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Kickback Statutes

Kickbacks: A Worm at the Heart of Our Federal Health Care Systems

Kickbacks can be one of the most corrosive elements in any system, damaging free trade and shortchanging customers. In our federal health care programs, kickbacks degrade care in favor of insiders making money through trading favors.

Briefly, kickbacks are secret financial arrangements between parties that benefit the parties involved. When it comes to health care, these arrangements are often between doctors and hospitals or other health care providers, drug or device manufacturers, labs, or chronic care facilities. Kickbacks cost us all a lot of money while shorting the patients who need care. Kickback systems can be complex, involve non-monetary compensation, such as cars or vacations, and are a troubling problem, damaging whatever system of which they are a part.

Practically all of the time, kickbacks are illegal.

The ethics of medical professionals dictate that they should determine the best course of diagnosis and treatment without regard for lining their own pockets. When kickbacks are involved, diagnostics and treatment that are often medically unnecessary are performed purely for the profit of certain individuals or entities.

With our federal health care programs—Medicare, Medicaid, and others—we have the Anti-Kickback Statute (AKS) and the Stark Law to prescribe limits and penalties in such situations. The Stark Law prohibits physicians from receiving financial gain for referring Medicare and Medicaid patients for tests and other medical services.

What is the Anti-Kickback Statute?

The federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b) is a criminal law forbidding compensation that is meant to expedite a transaction. The AKS was included in the Medicare and Medicaid Patient Protection Act of 1987 and was originally enacted in 1972.

Elements of the AKS are as follows:

  • The AKS applies to all federal health care programs.
  • Medical referrals are allowed to originate with any person or entity (as opposed to the Stark Law, which concerns physicians), and allowed to apply to any item or service. However, asking for, offering, receiving, or paying anything of value with regard to referrals or to generate business with a federal health care program is prohibited.
  • Willful and knowing intent must be proven for the AKS to be violated.
  • Safe harbors, or certain kinds of conduct deemed not to violate the law, do exist (42 C.F.R. § 1001.952). Safe harbors often include investments, sales and rental agreements involving physical property, sales of certain physician practices in underserved areas, management contracts, and other business-related activities. But it is important to remember that safe harbor protection is awarded only to arrangements that exactly meet all the conditions named in the safe harbor.

Penalties for violating the AKS can be steep. Criminal penalties can amount to fines of up to $25,000 and up to a five-year prison sentence per violation. As kickbacks are usually ongoing enterprises, with dozens or even hundreds of violations, the fines and the prison terms can add up quickly.

Civil and administrative penalties for violating the AKS are:

  • Liability under the False Claims Act, exposing parties to having an FCA case brought against them
  • Exclusion from federal health care programs (e.g., a hospital being prohibited from receiving reimbursement for Medicare patients)
  • Up to $50,000 in civil monetary penalties per violation
  • Civil assessment penalties of up to three times the kickback amount.

Recent Successful Qui Tam Kickback Cases

Violations of an anti-kickback statute are one reason to bring a whistleblower suit, and there have been no shortage of such cases in the recent past. All of the following settlements originated with whistleblowers as qui tam cases:

  • July, 2016: Atrium Medical Corp. settled claims that the company paid kickbacks to physicians for advocating the unapproved usage of arterial stents. The settlement of $11.5 million in the qui tam case is one of the largest medical device cases on record where the government declined to intervene. The award portion for the former Atrium sales rep and business manager who blew the whistle has not yet been determined.
  • June, 2016: A qui tam whistleblower suit against OPKO Health and an owning physician was settled for $9.35 million. The whistleblower alleged that the lab and its former owner violated both the AKS and the Stark Law by helping physicians buy electronic health record systems in exchange for gaining Medicare referrals. The whistleblower’s award was $1.683 million.
  • March, 2016: Respironics Inc., a sleep therapy products supplier, agreed to resolve charges of False Claims Act violations by settling for $34.8 million because of a qui tam suit brought by a whistleblower. The kickbacks consisted of free call center services given by Respironics. The whistleblower’s portion amounted to $5.38 million.
  • October, 2015: Numerous violations of the AKS and the Stark Law resulted in Millennium Health settling for an eye-popping $256 million. Unnecessary medical testing and numerous illegal payments to doctors were alleged. In this qui tam suit, the whistleblowers received $30.35 million for the urinary drug testing claims and $1.48 million for the genetic testing claims.

Generally, most qui tam cases are brought by current or former employees.

But, with the vastness of the medical areas involved in federal health care programs, many others—subcontractors, patients, business competitors, and customers—might discover fraud and consider bringing a suit.

The Whistleblower Lawyer.

If you think you have the facts needed to bring a whistleblower case, the experienced whistleblower attorneys at the Louthian Law Firm can review your case and help you file the appropriate disclosure statement. Under some circumstances, the government will intervene, or join in your lawsuit.

Your chances of succeeding are greater if your whistleblower claim is substantive, clear, and to the point. Because of this, meeting with a qualified whistleblower attorney can increase your chances of winning. The Louthian Law Firm can help you form your claim so that the government will be more inclined to intervene in your case; government intervention can sometimes increase the chances of recovering reward money. Even if the government decides not to intervene, it could still be a good idea to pursue your case without government involvement. Our strong support system can assist you through every step of the process.

For a free, confidential evaluation of your case, call the Louthian Law Firm today at 1-803-454-1200 or, if you prefer, you can fill out our online contact form.

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