Common Frauds – Self-dealing and Kickbacks

Two laws that are often cited in False Claims Act (FCA) allegations are the Stark law and Anti-Kickback law  These laws are about physicians referring patients to themselves and the taking of kickbacks.

Physician Self-Referral Law (“Stark Law”)

The Stark Law prohibits a physician from referring patients to an entity (such as a Long-Term Care or Skilled Nursing Facility facility) for a “designated health service” payable by Medicare or Medicaid, if the physician or a member of his or her immediate family has a financial relationship with the entity.  The law does allow for some exceptions and limited types of relationships.

Example Case Study: Adventist Health System

In 2013, Adventist Health System, a non-profit hospital and healthcare facility operator, agreed to pay $115 million to settle FCA allegations (with no determination of liability) that stemmed from Stark Law and Anti-Kickback Statute allegations.

The government alleged:

  • A doctor’s BMW and Mustang car leases were paid for even though there were no provisions for such compensation in his contract.
  • A doctor was paid his full base salary even though he worked only three days a week and took over 50 days off a year.
  • A doctor had staff and equipment bills at his independent private practice paid for.

Learn more about the Physician Self-Referral Law here.

The Anti-Kickback Statute

The Anti-Kickback Statute prohibits the knowing and willful payment to induce or reward patient referrals or the generation of business involving any item or service payable by Federal health care programs (ex: drugs, supplies, or health care services for Medicare or Medicaid patients).

Kickback payments can include anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies.  There are “safe harbor” provisions that protect some types of payment and business practices.

Example Case Study: Johnson & Johnson

In 2013 Johnson & Johnson settled False Claims Act allegations for $2.2 billion.  The settlement resolved allegations that the company:

  • Paid kickbacks to physicians to prescribe the drug Risperdal
  • In an effort “to target elderly dementia patients in nursing homes”, paid kickbacks to Omnicare Inc. (a pharmacy specializing in dispensing drugs to nursing home patients)

Learn more about the Anti-Kickback statute here