations is a critical aspect of medical practice. For physicians in the United States, understanding federal fraud and abuse laws is not just about compliance—it’s about upholding ethical standards and ensuring the integrity of healthcare systems. Several key federal laws are in place to prevent fraud and abuse within federal health care programs, protecting both patients and taxpayer dollars. These laws are vigorously enforced by agencies such as the Department of Justice (DOJ), the Department of Health & Human Services Office of Inspector General (OIG), and the Centers for Medicare & Medicaid Services (CMS). For anyone involved in the healthcare industry, especially physicians, familiarity with these regulations is paramount to avoid severe penalties, including criminal charges, civil fines, exclusion from federal health care programs, and even the loss of your medical license.
The five most critical federal fraud and abuse laws that physicians must be aware of include:
- The False Claims Act (FCA)
- The Anti-Kickback Statute (AKS)
- The Physician Self-Referral Law (Stark law)
- The Exclusion Authorities
- The Civil Monetary Penalties Law (CMPL)
Let’s delve into each of these laws to understand their implications for your medical practice.
The False Claims Act (FCA)
The False Claims Act (31 U.S.C. § § 3729-3733) stands as a cornerstone in protecting the government from fraudulent activities. It essentially prohibits submitting false or fraudulent claims for payment to federal health care programs like Medicare and Medicaid. This means that any claim you submit for services or goods to these programs must be truthful and accurate. Submitting claims that you know, or should know, are false can lead to significant financial repercussions.
What constitutes a false claim? It’s not just about intentional deception. The FCA defines “knowing” to include situations where you have actual knowledge of falsity, but also instances where you act in deliberate ignorance or reckless disregard of the truth. This broad definition means you can be held liable even if you didn’t intentionally defraud the government, but were negligent or careless in your billing practices.
The penalties for violating the FCA are substantial. You could face fines up to three times the program’s loss, plus over $11,000 per false claim filed. Given that each billed item or service counts as a separate claim, these fines can accumulate rapidly. Importantly, a claim stemming from a kickback or a Stark law violation can also be considered false under the FCA, creating multiple layers of liability.
A unique aspect of the civil FCA is its whistleblower provision. This allows private individuals, known as “relators,” to file lawsuits on behalf of the U.S. government if they have evidence of false claims. These whistleblowers can be current or former employees, business partners, or even competitors, and they are entitled to a percentage of any recovered funds. This provision encourages the reporting of fraud and abuse, acting as a powerful deterrent.
Beyond the civil FCA, a criminal FCA (18 U.S.C. § 287) also exists. Criminal penalties for submitting false health care claims can include imprisonment and criminal fines, highlighting the severe consequences of fraudulent billing practices.
The Anti-Kickback Statute (AKS)
The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) is a criminal law designed to prevent corruption in healthcare referrals. It prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving items or services payable by federal health care programs. This means you cannot offer, pay, solicit, or receive anything of value in exchange for referrals of patients covered by programs like Medicare and Medicaid.
“Remuneration” is broadly defined and includes not only cash but also anything of value. This could encompass free rent, lavish trips, meals, or excessive compensation for medical directorships or consultancy roles. The AKS recognizes that while rewarding referrals might be acceptable in some industries, it is illegal within federal health care programs due to the potential for abuse and harm to patients and programs.
Both parties involved in a kickback scheme—those offering or paying remuneration and those soliciting or receiving it—can be held liable under the AKS. The intent of each party is a crucial factor in determining liability. Violations of the AKS carry serious criminal penalties, including fines, jail terms, and exclusion from participation in federal health care programs. Civil monetary penalties under the CMPL can also reach up to $50,000 per kickback, plus three times the remuneration amount.
To provide clarity and protection for legitimate business arrangements, “safe harbors” exist under the AKS. These safe harbors outline specific payment and business practices that, if structured correctly, are protected from prosecution. To qualify for safe harbor protection, an arrangement must strictly adhere to all requirements of the specific safe harbor. Examples include safe harbors for personal services and rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees.
Physicians are particularly susceptible to kickback schemes due to their role as referral sources. Your decisions on drug prescriptions, specialist referrals, and healthcare services significantly influence where patients seek care, making you an attractive target for those seeking to gain a financial advantage. Remember, it is equally illegal to both receive kickbacks for referrals and to offer kickbacks to induce referrals to your own practice.
Kickbacks in healthcare are detrimental because they can lead to:
- Overutilization of services: Unnecessary services may be provided simply to generate profit.
- Increased program costs: The financial burden on federal health care programs increases due to inflated service utilization.
- Corruption of medical decision-making: Clinical decisions may be influenced by financial incentives rather than patient needs.
- Patient steering: Patients may be directed to specific providers or services not in their best interest.
- Unfair competition: Providers who engage in kickback schemes gain an unfair advantage over those who operate ethically.
The AKS also extends to patient-related inducements. For instance, routinely waiving patient copays required by Medicare and Medicaid could be seen as an illegal inducement under the AKS. While you can waive copays based on individual patient financial hardship or unsuccessful collection efforts, you cannot advertise the routine forgiveness of copayments as an incentive. Providing free or discounted services to uninsured individuals is generally permissible. Furthermore, the beneficiary inducement statute adds civil monetary penalties for offering remuneration to Medicare and Medicaid beneficiaries to influence their service utilization.
It’s critical to understand that patient harm or financial loss to federal programs does not need to be proven to establish an AKS violation. Even if a service is medically necessary and properly rendered, accepting or paying kickbacks in connection with that service remains illegal. Arguments that a referral decision would have been the same without a kickback are not a valid defense.
Physician Self-Referral Law (Stark Law)
The Physician Self-Referral Law, commonly known as the Stark Law (42 U.S.C. § 1395nn), directly addresses conflicts of interest arising from physician referrals. It 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 an exception applies. These financial relationships encompass both ownership/investment interests and compensation arrangements.
For example, if you have an ownership stake in a physical therapy clinic, the Stark Law restricts your ability to refer your Medicare or Medicaid patients to that clinic for physical therapy services unless the financial relationship falls under a specific exception. Without an applicable exception, referrals are prohibited, and the entity cannot bill Medicare or Medicaid for services resulting from those prohibited referrals.
“Designated health services” (DHS) under the Stark Law are specifically defined and 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 (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
The Stark Law is a strict liability statute, meaning that proof of specific intent to violate the law is not required. Liability arises from the mere act of making prohibited referrals. Submitting or causing the submission of claims for services resulting from prohibited referrals violates the Stark Law. Penalties for Stark Law violations can include substantial fines and exclusion from participation in federal health care programs.
For more detailed information on the Stark Law and its exceptions, you can visit the CMS’s Stark Law Website.
Exclusion Statute
The Exclusion Statute (42 U.S.C. § 1320a-7) grants the OIG the authority to exclude individuals and entities from participating in all federal health care programs. Exclusion is a significant penalty, effectively barring individuals and entities from receiving payment from programs like Medicare, Medicaid, TRICARE, and the Veterans Health Administration.
The OIG is mandated to exclude individuals and entities convicted of certain criminal offenses, including:
- Medicare or Medicaid fraud, and offenses related to the delivery of items or services under these programs.
- Patient abuse or neglect.
- Felony convictions for other health-care-related fraud, theft, or financial misconduct.
- Felony convictions for unlawful manufacture, distribution, prescription, or dispensing of controlled substances.
The OIG also has discretionary authority to exclude individuals and entities based on other grounds, such as:
- Misdemeanor convictions related to health care fraud (excluding Medicare or Medicaid fraud) or controlled substances offenses.
- Suspension, revocation, or surrender of a healthcare license due to professional incompetence, performance, or financial integrity issues.
- Providing unnecessary or substandard services.
- Submitting false or fraudulent claims to a federal health care program.
- Engaging in unlawful kickback arrangements.
- Defaulting on health education loan or scholarship obligations.
Exclusion has profound consequences. Excluded physicians cannot bill federal health care programs directly for services they furnish, order, or prescribe. This prohibition extends to indirect billing through employers or group practices. Furthermore, even if a patient pays privately for services from an excluded physician, any subsequent orders or prescriptions from that physician will not be reimbursable by federal health care programs.
As a healthcare provider, you have a responsibility to ensure you do not employ or contract with excluded individuals or entities. This responsibility applies across all practice settings and capacities where federal health care programs might reimburse for services. To fulfill this obligation, you must screen both 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 party can lead to civil monetary penalties and the obligation to repay any federal health care program payments attributable to the excluded individual or entity’s services.
For more information and to access the LEIE, visit the OIG’s exclusion Website.
Civil Monetary Penalties Law (CMPL)
The Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a) grants the OIG the authority to impose civil monetary penalties (CMPs) and, in some cases, exclusion for a wide range of violations. The CMPL allows for penalties ranging from $10,000 to $50,000 per violation, depending on the nature of the offense.
Examples of conduct that can lead to CMPL violations include:
- Presenting a claim that the person knows or should know is for an item or service not provided as claimed or is false or fraudulent.
- Presenting a claim for an item or service for which payment may not be made.
- Violating the Anti-Kickback Statute (AKS).
- Violating Medicare assignment provisions.
- Violating the Medicare physician agreement.
- Providing false or misleading information expected to influence a discharge decision.
- Failing to provide an adequate medical screening examination for patients presenting to a hospital emergency department with an emergency medical condition or in labor (EMTALA violations).
- Making false statements or misrepresentations on applications or contracts to participate in federal health care programs.
The CMPL provides the OIG with a flexible tool to address various forms of fraud and abuse within federal health care programs, ensuring accountability and protecting program integrity.
By understanding and adhering to these five key federal fraud and abuse laws, physicians can ensure ethical practices, legal compliance, and the continued integrity of federal health care programs. Proactive education and robust compliance programs are essential for navigating these complex regulations and safeguarding your practice and your patients.
