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What Constitutes a “Safe Harbor” in an Anti-Kickback Statute Investigation?

anti-kickback statute

In a federal investigation under the Anti-Kickback Statute (AKS), a key defense strategy will often be to assert a statutory or regulatory safe harbor. As explained by the U.S. Department of Health & Human Services’ (DHHS) Office of Inspector General (OIG), “[t]he ‘safe harbor’ regulations describe various payment and business practices that, although they potentially implicate the Federal anti-kickback statute, are not treated as offenses under the statute.”

The Anti-Kickback Statute is extremely broad. Under the AKS, a health care provide or third-party can face civil or criminal prosecution for “offering, paying, soliciting or receiving anything of value to induce or reward referrals or generate Federal health care program business.” Since this has the potential to proscribe many types of transactions that do not have potential negative implications for patients or the potential to result in improper payments from federal health care benefit programs such as Medicare, Medicaid, and Tricare, Congress and DHHS have delineated various “safe harbors” that insulate transactions from AKS prosecution.

Example Safe Harbors under the Anti-Kickback Statute

There are numerous safe harbors under the Anti-Kickback Statute, many of which are extremely detailed and technical in nature. When engaging in transactions with potential AKS implications, it will often be in the health care providers’ and other entities’ best interests to structure these transactions with a specific safe harbor in mind. But, even if you did not consider the AKS and are now facing a federal investigation, you may still be able to find a safe harbor that protects you.

Some of the most commonly used safe harbor provisions under the Anti-Kickback Statute include the following:

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Roger Bach
Roger Bach
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Dennis A. Wichern
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Chris Quick
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Kevin M. Sheridan
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Ray Yuen
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Gamal Abdel-Hafiz
Gamal Abdel-Hafiz
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Former Supervisory Special Agent, FBI

1. Bona Fide Employment Relationship

Bona fide employment relationships qualify for safe harbor protection under Section 1128B of the Social Security Act (which is home to the Anti-Kickback Statute). As explained by the OIG, the AKS “exempts from its reach ‘any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services.'” For the purposes of the AKS, employment status is determined based upon the applicable common law principles that typically evaluate factors such as:

  • The level of control the employer exerts over the employee;
  • The timing and method of payment (e.g., bi-monthly paychecks as opposed to invoicing); and
  • The location and tools or equipment used by the employee during work hours.

2. Personal Service Arrangements

Personal service arrangements that do not qualify as bona fide employment relationships qualify for safe harbor protection under the Anti-Kickback Statute if they satisfy seven specific conditions outlined in Section 1128B. These conditions are:

  • A written and signed agency agreement;
  • Provisions in the agency agreement covering all of the services to be provided for the term of the agreement;
  • Provision for services that do not violate state or federal law;
  • A contract term of one year or longer;
  • Scheduling of the services to be provided if they are not to be performed on a full-time basis;
  • Compensation that is consistent with an arm’s length transaction and that does not take into account the quantity or quality of referrals between the parties; and
  • The services covered under the agreement are no more than are reasonably necessary to accomplish the parties’ commercially reasonable business purpose.

3. Lease or Rental of Office Space or Equipment

The safe harbor regulations under the Anti-Kickback Statute contain near-identical provisions insulating office space and equipment rental agreements that satisfy certain conditions. A lease or rental agreement will not trigger AKS liability if:

  • The parties have a written and signed lease or rental agreement that specifies the premises or items covered by the lease;
  • The term of the lease is for not less than a year;
  • The aggregate rental charge is set in advance consistent with fair market value and does not take into account “the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid, or all other Federal health care programs;”
  • The lease or rental agreement specifies the schedule for the lease or rental; and
  • The scope lease or rental agreement is no greater than is reasonably necessary for commercial purposes.

4. Referral Services

Despite the Anti-Kickback Statute’s express intent to prohibit payments for referrals, payments of “remuneration” to referral services are permitted under certain circumstances. The “referral services” safe harbor provides:

“‘[R]emuneration’ does not include any payment or exchange of anything of value between an individual or entity (‘participant’) and another entity serving as a referral service (‘referral service’), as long as all of the following four standards are met –

“(1) The referral service does not exclude as a participant in the referral service any individual or entity who meets the qualifications for participation.

“(2) Any payment the participant makes to the referral service is assessed equally against and collected equally from all participants and is based only on the cost of operating the referral service, and not on the volume or value of any referrals to or business otherwise generated by either party for the other party for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal health care programs.

“(3) The referral service imposes no requirements on the manner in which the participant provides services to a referred person, except that the referral service may require that the participant charge the person referred at the same rate as it charges other persons not referred by the referral service, or that these services be furnished free of charge or at reduced charge.

“(4) The referral service makes the following five disclosures to each person seeking a referral, with each such disclosure maintained by the referral service in a written record certifying such disclosure and signed by either such person seeking a referral or by the individual making the disclosure on behalf of the referral service –

“(i) The manner in which it selects the group of participants in the referral service to which it could make a referral;

“(ii) Whether the participant has paid a fee to the referral service;

“(iii) The manner in which it selects a particular participant from this group for that person;

“(iv) The nature of the relationship between the referral service and the group of participants to whom it could make the referral; and

“(v) The nature of any restrictions that would exclude such an individual or entity from continuing as a participant.”

5. Group Purchasing Organizations

Certain transactions between vendors and group purchasing organizations (GPO) are exempt from Anti-Kickback Statute liability as well. In order to qualify for safe harbor protection, (i) the GPO must have a compliant written agreement in place with the vendor, and (ii) the GPO must submit written disclosures to DHHS.

Other safe harbor provisions under the Anti-Kickback Statute apply to transactions and relationships including (but not limited to):

  • Discounts
  • Investment Interests
  • Management contracts
  • Practitioner recruitment
  • Price reductions
  • Sale of health care practice
  • Waivers of copayments, coinsurance, and deductibles
  • Warranties

Do You Need to Secure Protection under an Anti-Kickback Statute Safe Harbor?

If your health care practice or business is under investigation for alleged violations of the Anti-Kickback Statute, you need experienced legal representation. Dr. Nick Oberheiden is an experienced health care fraud defense law attorney who is seasoned in AKS investigations. To learn more about the safe harbor protections you may have available, call Oberheiden, P.C. at (214) 692-2171 or request a free consultation with Dr. Oberheiden online now.

This information has been prepared for informational purposes only and does not constitute legal advice. This information may constitute attorney advertising in some jurisdictions. Merely reading this information does not create an attorney-client relationship. Prior results do not guarantee similar outcomes in the future. Oberheiden, P.C. is a Texas professional corporation with its headquarters in Dallas. Mr. Oberheiden limits his practice to federal law.

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