The Ultimate Guide to the Federal Kickback Statutes

The federal kickback statutes impose civil and criminal penalties for healthcare providers, government contractors, and other individuals and entities that pay unlawful referral fees and other forms of remuneration out of federally reimbursed funds. These statutes are intended to help fight fraud, waste, and abuse (FWA) involving taxpayer funds, and the U.S. Department of Justice (DOJ) aggressively prosecutes those who are accused of using federal funds for unlawful purposes.

Within the healthcare and government contracting sectors, the DOJ uses three primary statutes to prosecute individuals and entities accused of offering, paying, soliciting, and receiving unlawful kickbacks. The three main federal kickback statutes in these areas are:

• Anti-Kickback Act of 1986 (AKA)
• Anti-Kickback Statute (AKS)
• Eliminating Kickbacks in Recovery Act (EKRA)

However, DOJ prosecutors can (and do) use several other federal statutes to prosecute cases involving alleged kickbacks as well. Depending on the circumstances involved, kickback allegations can have implications under federal laws ranging from the False Claims Act (FCA) to the Foreign Corrupt Practices Act (FCPA). Anti-kickback cases will frequently lead to charges under the federal conspiracy, mail fraud, wire fraud, and money laundering statutes as well; and, when federal grand juries return indictments for multiple charges, defendants can face enormous fines and the potential for an effective life sentence.

Federal Kickback Statutes: An Overview

As a result, healthcare providers, government contractors, and others targeted in federal kickback investigations need to take their situations extremely seriously. This starts with understanding the charges involved. Here is an overview of the elements of each offense (and the potential penalties) under each of the three main federal kickback statutes:

1. Anti-Kickback Act of 1986 (AKA)

The Anti-Kickback Act of 1986, 41 U.S.C. Section 51 et seq., allows the DOJ to pursue charges against government contractors and related entities that engage in prohibited conduct. As the DOJ explains, the AKA “expand[s] the definition of prohibited conduct and by making the [AKS] applicable to a broader range of persons involved in government subcontracting.” Key provisions of the Anti-Kickback Act include:

• The AKA prohibits contractors from including amounts in government contract bids specifically for the purpose of paying kickbacks. Prohibited kickbacks include “money, fees, commission, credit, gift, gratuity, thing of value, or compensation of any kind.”
• The AKA expands the AKS’s prohibitions to cover “improperly obtaining or rewarding favorable treatment,” whereas the original statute applied only to “the inducement or acknowledgement of a subcontract” within the federal contracting sector.
• The AKA covers all types of entities involved in federal contracting. This includes (but is not limited to) prime contractors, prime contractor employees, subcontractors, and subcontractor employees.”
• The AKA expands the prohibitions on kickbacks in the government contracting sector to include kickbacks paid under all government contracts. A previous restriction to “negotiated contracts” has been abolished.
• The AKA requires evidence that a defendant “knowingly and willfully engage in the prohibited conduct for the imposition of criminal sanctions.” It does not require evidence of intent to violate the statute’s prohibitions on referral fees and other forms of remuneration.

2. Anti-Kickback Statute (AKS)

The Anti-Kickback Statute, 42 U.S.C. Section 1320a-7b, is the primary statute that the DOJ uses to prosecute illegal payments between providers and other parties in the healthcare sector. It applies to payments made using funds reimbursed by all federal healthcare programs; and, while it provides for civil enforcement in some cases, it allows for criminal prosecution in cases involving “knowing” and “willful” conduct.

Subsection 1320a-7b contains several specific prohibitions. Some examples of violations that can be prosecuted as criminal offenses under the AKS include:

• “[K]nowingly and willfully mak[ing] or caus[ing] to be made any false statement or representation of a material fact in any application for any benefit or payment under a Federal health care program.”
• “[K]nowingly and willfully mak[ing] or caus[ing] to be made any false statement or representation of a material fact for use in determining rights to [a] benefit or payment.”
• “[K]nowingly and willfully solicit[ing] or receiv[ing] 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 or arranging 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.”
• “[K]nowingly and willfully solicit[ing] or receiv[ing] any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind . . . in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program.”
• “[K]nowingly and willfully offer[ing] or pay[ing] any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person . . . to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service . . . or . . . purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program.”

Violations of the Anti-Kickback Statute carry up to a $100,000 fine and 10 years of federal imprisonment in most cases. However, as each individual payment (or offer or solicitation) can be prosecuted as a separate offense, it is not unusual for the stakes to be far higher in a case prosecuted under the AKS.

3. Eliminating Kickbacks in Recovery Act (EKRA)

The Eliminating Kickbacks in Recovery Act, 18 U.S.C. Section 220, is a relatively new (and relatively unknown) weapon in the DOJ’s arsenal for fighting kickbacks in the healthcare sector. The penalties under the EKRA are far more substantial than those under the AKS, so facing prosecution under the EKRA is a matter that requires special attention and representation by federal defense counsel with specific experience handling these types of challenging and high-risk cases.

The Eliminating Kickbacks in Recovery Act establishes two specific prohibitions. Under this federal kickback statute, it is unlawful to:

• Knowingly and willfully “solicit[] or receive[] any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory” with respect to services covered by a healthcare benefit program; or,
• Knowingly and willfully “pay[] or offer[] any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—(A) to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or (B) in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory.”

Violations of the EKRA carry up to a $200,000 fine and 10 years of federal imprisonment for each occurrence. Doctors, laboratory owners, and other individuals prosecuted under the EKRA can face prosecution under the AKS, FCA, and other federal statutes as well.

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Safe Harbors, Exceptions, and Other Defenses to Federal Kickback Allegations

While criminal prosecutors at the DOJ have several options for pursuing kickback-related charges, individuals and entities targeted in these cases also have a variety of defenses available. These include defenses based on safe harbors and exceptions expressly set forth in the AKS and EKRA.

The federal kickback statutes recognize that not all payments made using government-reimbursed funds constitute unlawful remuneration. This recognition is manifested in the form of safe harbors and exceptions that provide defenses to prosecution. Some examples of these safe harbors and exceptions include statutory provisions that specifically allow transactions such as:

• Qualifying discounts and price reductions
• Payments made under bona fide employment and independent contractor agreements
• Payments made under personal services and management contracts
• Contracts for equipment and facility rentals
• Compensation paid for authorized referral services

Along with these safe harbors and exceptions, individuals and entities targeted under the federal kickback statutes can assert the same types of defenses that are available in other federal criminal cases. These include (but are by no means limited to) defenses such as:

• Inadequate evidence of knowledge, willfulness, or intent
• Inadequate evidence of an unlawful offer, solicitation, payment, or receipt
• Inadmissibility of the government’s evidence due to constitutional violations
• Expiration of the statute of limitations
• Errors during the government’s investigation, grand jury proceedings, pre-trial proceedings, or trial

Speak with a Federal Kickback Defense Lawyer at Oberheiden P.C.

At Oberheiden P.C., we have extensive experience defending healthcare providers, government contractors, and other clients in federal kickback cases. This includes defending clients during investigations, grand jury proceedings, trials, and appeals. If you are under investigation or facing charges for alleged kickback violations, we can help, and we encourage you to contact us for a complimentary initial consultation. Please call 888-680-1745 or contact us online to schedule an appointment today.