Legal Expertise and Defense for Healthcare Professionals Accused of Patient Bribery
Former DOJ-Prosecutors & Health Care Law Defense Counsel
Oberheiden & McMurrey, LLP represents medical marketers and business owners accused of patient bribery in a number of federal investigations across the United States. Most of our clients find out that they are subject to a government investigation in one of two ways: they either receive notice that they are subpoenaed to testify before a Grand Jury or they found out when federal agents from the Office of Inspector General or the FBI unexpectedly show up at their house or business with an interview request. This brief article explains why paying patients is risky and may lead to criminal exposure.
The Anti-Kickback Statute
Central to patient bribery investigations is the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)). The Anti-Kickback Statute makes it a federal crime for anyone (e.g. physicians, marketers, pharmacies, patients etc.) to knowingly or willfully pay or receive remuneration in exchange for referrals or the purchase of any item or service that might be paid for by a federal health care program. Both direct and indirect remuneration is prohibited. In addition, the Anti-Kickback Statute is reciprocal, meaning that both the payer of kickbacks and the receiver of kickbacks are liable under the statute.
Exceptions: The federal Anti-Kickback Statute only applies in cases where the beneficiary is part of a federal health care program, but almost all 50 states have adopted the federal Anti-Kickback Statute as a state offense. Additionally, the Anti-Kickback Statute includes an enumerated list of “safe harbors,” or exceptions to the application of the statute, including for “referral services,” which is discussed in more detail below.
Remuneration: The Department of Health and Human Services’ Office of the Inspector General (OIG) defines “remuneration” very broadly as “the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or kind.” OIG Advisory Opinion No. 12-21 (OIG AO 12-21) (emphasis added). Thus, remuneration may include gifts, gift cards, waiver of fees, complimentary equipment, prizes, etc.
Remuneration is considered improper if it is given to a patient to incentivize that patient to select a particular provider, prescription, or medical service. See OIG Special Fraud Alert regarding the Anti-Kickback Statute (Dec. 19, 1994) (“OIG SFA 1994”). Under the “One Purpose Rule,” OIG has interpreted the Anti-Kickback Statute “to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals.” OIG AO No. 12-21.
Examples: Recent examples of improper remuneration from marketers include providing gift cards to patients in exchange for their Medicare or Tricare information, which was then used to bill for laboratory testing and setting up sham medical studies as a guise for issuing payments to patients in order to induce them to use a particular provider.
Other examples of remuneration that have the potential to be improper include reimbursing patients for their co-pay, co-insurance, or deductible for using as particular item or service (or reimbursing pharmacies or physicians for their waiver of patients’ co-pays, co-insurance, or deductibles) and patient assistance programs, which help needy patients obtain prescriptions. See OIG SFA 1994.
Penalties: A violation of the Anti-Kickback statute is a federal felony offense that carries with it penalties including: 1) imprisonment of up to five years; 2) fines of up to $25,000 per violation; and 3) mandatory exclusion from federal health care programs. Importantly, pursuant to the Affordable Care Act, any violation of the Anti-Kickback Statute is automatically deemed a violation of the False Claims Act (described below).
The Beneficiary Inducement Statute
The Beneficiary Inducement Statute (42 U.S.C. § 1320a-7a(a)(5) imposes steep civil monetary penalties on anyone who offers to or transfers remuneration to any federal health care beneficiary which that person knows (or should know) is likely to influence that beneficiary to order or receive any item or service from a particular provider, practitioner, or supplier.
The OIG has explained that offering valuable gifts to beneficiaries “raises quality and cost concerns” because “providers may have an economic incentive to offset the additional costs attributable to the giveaway by providing unnecessary services or by substituting cheaper or lower quality services” and “the use of giveaways to attract business also favors large providers with greater financial resources for such activities, disadvantaging smaller providers and businesses.” OIG Special Advisory Bulletin regarding Offering Gifts and Other Inducements to Beneficiaries (August 2002) (OIG SPB 2002).
Exemptions: The Beneficiary Inducement Statute specifies several exemptions to the purview of the regulations. The most important exceptions are: 1) waivers of coinsurance or deductibles provided on an individualized basis based on a good faith determination of financial need; 2) remunerations of a nominal value – defined as less than $15 per item or less than $75 annually  (i.e. a t-shirt). (OIG SPB 2002). These exceptions are subject to interpretation and restrictions.
Penalties: Punishment for violation of the Beneficiary Inducement Statute includes: 1) fines of up to $10,000 for each item or service billed to a federal health care program in violation of the statute; 2) recoupment of up to three times the government’s damages or three times the amount billed for each item or service; and 3) permanent or temporary exclusion from participation in federal health care programs.
The False Claims Act
The False Claims Act (31 U.S.C. § 3729 et seq.) holds individuals and entities accountable for submitting false or fraudulent payment claims to the government. Examples of claims qualifying under the False Claims Act include a doctor billing Medicare for unnecessary treatments to a patient or laboratories billing Medicare for tests that were never performed. As noted above, any claim submitted in violation of the Anti-Kickback Statute also qualifies as a false claim for purposes of the False Claims Act.
Penalties: Punishment for violation of the False Claims Act includes: 1) fines ranging from up to $10,781.40 to up to $21,562.80 per false claim; 2) three times the amount of damages sustained by the government as a result of the false claims; and 3) permanent or temporary exclusion from participation in federal health care programs. Criminal prosecution is possible as well.
The federal government considers payments to patients to use a certain product or provider a criminal offense. The Department of Justice has significantly increased the number of investigations and prosecutions of individuals that are part of a marketing-patient arrangement. In cases where the federal Anti-Kickback Statute does not apply because payments were made to private insurance patients, the government has used alternative statutes such as mail fraud, wire fraud, and money laundering. If you are a medical marketer and you have questions about current investigations and effective defense strategies, you should contact the former federal prosecutors and experienced health care defense attorneys at the Oberheiden & McMurrey, LLP directly. Consultations are free and confidential.
Oberheiden & McMurrey, LLP
Oberheiden & McMurrey, LLP has successfully defended individuals and companies in civil and criminal health care fraud investigations across the United States. Clients of Oberheiden & McMurrey, LLP are represented by senior attorneys with distinct backgrounds that can identify the right strategy based on years of specific experience. If you have questions about medical marketing, you should contact our healthcare fraud defense attorneys directly, including on weekends.
Call Oberheiden & McMurrey, LLP today and speak with former federal prosecutors and established defense counsel about your case. All initial consultations are free and confidential. We are available to discuss your case. You can call us directly or complete our contact form or by sending us an email.
 The definition of nominal value was increased via the OIG’s General Policy Statement Regarding Gifts of Nominal Value to Medicare and Medicaid Beneficiaries (Dec. 7, 2016).