Few, if any, in the medical industry are unfamiliar with the federal Anti-Kickback Statute (“AKS”). Under AKS, those giving or receiving compensation for referrals for items or services reimbursed by the federal healthcare programs are subject to criminal prosecution. The statute is intended to prevent exploitation of the federal healthcare system, avoid unnecessary inflation of program costs and encourage fair competition in the industry.
AKS prohibits, among other things, the knowing and willful payment or receipt of any form of compensation to induce or reward referrals involving any item or service payable by federal healthcare programs. “Federal healthcare programs” include more than just Medicare and Medicaid – “any plan or program providing health care benefits, whether directly through insurance or otherwise, that is funded directly, in whole or part, by the United States government (other than the Federal Employees Health Benefits Program), or any state health care program” is included. This means that remuneration for referrals in connection with items and services that are reimbursable under TRICARE, the Veterans Administration, Federal Employees’ Compensation Act, and block grant programs are all subject to prosecution under AKS.
Where items or services are not reimbursable by a federal healthcare program, providers and referring parties are not subject to AKS prosecution. However, due to an emerging trend in prosecution, the absence of reimbursement from federal healthcare programs should no longer leave providers and referral sources with a sense of security that they cannot be prosecuted for kickback arrangements.
Prosecutors are increasingly bringing charges against payers and recipients of remuneration for referrals in the medical arena under the Travel Act. The Travel Act criminalizes the use of the United States mail and interstate or foreign travel for the purpose of engaging in certain specified criminal acts. The Travel Act typically enforces two categories of state laws – laws prohibiting commercial bribery (i.e. corrupt dealings to secure an advantage over business competitors) and laws addressing illegal remuneration, including specific provisions regarding improper payments in connection with referral for services.
In two very recent high profile cases, prosecutors brought charges against those allegedly involved in kickback schemes under the both AKS and the Travel Act – Biodiagnostic Laboratory Services in New Jersey and Forest Park Medical Center in Texas. Both cases have resulted in several plea bargains, yet both have charges under AKS and the Travel Act that are still pending. While no court has directly ruled on the merits of prosecuting kickback schemes for medical services and items under the Travel Act, it is noteworthy that, in the Forest Park Medical Center case, the charges under the Travel Act survived a motion to dismiss at the district court level just last month.
All parties involved in referral arrangements for medical items or services should be on heightened alert as a result of this development. Whereas AKS can only be used to prosecute parties to a kickback arrangement where federal healthcare program funds are at issue, the use of the Travel Act may broaden prosecutors’ reach to the private payor sector, even where federal healthcare programs are not involved.