Back To HEALTHCARE FRAUD
One of the most common fact patterns of healthcare fraud brought under the False Claims Act are violations of the Anti-Kickback Statute and the physician self-referral law (much better known as the Stark Law, after its author). The overarching goal of both laws is to control healthcare costs and keep financial considerations out of medical decision-making. These laws generally prohibit medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients whose treatment will be paid for by government healthcare programs such as Medicare and Medicaid, and from entering certain kinds of financial relationships that aim to capture referral streams.
The Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b), applies broadly to any medical provider that arranges or recommends medical services that are ultimately paid for, fully or partially, by federal healthcare programs like Medicare, Medicaid, TRICARE, and others. The law applies to nearly every level of healthcare entity, including doctors’ offices, nursing homes, and hospitals, as well as pharmaceutical manufacturers and distributors. AKS violations require “intent to induce referrals.” An AKS violation can constitute a violation of the False Claims Act even if the provider did not specifically intend to violate the AKS.
The variety of conduct covered by the AKS is very broad, and the schemes to pay kickbacks are often very creative. The standard, simple fact pattern of an AKS violation is a company paying doctors kickbacks to use its medical device or prescribe its drug. Even if the procedure or prescription was medically necessary and properly executed, that fact pattern can violate the AKS. A recent example of this scheme is shown via a settlement by a spinal devices company called Innovasis, which agreed to pay $12 million to resolve allegations that it was providing kickbacks, amongst them luxury ski trips, to orthopedic surgeons to steer them toward using the company’s devices. In 2019, a pharmaceutical company, US WorldMeds, paid $17.5 million to settle a similar case, with its alleged kickbacks including trips to the Kentucky Derby. Both of these cases were brought by whistleblowers.
But kickback arrangements can get a lot more complicated than buying luxurious outings. Whistleblower Partners recently represented a whistleblower who accused DaVita, the dialysis giant, of violating the AKS. The company recently agreed to pay $34.5 million to resolve allegations of three novel kickback theories involving DaVita’s pharmacy business, its vascular access center business, and medical directorships at dialysis centers. The team that represented the whistleblower included Eric Havian, Mike Ronickher, Hamsa Mahendranathan, and Harry Litman. In 2014, Eric Havian represented another whistleblower in a case involving allegations of kickbacks by DaVita, with the company paying $400 million to resolve allegations that it sold shares in its dialysis center at under market value to disguise kickbacks paid to physicians.
Another common fact pattern under the AKS involves kickbacks paid to patients by drug companies. As anyone familiar with prescription drugs knows, picking up medicine often comes with a copay, generally tied to the cost of the drug, with more expense drugs requiring higher copays. Medicare depends on market forces to incentivize patients (and their prescribing physicians) to choose lower cost drugs, or generic drugs, when those are an option. One way of incentivizing that choice is the required copays. In the past few years, many pharmaceutical companies have tried to waive those copays via foundations or coupons, which is allowed in narrow circumstances but can violate the AKS. There have been massive resolutions under this theory with Pfizer ($23.85 million), Biogen ($22 million), Gilead ($97 million), Novartis ($51 million), Sanofi ($12 million), Astellas and Amgen ($125 million), Jazz, Lundbeck, and Alexion ($122 million), Actelion ($360 million), and United Therapeutics ($210 million), amongst others.
The Stark Law, 42 U.S.C. § 1395nn, is somewhat more narrow than the AKS and prohibits healthcare providers from making referrals for certain health services, payable by Medicare, to another entity that the provider or an immediate family member has a financial relationship with, unless an exception applies. The Stark Law, unlike the AKS law, is a “strict liability” statute, meaning proof of intent to induce referrals is not required. Also unlike the AKS, the law only applies to certain services, such as lab testing, drugs, and durable medical equipment, and only to the relationships with physicians.
A formulaic example of a Stark violation would be a hospital paying a physician an inflated wage, a wage well above market value, with the goal of capturing ancillary services (like labs and imaging) ordered by that physician.
In 2023, an Indiana-based hospital chain, Community Health Network, paid $345 million to settle allegations that it violated the Stark Law. The hospital was accused of paying cardiovascular specialists, neurosurgeons, and breast surgeons salaries much higher, indeed sometimes double, the prevailing wage, with the goal of capturing downstream referrals. The case was initiated by a whistleblower, the system’s former CFO. Another example is a $25 million settlement with a Georgia hospital, which resolved allegations that it violated the law regarding a single oncologist. This case was also initiated by a whistleblower.
Healthcare entities that violate the AKS and Stark law make services more expensive for everyone, cloud medical judgment, and may be liable under the False Claims Act, a law that empowers whistleblowers to detect and expose fraud against the government.
Schemes to game the rules can be extremely complex and look different than those discussed here. This page does not cover all, or even the majority of, kickback or Stark schemes.
Due to the complicated and often opaque nature of relationships in the healthcare industry, insiders are necessary to prevent and detect fraud.
Under the FCA, whistleblowers can bring lawsuits against healthcare providers, vendors, and drug companies who they allege violate the law. As an incentive, whistleblowers can be rewarded 15-30% of the amount the defendant ultimately pays the government as a result of the case.
Whistleblower Partners has secured multiple high-profile wins kickback matters and can help you assess whether you might have a case. If you would like more information or would like to speak to an attorney at Whistleblower Partners, please contact us for a confidential consultation.
These descriptions of kickback and Stark violations are general in nature and do not constitute legal advice. Kickback and Stark violations are complex and ever-evolving. The attorneys at Whistleblower Partners understand the complicated, constantly changing legal landscape and are happy to discuss any potential matter further.
If you would like more information or would like to speak to an attorney at Whistleblower Partners, please contact us for a confidential consultation.
