The Health Care Entrepreneur’s Guide to Important Laws: Part 1

By: Anahita Anvari

Health Care Entrepreneurs need to know about The Anti-Kickback Statute and Stark Law.  At a recent event, “Health Law 101: Key Legal Issues for Health Care Companies,” speakers identified the top five legal and regulatory issues for health care entrepreneurs to be aware of: The Anti-Kickback Statute, Stark Law, False Claims Act, Qui Tam Provisions, and HIPAA.

This post aims to provide a general overview of the first two laws: The Anti-Kickback Statute and Stark Law, although it is appropriate to flag that violations of either of these laws can form the basis of a False Claims Act violation as well.

What is the Anti-Kickback Statute (AKS) and What Does It Mean for Me?

The AKS is a criminal statute intended to protect against health care fraud and abuse. The law makes it illegal to offer, pay, solicit, or receive a remuneration to induce a referral or generate business of a federal health care program. Therefore, you may not give or receive, or attempt to give or receive, anything of value in return for such referrals or business.

a.  Are There Any Exceptions to the AKS?

The AKS includes several “safe harbor” exceptions. Not meeting a safe harbor does not mean that an arrangement automatically violates the AKS. However, a business arrangement will not be an AKS violation if it meets all the requirements of a safe harbor. Therefore, you should consult with an attorney to determine whether your business arrangement falls squarely within a safe harbor, or how to structure future business arrangements so that they do fall within the safe harbor.

b. What Are Some Examples of AKS Violations?

Examples of kickbacks that may violate the AKS include: cash payments, free meals or gifts provided to physicians, and certain arrangements where payments to a physician exceed the fair market value. This list is not exhaustive and other arrangements may be an AKS violation.

What is the Physician Self-Referral (Stark) Law and What Does It Mean for Me?

 The Stark Law prohibits physicians from referring patients to receive designated health services (DHS), payable by Medicare or Medicaid, from an entity in which the physician or immediate family member has a financial relationship. A list of DHS’ can be found here.

Defined broadly, a “financial relationship” means an ownership or investment interest in an entity, or a compensation arrangement between a physician and an entity. For example, such investment interest could be through ownership of shares in the entity providing the DHS, or an interest in a different entity that holds an ownership or investment interest in the entity providing the DHS. More information about financial arrangements can be found here.

There is no intent requirement to violate the Stark Law.  This means that you may be in violation of the Stark Law even if you did not know of the violation or it was by accident. Therefore, you should consult with an attorney to determine if your business arrangement complies with the Stark Law.

a. Are There Any Exceptions to the Stark Law?

The Stark Law provides over thirty general exceptions, such as referring a patient to another doctor in the same practice group, certain rentals of office space or equipment, and ownership of some publicly traded securities and mutual funds. You should consult with an attorney to determine if your business arrangement meets a Stark Law exception.

b. What Are Some Examples of a Stark Law Violation?

Examples of Stark Law violations include referring patients to a facility in which you have a financial interest, retention of Medicare or Medicaid overpayments, miscoding health care claims to obtain greater reimbursement, billing Medicare of Medicaid for services that did not occur, referring patients for medically unnecessary procedures, and paying physician salaries and bonuses far above the fair market value. This list is not exhaustive and other arrangements may be a Stark Law violation.

What are the consequences of violating the AKS or Stark law?

A violation of the AKS can lead to criminal penalties and administrative sanctions, including imprisonment, civil monetary penalties of potentially $50,000 for each violation, and exclusion from further participation in federal health care programs. A violation of the Stark Law can lead to additional penalties. Depending on the situation, these penalties may be up to $15,000 for each improper claim billed to Medicare or Medicaid, or up to $100,000 for each arrangement.

For example, a Pennsylvania hospital and a regional cardiology group were recently involved in a lawsuit for submitting claims to Medicare and Medicaid that violated the AKS and Stark Law. The claims were based on impermissible referrals from the cardiology group to the hospital. The companies agreed to a settlement totaling $20.75 million.

How Do I Comply with the AKS and Stark Law?

You should take appropriate steps to comply with the AKS and Stark Law by implementing and maintaining an effective compliance program. The Office of the Inspector General (OIG) of the Department of Health and Human Services has identified seven essential elements to create an effective compliance program:

  1. Implementing written policies, procedures, and standards of conduct.
  2. Designating a compliance officer and compliance committee.
  3. Conducting effective training and education.
  4. Developing effective lines of communication.
  5. Conducting internal monitoring and auditing.
  6. Enforcing standards through well-publicized disciplinary guidelines.
  7. Responding promptly to detected offenses and taking corrective action.

While OIG has noted that compliance programs are not “one size fits all,” businesses should put forward a meaningful effort to ensure adequate compliance. Implementing these seven elements into your business’ compliance program can help guarantee your compliance.

As a final note, be aware that some states have their own anti-kickback and self-referral laws. These state laws may be stricter than the federal laws, and may include business arrangements involving private health insurers, rather than just federal health care programs. You should consult with an attorney regarding the laws in your state.

*This post was authored on October 31, 2018.

Anahita Anvari, at the time of this post, is a second-year law student at Penn State’s Dickinson Law. She is from Southern California and is interested in health care law. Anahita founded the Health Law and Policy Society and is currently serving as an Associate Editor of the Dickinson Law Review.

 

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Author: Prof Prince

Professor Samantha Prince is an Associate Professor of Lawyering Skills and Entrepreneurship at Penn State Dickinson Law. She has a Master of Laws in Taxation from Georgetown University Law Center, and was a partner in a regional law firm where she handled transactional matters that ranged from an initial public offering to regular representation of a publicly-traded company. Most of her clients were small to medium sized businesses and entrepreneurs, including start-ups. An expert in entrepreneurship law, she established the Penn State Dickinson Law entrepreneurship program, is an advisor for the Entrepreneurship Law Certificate that is available to students, and is the founder and moderator of the Inside Entrepreneurship Law blog.