Understanding the landscape of federal fraud and abuse laws is critical for anyone involved in the U.S. health care system, especially concerning government health care programs. These laws are in place to protect programs like Medicare and Medicaid from fraud, ensuring proper use of taxpayer dollars and maintaining the integrity of patient care. For physicians and healthcare providers, awareness and adherence to these regulations are not just ethical obligations, but legal necessities. Violations can lead to severe repercussions, including criminal penalties, substantial civil fines, exclusion from federal health care programs, and even the loss of a medical license.
Five key federal fraud and abuse laws are particularly relevant to physicians: 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 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). This article provides an overview of these critical laws, emphasizing their implications within government health care programs.
The False Claims Act (FCA) [31 U.S.C. § § 3729-3733]
A cornerstone in protecting government health care programs, the civil False Claims Act (FCA) is designed to prevent overcharging and substandard services. Submitting claims to Medicare or Medicaid that are knowingly false or fraudulent is illegal under this act. This includes situations where a provider “should know” the claim is false, demonstrating a broad scope of liability. Penalties for false claims can be significant, potentially reaching three times the program’s financial loss, plus fines that can exceed $11,000 per claim. Given that each service billed to Medicare or Medicaid constitutes a claim, these fines can quickly accumulate. Importantly, claims arising from kickbacks or Stark law violations are also considered false or fraudulent under the FCA, creating overlapping liabilities across different statutes.
A crucial aspect of the civil FCA is that it does not require proof of specific intent to defraud. “Knowing” behavior is defined broadly to include not only actual knowledge but also deliberate ignorance or reckless disregard for the truthfulness of the information submitted. Furthermore, the FCA includes a whistleblower provision, empowering individuals to file lawsuits on behalf of the U.S. government. These whistleblowers, who can be current or former business associates, staff, patients, or even competitors, are entitled to a percentage of any recovered funds, incentivizing the reporting of fraudulent activities within government health care programs.
In addition to the civil FCA, a criminal FCA (18 U.S.C. § 287) exists, carrying penalties of imprisonment and criminal fines for submitting false health care claims. Cases of physicians facing imprisonment for false claims highlight the seriousness of these violations. The OIG can also impose administrative civil monetary penalties for false or fraudulent claims, further underscoring the multi-faceted enforcement approach.
The Anti-Kickback Statute (AKS) [42 U.S.C. § 1320a-7b(b)]
The Anti-Kickback Statute (AKS) is a criminal law specifically targeting financial incentives within government health care programs. It prohibits the knowing and willful offer, payment, solicitation, or receipt of “remuneration” to induce or reward patient referrals or the generation of business involving items or services payable by federal health care programs, such as Medicare and Medicaid. This includes a wide range of items and services from drugs and medical supplies to various health care services. “Remuneration” is broadly defined as anything of value, extending beyond cash to include benefits like free rent, lavish travel and accommodations, or inflated compensation for medical directorships or consulting roles.
While rewarding referrals may be acceptable in some commercial sectors, it is a criminal offense within federal health care programs. The AKS applies to both those who offer or pay kickbacks and those who solicit or receive them. A key element in determining liability under the AKS is the intent of each party involved.
Violations of the AKS carry significant criminal penalties and administrative sanctions, including substantial fines, imprisonment, and exclusion from participation in federal health care programs. Under the CMPL, those involved in kickback schemes also face civil penalties of up to $50,000 per kickback, plus three times the amount of the remuneration.
To provide clarity and protection for legitimate business arrangements, “safe harbors” exist. 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 the relevant 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. More information on safe harbors is available in “OIG’s Safe Harbor Regulations.”
Physicians are particularly vulnerable to kickback schemes due to their role as referral sources within government health care programs. They influence patient choices regarding medications, specialists, and various health care services and supplies. This control makes them attractive targets for individuals and companies seeking to gain patient business through illegal inducements. It is crucial to remember that both accepting kickbacks for referrals and paying kickbacks to receive referrals of Medicare and Medicaid patients are illegal.
Kickbacks in health care can have detrimental consequences, including:
- Overutilization of services
- Increased costs for government health care programs
- Compromised medical decision-making
- Patient steering for financial gain
- Unfair competition among providers
The AKS also extends to patient referrals. For instance, routinely waiving patient copays required by Medicare and Medicaid could be seen as an illegal inducement under the AKS. While waiving copays is permissible in cases of genuine financial hardship or uncollectible debt, it cannot be advertised or implemented as a standard practice. 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)) imposes civil monetary penalties on physicians who offer remuneration to Medicare and Medicaid beneficiaries to influence their service utilization.
Crucially, proving patient harm or financial loss to government health care programs is not necessary to establish an AKS violation. A physician can be found guilty even if the services provided were medically necessary and actually rendered. The acceptance of kickbacks, whether from drug or device companies or DME suppliers, is illegal regardless of whether the prescribed drug or ordered equipment was medically appropriate.
The Physician Self-Referral Law (Stark Law) [42 U.S.C. § 1395nn]
The Physician Self-Referral Law, commonly known as the Stark Law, directly addresses conflicts of interest within government health care programs. 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 a specific exception applies. These financial relationships encompass both ownership/investment interests and compensation arrangements. For example, physician investment in an imaging center creates a financial relationship subject to the Stark Law. Without an applicable exception, referrals to the imaging center are prohibited, and the entity cannot bill Medicare or Medicaid for those referred services.
“Designated health services” (DHS) covered under the Stark Law 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
For detailed information, refer to CMS’s Stark law Website.
The Stark Law operates as a strict liability statute. This means that proof of specific intent to violate the law is not required for a violation to occur. The law prohibits the submission, or causing the submission, of claims that violate its referral restrictions. Physicians found in violation of the Stark Law face penalties including fines and exclusion from participation in federal health care programs.
Exclusion Statute [42 U.S.C. § 1320a-7]
The OIG has a mandatory exclusion authority, legally requiring the exclusion of individuals and entities convicted of certain criminal offenses from participation in all federal health care programs. These mandatory exclusions apply to convictions related to:
- Medicare or Medicaid fraud, and any 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 possesses discretionary exclusion authority, allowing them to exclude individuals and entities based on other grounds, such as: misdemeanor convictions related to health care fraud (excluding Medicare or Medicaid fraud), misdemeanor convictions related to controlled substances, license suspension or revocation related to professional competence or financial integrity, providing unnecessary or substandard services, submitting false or fraudulent claims to a federal health care program, engaging in unlawful kickback arrangements, and defaulting on health education loan or scholarship obligations.
Exclusion from federal health care programs has profound consequences. Excluded physicians cannot receive payment from Medicare, Medicaid, TRICARE, the Veterans Health Administration, or any other federal health care program for services they furnish, order, or prescribe. This prohibition extends to both direct billing and indirect billing through employers or group practices. Furthermore, any order or prescription from an excluded physician is not reimbursable by federal health care programs, even if the patient pays privately for the service.
For further details, consult Special Advisory Bulletin: The Effect of Exclusion From Participation in Federal Health Care Programs.
It is the responsibility of health care providers to ensure they do not employ or contract with excluded individuals or entities in any capacity where federal health care program funds might be used for the items or services provided. This necessitates screening both current and prospective employees and contractors against the OIG’s List of Excluded Individuals and Entities (LEIE), an online database accessible through OIG’s Exclusion Website. Employing or contracting with an excluded party that results in federal health care program payment for furnished services can lead to civil monetary penalties and the obligation to repay any amounts related to the excluded individual or entity’s services.
For more information, visit OIG’s exclusion Website.
Civil Monetary Penalties Law (CMPL) [42 U.S.C. § 1320a-7a]
The Civil Monetary Penalties Law (CMPL) grants the OIG authority to seek civil monetary penalties and sometimes exclusion for a broad spectrum of misconduct within government health care programs. The CMPL allows for varying penalty amounts, ranging from $10,000 to $50,000 per violation, depending on the specific infraction. Examples of CMPL violations include:
- Presenting claims for items or services not provided as claimed, or that are false or fraudulent.
- Presenting claims for items or services for which payment cannot be made under government health care programs.
- Violating the Anti-Kickback Statute (AKS).
- Violating Medicare assignment provisions.
- Violating Medicare physician agreements.
- Providing false or misleading information intended to influence discharge decisions.
- Failing to provide adequate medical screening examinations for emergency department patients with emergency medical conditions or in labor (EMTALA violations).
- Making false statements or misrepresentations on applications or contracts to participate in federal health care programs.
