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Why LTC operators should care about anti-kickback statute trends

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Richard Cheng
Richard Cheng

Skilled nursing facility operators should pay close attention to anti-kickback statutes trends because enforcement is evolving and the issues can affect providers greatly.

An AKS, after all, is considered a violation of the False Claims Act, according to the Affordable Care Act, and the burden of proof for the government is lower. Over the past two years, there has been ample FCA litigation in long-term care and the penalties are quite substantial.

For SNF operators, anti-kickback and false claims cases can be corporate killers and have crippling financial effects. Direct cash compensation or luxury trips in exchange for referrals rarely occur these days. Instead, remuneration derives from management services agreements, processing fees and consulting arrangements. Further, it is arguable the definition of “referral” was broadened in 2015, expanding the AKS's reach, as discussed below.


The AKS prohibits knowingly and willfully paying or receiving remuneration in exchange for patient referrals from which payment may be made by a federally funded healthcare program (e.g. Medicare, Medicaid, Tricare, etc.). The AKS has been amended several times, including an expansion of the term “remuneration” in 1977, and added a knowledge requirement in 1980, mandating that an AKS violation must be committed “knowingly and willfully.”

To lessen the restrictive nature of the AKS, there are statutory (6) and regulatory (25) safe harbors. Additionally, the Office of Inspector General can consider new safe harbor proposals. There are several currently being considered. An AKS safe harbor analysis takes into account the language of the safe harbor, (e.g., the space rental safe harbor), applicable facts, any relevant OIG Advisory Opinion and relevant case law.

Drivers of enforcement

In the past few years, the Department of Justice has entered into large AKS settlements, proving governmental investigations and enforcement actions are leading to large monetary recoveries.  More specifically, the federal government is recovering $8 for every $1 invested, making this effort yield a high return on investment that will likely continue.  

The ACA provides the federal government additional approaches to pursue violations under the AKS. Prior to the passage of the ACA, many courts held that AKS violations did not automatically constitute a FCA violation and required additional supportive evidence to assert a successful FCA claim.

However, the ACA clarified that no additional facts are required to prove a FCA violation. The ACA also made it easier to bring an AKS criminal case because the ACA was passed, the government does not have to prove actual knowledge or specific intent to successfully prosecute an AKS violation claim.  

Anti-kickback cases in 2015

The following two cases depict financial arrangements between a provider and the referral sources. The first is a look at a relationship between a SNF and a kickback scheme involving a group of physicians hired as medical directors. The second case, while involving a home health care agency and not a SNF, the legal analysis is transferable and applies to SNF operators. Let's take a look.

United States ex rel. Beaujon v. Hebrew Homes Health Network, Inc., et al.

Hebrew Homes Health Network Inc. (“Homes”), its subsidiaries, affiliates and William Zubkoff, its former president and executive director, agreed to pay $17 million to settle allegations that Homes violated the AKS by improperly paying doctors for referrals of Medicare patients requiring skilled nursing care.

Based on the Department of Justice allegations, Homes operated a kickback scheme by hiring physicians as medical directors pursuant to contracts that specified job duties and hourly requirements. Each medical director agreement entitled the physician to receive thousands of dollars per month while performing few, if any, of their contracted job duties.

DOJ allegations state that compensation was provided solely for patient referrals to Homes, which increased significantly after medical directors were hired, creating compensation arrangements in violation of the AKS.

U.S. v. Patel

In this case, the Seventh Circuit Court issued a ruling that impacts and arguably broadens the term “refer.” The court adopted a broader interpretation, holding that a physician makes a “referral” for purposes of the AKS when he or she makes a “certification and recertification” that care is necessary, even if the physician never directed patients to the specific provider.

Note, however, that the home health care provider in question paid $300 to $400 to Patel for each certification and was on a list of providers given out by Patel, complicating the case. This expansion creates greater potential AKS exposure when physicians authorize the use of medical service providers if there are any forms of remuneration coming from the related entity.  

The above-mentioned cases are some 2015 highlights related to the anti-kickback statute.  Providers should be aware that in 2016, the DOJ has indicated that it will be proactive in litigating issues.

If you think a potential threat exists or have any concerns, I recommend contacting an attorney who is competent in health care regulatory matters.

Richard Y. Cheng is an attorney at Shannon, Gracey, Ratliff & Miller LLP, where he is partner and co-leader of the Healthcare Practice Group. Prior to his legal career, Richard worked as a licensed occupational therapist in Dallas. 

Guest Columns

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