A significant portion of the federal budget is used to fund healthcare services for seniors, veterans, people with low income, and others through various government insurance and other programs. To protect taxpayers from abuse of these beneficial programs and to ensure providers’ incentives remain aligned with those of their patients, both the federal and state governments have rules limiting the ability to accept fees for referral of patients using these programs. These rules are known as “anti-kickback” rules, the most widely known being the federal Stark Law. They aim to prohibit the payment of referral fees, thus eliminating incentives to refer patients for unnecessary services that enrich the referrer, at the expense of the government program.
Federal Anti-Kickback Laws
It violates the federal anti-kickback laws to solicit or to accept “any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind-- in return for referring an individual to a person for the furnishing … of any item or service for which payment may be made in whole or in part under a Federal health care program.” In simple terms, a health care provider cannot provide anything of value to another person or entity in exchange for referrals of patients whose bills will be paid by the federal government.
These laws could pose a challenge for providers who accept referrals from someone, to whom they also happen to pay money. This might be because the referrer is the provider’s landlord or a vendor. Thus, practitioners who share office space, staff, or other overhead costs with another practice must be wary. Just because there is another reason for a payment, doesn’t mean a regulatory agency won’t look upon it with suspicion.
Fortunately, the anti-kickback laws provide for numerous safe harbors which establish permissible instances when a provider can pay a referrer in a manner that is not violative of the anti-kickback laws. These are for common expenses, such as rent, supplies, and the like that a provider might have to pay a referrer. The key thing providers must be aware of is that for an expense to qualify for one of the safe harbors, the amount paid must be set in advance of any referrals and be in no way tied to the referrals or to the providers’ revenue, profits, or business generally. This feature of the safe harbors prevents bad actors from disguising referral payments.
The Stark Law
The federal Stark Law is similar to the anti-kickback law, with a few key distinctions. Firstly, it prohibits referrals by physicians, as opposed to from anyone at all. Second, it covers certain “designated health services,” as opposed to all services from healthcare and pharmaceutical companies. Thirdly, it applies to services that are going to be paid for by Medicaid or Medicare, as opposed to all government funded healthcare expenses. It prohibits referring physicians (or their immediate family) from having a financial relationship with the entity receiving the referral. As with the anti-kickback rules, there are exceptions to this prohibition for “rental of office space” and other common expenses, but like the anti-kickback laws, to benefit from the exceptions the expenses generally must be for a fixed amount.
While the basic thrust of these schemes is simple enough, both the anti-kickback laws and the Stark Law contain various intricacies that anyone who accepts referrals for government funded healthcare services ought to familiarize themselves with. New York practitioners also need to be aware of parallel rules at the state level, that in turn contain their own requirements. Consulting with experienced counsel is always well advised when navigating health care regulatory matters.