October 20, 2023

The Anti-Kickback Statute, the Stark Act, and the False Claims Act are all separate federal statutes, created by different legislatures in different eras: 1972, 1988, and 1863 to be exact. Each statute creates risks for healthcare providers who are reimbursed by the federal government through either Medicare or Medicaid programs. 

The False Claims Act – or FCA – is notable in that allows for private citizen plaintiffs (called “relators” under the law, but often referred to as “whistleblowers) to pursue a federal lawsuit on behalf of the government where there is evidence of a defendant defrauding the federal government by, among other things, presenting a “false claim” for reimbursement to the federal government. A successful FCA plaintiff then stands to be rewarded with between 15% and 30% of the total amount of financial rewards collected by the federal government in either a settlement or at a trial. Because these total penalties imposed on FCA defendants – particularly in the case of healthcare and pharmaceutical defendants – can reach into the tens and even hundreds of millions of dollars, an FCA plaintiff can obtain an extremely large financial reward for coming forward with evidence of wrongdoing. 

Frequently, whistleblowers pursue FCA claims against healthcare industry defendants based upon alleged violations of the Anti-Kickback Statute and/or the Stark Act, thus potential plaintiffs with knowledge of wrongdoing are advised to work with their FCA counsel to determine if such a violation has occurred. 

Anti-Kickback Statute: Prohibitions and Penalties

The Anti-Kickback Statute – or AKS – is a federal criminal law which prohibits the knowing and willful payment or receipt of any “remuneration” (including any kickback, bribe, or rebate) in return for either:

  • Referring an individual to a person for any item or service for which payment may be made in whole or in part under a federal health care program, or
  • Purchasing, leasing, ordering, or arranging for any good, facility, service, or item for which payment may be made in whole or in part under a federal health care program (or simply for recommending the purchase, leasing, or ordering of any such good, facility, service or item)

Thus, the Anti-Kickback statute makes it a crime to have any paid referral arrangement (whether in cash, property, or in-kind arrangement) for any health care services or goods for which payment is made under federal health care programs such as Medicare or Medicaid, subject to certain exceptions. There are a number of “safe harbor” provisions pursuant to the Anti-Kickback Statute which protect from prosecution those individuals and entities that have referral systems that operate within federal guidelines.

The Anti-Kickback Statute targets both those who make payments for referrals and those who receive them, and violation of the statute is a felony. An individual found guilty of violating the Anti-Kickback Statute faces up to ten years in prison and a $100,000 fine, in addition to being excluded from federal health care programs. 

Stark Law: Physician Self-Referral and its Implications

Similar to the Anti-Kickback Statute, the Stark Law (also called the “Physician Self-Referral Law”) prohibits certain types of referrals for health services for which payments are submitted for reimbursement under federal health care programs including Medicaid and Medicare. 

In brief, the federal Stark Law prohibits a physician from making referrals for designated health services to entities in which that physician or an immediate family member of the physician has a financial interest. A financial interest in another entity can include either an ownership or investment interest of the referring physician (or family member) in the entity, or a compensation arrangement between the referring physician (or family member) in the entity. A compensation arrangement is any financial arrangement involving remuneration – whether overtly or covertly, directly or indirectly, or in cash or in kind. 

The types of designated health services for which a referral might violate the Stark Law are wide-ranging, including inpatient and outpatient hospital services, physical therapy services, home health services, occupational therapy services, medical equipment and supplies, and outpatient prescription drugs. 

As with the Anti-Kickback Statute, there are numerous exceptions to the Stark Law for certain arrangements and payments such as for physician recruitment, certain personal service arrangements that meet specified requirements (including being set out in writing, having a term of at least one year, and involving fair market value compensation), and certain group practice arrangements. 

Physicians found to violate the Stark Law can face exclusion from participating in Medicare and Medicaid, denial of payment, and civil penalties of up to $15,000 per submitted claim and $100,000 for the existence of each arrangement or scheme. 

The Role of Whistleblowers in Exposing Healthcare Fraud

While a violation of either the Anti-Kickback Statute or Stark Law might result in a civil or criminal legal action against the offending parties (e.g., a physician or hospital), those same violations may form the basis of a successful FCA whistleblower lawsuit pursued by a private plaintiff with knowledge of the violations. 

Significantly, it is not necessary for a private plaintiff to wait for the government to pursue AKS or Stark Law actions against a defendant prior to that plaintiff filing an FCA lawsuit. In fact, it may well be too late at that point, as the federal government might already have the evidence it needs to recover FCA penalties against a defendant without the whistleblower’s involvement, and thus there would be no need for the whistleblower. 

Because of the sheer vastness and complexity of the Medicare and Medicaid reimbursement systems, the federal government (and state governments in the case of state FCA statutes, such as the California False Claims Act) cannot fully investigate every healthcare reimbursement claim, and thus relies on whistleblowers who see corruption occurring at the ground level to provide evidence of AKS, Stark Law and FCA violations. Such whistleblowers can be physicians, nurses, healthcare executives, data entry specialists or any other person in a position to provide evidence related to kickbacks, self-referrals or other violations of the FCA to the federal government. 

Contact a California FCA Attorney Today

A plaintiff in a successful FCA lawsuit has the potential of obtaining a financial reward between 15% and 30% of the total penalties levied against the defendant. It is important to work with legal counsel with the experience to not only assist you in compiling and submitting your information in pursuit of obtaining the largest whistleblower reward possible – while at the same time protecting victims of fraud and promoting fair market competition – as well as the experience to protect you from retaliation and obtain justice on your behalf. If you have information that you believe may form the basis of an FCA claim, contact our office today to schedule a consultation with one of our attorneys to determine your next steps.  

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