What Do These Cases All Have in Common?

1. Mr. Cobb, a Rhode Island physician assistant, was sentenced to 12 months in jail for violating the Anti-Kickback Law.
2. Dr. Montijo of Florida paid $650,000 to settle allegations of violating the Anti-Kickback Law.
3. Dr. Lagrada of New Jersey pled guilty to violating the Anti-Kickback Law, forfeiting $69,880 of the illegal payments received. He faces a fine of up to $25,000 and up to five years in prison. Twelve other doctors and one physician assistant were also arrested and charged with accepting similar kickbacks.
4. Dr. Goldman of Pennsylvania was criminally indicted Aug. 2, 2012, for allegedly violating and conspiring to violate the Anti-Kickback Law.
5. Dr. Lancaster of Florida paid $101,000 to settle allegations of violating the Anti-Kickback Law.
6. Cochlear Americas, based in Colorado, paid the government $950,000 to settle allegations of anti-kickback violations.

The simple answer is anti-kickback violations. However, the complete answer lies in how the law applies to improper payments, including physician compensation arrangements, as well as other risks that may arise under Stark and federal income tax laws for non-profit organizations.

What Is the Anti-Kickback Statute?

The federal Anti-Kickback Law has been “on the books” for many years, having last been revised under the Patient Protection and Affordable Care Act of 2010. Criminal and civil penalties can be imposed against any person who knowingly or willfully solicits, receives, offers or pays any remuneration that may induce another person to recommend or refer an individual to obtain health care items or services payable under Medicare or Medicaid. Remuneration includes kickbacks, bribes or rebate, whether paid in cash or in-kind. A violation occurs even if there is no payment made. The Anti-Kickback Law is broader than Stark in that it applies to any individual (not just physicians) and to any health care items or services payable under the Medicare or Medicaid programs. Violations of the Anti-Kickback Statute can result in:

• Criminal fines of up to $25,000 per violation,
• Up to five years in prison,
• Civil Monetary penalties of up to $50,000 per violation, and/or
• Exclusion from participation in Medicare and Medicaid programs.

There are several exceptions (known as “Safe Harbors”) under the law to protect legitimate payments between those in a position to refer Medicare and/or Medicaid health care items or services. These include, but are not limited to, written arrangements for leases and personal services based on fair market value, not the volume of health care items or services referred, and legitimate employment arrangements.

Now for More Details.

1. Mr. Cobb accepted payments from a durable medical equipment company in exchange for recommending bone-growth stimulator devices that were ordered by the surgeon. The surgeon, unaware of the payment arrangement, relied on Mr. Cobb to select the device.
2. Dr. Montijo was alleged to have solicited and received consulting payments from two medical device manufacturers in exchange for using their orthopedic hip and knee products.
3. Dr. Lagrada admitted to accepting cash payments for referring patients to a diagnostic testing facility.
4. Dr. Goldman is accused of accepting payments from a hospice provider in exchange for patient referrals. It is claimed that Dr. Goldman entered into a “sham” medical directorship arrangement to make the payments appear to be for personal services when they were actually for patient referrals to the hospice provider.
5. Dr. Lancaster allegedly solicited payments from a durable medical equipment company, in the form of guaranteed consulting fees and payment for personal services, in exchange for his use and marketing of their product.
6. Cochlear Americas was alleged to have paid illegal remuneration to physicians who prescribed the use of their manufactured implants. The remuneration allegedly came in the form of credit for future product purchases, gifts, donations and sponsorship.

In addition to penalties under the Anti-Kickback Law, some of these improper physician compensation arrangements could result in penalties under the Stark Law. In the case of non-profit entities, the risk of tax penalties and possible loss of tax-exempt status could arise.

What Can You, as a Seton Physician, Do to Avoid These Potential Risks?

First, refuse any solicitation or offers of money or gifts for patient referrals. If you have been approached with this or know of anyone who has, let us know. Do not accept any payments or gifts for referrals.

Second, make sure that any payment arrangement is based on fair market value and not on the potential business that can be obtained and/or referred. This includes, but is not limited to, consultation arrangements, payments for research activity, medical directorship agreements, coverage arrangements and space or equipment rental agreements.
 
Third, make sure there is a written agreement approved by Seton Legal Services and signed by all parties BEFORE accepting any payment for services. Contact Steve Wohleb with Seton Legal Services if you have any questions about whether a proposed payment arrangement is acceptable.

For more information on the Anti-Kickback Statute, see Seton Administrative Policy 1000.05 and Ascension Standards of Conduct (right hand corner under “Heartbeat Articles”). Note: these links require Seton intranet access.