Title of law: The Anti-Kickback Statute, Criminal penalties for acts involving Federal health care programs
Fraud and abuse
Year enacted: 1972
Major amendments: 1977, 1980, 1987 (safe harbors implemented), 1996, 1997, 2003, 2010, 2015, 2018
Enforcement agencies: U.S. Department of Justice (DOJ), U.S. Department of Health & Human Services (HHS), Office of Inspector General (OIG), Centers for Medicare & Medicaid Services (CMS)
Applies to: Any medical providers accepting payment through government healthcare programs.
What Is the Anti-Kickback Statute?
The Anti-Kickback Statute (AKS) is a federal criminal statute prohibiting transactions intended to induce or reward referrals for items or services reimbursed by federal healthcare programs. It provides both criminal and civil penalties for violations of the statute. If “one purpose” of the transaction is to induce referrals, then the entire transaction is tainted. This statute is designed to protect federal healthcare program beneficiaries from referral decisions based on monetary influence.
The purposes of the statute include:
To prevent inappropriate medical referrals by providers who may be unduly influenced by financial incentives.
To prevent overutilization and increased federal healthcare program costs.
To prevent unfair competition.
To ensure the proper reporting of costs to the government.
The law includes safe harbors, which are forms of payment and business practices that may appear to violate the Anti-Kickback Statute but are protected if the party in question meets various tests to qualify. Examples of protected practices include:
Electronic health records items and services
Electronic prescribing items and services
Payments made to bona fide employees
Personal services and management contracts
Ambulatory surgical centers
The Anti-Kickback Statute was originally enacted as part of the Social Security Amendments of 1972. Before 1972, only one provision prohibited false claims and misrepresentation to the government, and the statute’s language made it difficult to prosecute Medicare and Medicaid fraud. Despite the update to the AKS, Medicare and Medicaid abuse continued to rise, resulting in new amendments being added to further discourage fraudulent activity.
The original statute made the receipt of kickbacks, bribes, or rebates in connection with items or services covered by Medicare and Medicaid programs a misdemeanor punishable by a fine, imprisonment, or both. In 1977, the Medicare-Medicaid Anti-Fraud and Abuse Amendments increased the penalty for violating the AKS from a misdemeanor to a felony to discourage Medicare and Medicaid fraud. In 1980, the statute was updated to require proof that the defendant acted “knowingly and willfully.”
The Medicare and Medicaid Patient and Program Protection Act (MMPPPA) was passed in 1987, which also made two important changes to the AKS. First, the OIG was granted authority to exclude violators of the AKS from participating in federal health care programs. Second, the legislation directed HHS to promulgate regulations that created additional exceptions to the AKS, which would become known as “safe harbors.” The first series of “safe harbor” regulations were implemented in 1991. In 1996, Congress further amended the AKS through the Health Insurance Portability and Accountability Act (HIPAA), primarily by expanding the law to cover all federal health care programs rather than just Medicare and state health care programs, adding a new exception relating to certain risk-sharing organizations, and enhancing communication between the OIG and public about the applicability of the AKS to certain transactions. One year later, Congress added a civil monetary penalty. Finally, the Patient Protection and Affordable Care Act of 2010 amended the intent requirement to clarify that the government no longer had to prove that the defendant intended to violate the law.
Cal. Bus. & Prof. Code § 650 (West 2019)—Unearned rebates, refunds, and discounts.
Prohibits state medical professionals to offer, deliver, or receive compensation for referring healthcare services.
Cal. Welf. & Inst. Code § 14107.2(a)-(b) (West 2019)—Renumeration for healthcare services.
Prohibits anyone from receiving or paying any remuneration for referrals of healthcare services covered by the state healthcare system.
Cal. Health & Safety Code § 445 (West 2019)—Patient referrals.
Prohibits anyone from profiting from referring patients to a healthcare provider.
Fla. Stat. § 456.054(2)(3)(a)—Renumeration and solicitation of patient referrals.
Prohibits healthcare providers to “pay, solicit, or receive a kickback” as money or other compensation for referring or soliciting patients.
Persons or entities are prohibited from paying or receiving commissions, bonuses, kickbacks, or rebates, and from engaging in split-fee arrangements with certain healthcare providers for referrals to clinical laboratories.
N.Y. Soc. Serv. Law § 366-d(2) (McKinney 2019)—Renumeration and solicitation of patients, facilities, goods.
Prohibits healthcare providers from soliciting, receiving, or agreeing to receive or accept payment from persons for Medicaid patients or for the purchase, lease, or order of any goods, facility, service, or item covered under Medicaid.
Texas Occ. Code Ann. § 102.001(a) (West 2019)—Renumeration for solicitation of patients.
Prohibits persons from offering to pay or accept, or paying or receiving renumeration, for soliciting patients for healthcare providers.
Anti-Kickback Statute Compliance Risks
The Anti-Kickback Statute is important to compliance professionals because violations expose healthcare organizations to criminal liability, including prison time for persons directly involved in violations. Healthcare organizations found liable for illegal renumeration or illegal patient admittance and retention practices are subject to up to $100,000 in fines, and those involved may be imprisoned for up to 10 years. Additionally, the AKS includes liability for false claims, and healthcare organizations that violate the AKS are likely to have also violated the False Claims Act. The following are specific AKS risk areas that compliance professionals need to monitor closely.
Risk Area: Making False Statements or Representations
knowingly and willfully makes or causes 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 (as defined in subsection (f)),
at any time knowingly and willfully makes or causes to be made any false statement or representation of a material fact for use in determining rights to such benefit or payment,
having knowledge of the occurrence of any event affecting (A) his initial or continued right to any such benefit or payment, or (B) the initial or continued right to any such benefit or payment of any other individual in whose behalf he has applied for or is receiving such benefit or payment, conceals or fails to disclose such event with an intent fraudulently to secure such benefit or payment either in a greater amount or quantity than is due or when no such benefit or payment is authorized,
having made application to receive any such benefit or payment for the use and benefit of another and having received it, knowingly and willfully converts such benefit or payment or any part thereof to a use other than for the use and benefit of such other person,
presents or causes to be presented a claim for a physician’s service for which payment may be made under a Federal health care program and knows that the individual who furnished the service was not licensed as a physician, or
for a fee knowingly and willfully counsels or assists an individual to dispose of assets (including by any transfer in trust) in order for the individual to become eligible for medical assistance under a State plan under [Medicaid], if disposing the assets results in the imposition of a period of ineligibility for such assistance under [42 U.S.C. §] 1396p(c)],
Shall (i) in the case of such a statement, representation, concealment, failure, or conversion by any person in connection with the furnishing (by that person) of items or services for which payment is or may be made under the program, be guilty of a felony and upon conviction thereof fined not more than $100,000 or imprisoned for not more than 10 years or both, or (ii) in the case of such a statement, representation, concealment, failure, conversion, or provision of counsel or assistance by any other person, be guilty of a misdemeanor and upon conviction thereof fined not more than $20,000 or imprisoned not more than one year, or both. In addition, in any case where an individual who is otherwise eligible for assistance under a Federal health care program is convicted of an offense under the preceding provisions of this subsection, the administrator of such program may at its option (notwithstanding any other provision of such program) limit, restrict, or suspend the eligibility of that individual for such period (not exceeding one year) as it deems appropriate; but the imposition of a limitation, restriction, or suspension with respect to the eligibility of any individual under this sentence shall not affect the eligibility of any other person for assistance under the plan, regardless of the relationship between that individual and such other person.
Context: The AKS overlaps some with the False Claims Act. Both statutes prohibit knowing and willful false statements for the procurement of federal funds; however, the AKS explicitly prohibits false claims made in regards to benefits or payments under a federal health program. Additionally, the AKS includes liability for healthcare organizations that misappropriate federal health program funds, present a claim for services furnished by a nonphysician, or assist a patient with disposing assets in order to become eligible for certain hospice and long-term care services.
Risk Area: Illegal Remunerations
Whoever knowingly and willfully solicits or receives 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 party under a Federal health care program, or
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,
shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.
Whoever knowingly and willfully offers or pays 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 for which payment may be made in whole or in part under a Federal health care program, or
to 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,
shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.
Whoever without lawful authority knowingly and willfully purchases, sells or distributes, or arranges for the purchase, sale, or distribution of a beneficiary identification number or unique health identifier for a health care provider under [Medicare, Medicaid, or the State Children’s Health Insurance Program (SCHIP)] shall be imprisoned for not more than 10 years or fined not more than $500,000 ($1,000,000 in the case of a corporation), or both.
Context: The AKS expressly prohibits anyone from knowingly and willfully soliciting patients, goods, facilities, and services covered under a federal healthcare program for compensation. Further, everyone, including healthcare organizations, is prohibited from offering or paying compensation for referrals of patients, goods, facilities, and services covered under a federal healthcare program. Lastly, attempting to buy, sell, or distribute patient beneficiary identification numbers or providers’ health identifier numbers given under Medicare, Medicaid, or SCHIP is strictly prohibited.
Risk Area: False Statements or Representations with Respect to Condition or Operation of Institutions
Whoever knowingly and willfully makes or causes to be made, or induces or seeks to induce the making of, any false statement or representation of a material fact with respect to the conditions or operation of any institution, facility, or entity in order that such institution, facility, or entity may qualify (either upon initial certification or upon recertification) as a hospital, skilled nursing facility, nursing facility, intermediate care facility for the mentally retarded, home health agency, or other entity (including an eligible organization under [ ]) for which certification is required under [Medicare] or a State health care program (as defined by [ ]), or with respect to information required to be provided under [ ], shall be guilty of a felony and upon conviction thereof shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.
Context: Keeping with the AKS’s prohibition of false claims, section 1320a-7b(c) of the statute prohibits the false claims relating to the operation of Medicare certified healthcare facilities.
Risk Area: Illegal Patient Admittance and Retention Practices
Whoever knowingly and willfully—
charges, for any service provided to a patient under a State plan approved under [Medicaid], money or other consideration at a rate in excess of the rates established by the State (or, in the case of services provided to an individual enrolled with a medicaid managed care organization under [Medicaid] under a contract under  or under a contractual, referral, or other arrangement under such contract, at a rate in excess of the rate permitted under such contract), or
charges, solicits, accepts, or receives, in addition to any amount otherwise required to be paid under a State plan approved under [Medicaid], any gift, money, donation, or other consideration (other than charitable, religious, or philanthropic contribution from an organization or from a person unrelated to the patient)—
as a precondition of admitting a patient to a hospital, nursing facility, or intermediate care facility for the mentally retarded, or
as a requirement for the patient’s continued stay in such a facility,
when the cost of the services provided therein to the patient is paid for (in whole or in part) under the State plan,
shall be guilty of a felony and upon conviction thereof shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.
Context: Healthcare providers are prohibited from knowingly and willfully overcharging Medicaid patients under a state Medicaid plan or requiring a Medicaid patient to pay as a precondition to being admitted, or continuing to stay, at a hospital when the services are at least partially covered by a state Medicaid plan.
Risk Area: Violation of Assignment Terms
Whoever accepts assignments described in [ ] or agrees to be a participating physician or supplier under [ ] and knowingly, willfully, and repeatedly violates the term of such assignments or agreement, shall be guilty of a misdemeanor and upon conviction thereof shall be fined not more than $4,000 or imprisoned for not more than six months, or both.
Context: Healthcare providers agreeing to accept assignment of Medicare’s reasonable charges must not intentionally and repeatedly violate the terms of the assignment.
Consequences for Noncompliance
Violations of false statements or representations, illegal remunerations, or illegal patient admittance and retention practices under the AKS result in a fine of up to $100,000 per violation and imprisonment of up to 10 years. Violations of the prohibition of the solicitation or distribution of beneficiary identification or unique health identifier numbers may result in a fine of up to $500,000 per violation and imprisonment of up to 10 years. Violations of false claims under the AKS may result in a fine of up to $100,000 per violation and imprisonment of up to 10 years. Violations of assignment of terms may result in a fine of up to $4,000 per violation and imprisonment of up to 6 months.
Criminal penalties per violation are up to $100,000 for a felony conviction and up to $20,000 for a misdemeanor conviction for making false statements or representations.
Criminal penalties per violation are up to $100,000 for illegal remuneration and up to $1,000,000 for buying, selling, or distributing beneficiary IDs or unique health identifiers.
Criminal penalties per violation are up to $100,000 for making false statements or representations with respect to condition or operation of a healthcare institution.
Criminal penalties per violation are up to $100,000 for illegal patient admittance and retention practices.
Criminal penalties per violation are up to $4,000 for violating assignment terms.
Civil money penalties per violation of up to $20,000 and not more than three times the amount of remuneration offered, paid, solicited, or received.
Exclusion from participating in federal healthcare programs.
Typical monetary penalties range from several hundred thousand to several million dollars. Extraordinary cases may range up to several hundred million to billions of dollars.
Developing and implementing policies and practices to ensure compliance with the AKS.
Making periodic internal compliance reports.
Daily monitoring of compliance activities.
Requiring employee training on federal healthcare program regulations.
Conspicuous posting of the OIG hotline telephone number for patients to report fraud.
Requiring eligibility screening of current and prospective employees ineligible to furnish services under a federal healthcare program.
Violations of the AKS involving illegal renumeration for items or services constitute a violation of the False Claims Act, which provides three times the damages the government sustains as a result of a false claims violation.
Up to 10 years for a felony conviction of false statements or representations.
Up to 10 years for illegal remuneration or for buying, selling, or distributing beneficiary IDs or unique health identifiers.
Up to 10 years for making false statements or representations with respect to condition or operation of a healthcare institution.
Up to 10 years for illegal patient admittance and retention practices.
Up to 6 months for violating assignment terms.
Important Compliance Guidance and Tools
Department of Health and Human Services, Office of Inspector General
HHS has set forth supplemental compliance program guidance for different segments of the healthcare industry in a series of publications on their website. They contain compliance recommendations and an expanded discussion of risk areas, enforcement priorities, and lessons learned in the area of corporate compliance. The guidance is intended to help healthcare systems and practices identify significant risk areas and refine ongoing compliance efforts.
Comparison of Anti-Kickback Statute and Stark Law
This document compares two similar laws, the Anti-Kickback Statute and the Stark Law, and helps clarify the application of the laws and which areas to be mindful of when evaluating compliance programs.
Safe Harbor Regulations
Find links to Federal Register notices containing preambles to the safe harbor regulations on this site.
Relevant Anti-Kickback Statute Cases and Opinions
United States v. Hong, 938 F.3d 1040 (9th Cir. 2019)
Case summary: Seong Hong operated acupuncture and massage clinics and provided infrastructure, facilities, therapists, and other staff to physical therapy companies in exchange for Medicare provider numbers. Under the arrangement, patients would receive acupuncture and massage treatments not covered by Medicare and virtually no physical therapy covered by Medicare. The physical therapy companies would still submit claims to the government for payment, and Hong would receive 56% of the Medicare payments—amounting to more than $1.6 million over the course of more than five years. Hong would be charged with healthcare fraud, illegal renumerations under the Anti-Kickback Statute, and identity theft.
Opinion issued: September 12, 2019
Link to full text: https://www.leagle.com/decision/infco20190912125
On appeal, Hong raised three arguments against his illegal remuneration conviction. First, he argued the remunerations were not for patient referrals but for the maintenance of clinics. Second, he argued that because the patients found the clinics on their own, no referral took place. And third, he argued no illegal remuneration occurred because no services were furnished.
In response to Hong’s first argument, the court explained that the Anti-Kickback Statute prohibits payment to induce future referrals, even if payment also includes compensation for professional services. Hong was the one providing the physical therapy companies the Medicare identifying information they needed to submit claims to Medicare. Thus, the court found sufficient evidence to determine the payments to Hong were, at least partially, for the patient’s information (i.e., referrals).
To the second argument, the court determined how patients found the clinic was immaterial to the issue of illegal remuneration. Instead, the issue was how patients and their information reached the physical therapy companies. Citing the same facts as above, the court found there was sufficient evidence showing patients’ information ended up in the physical therapy companies’ hands because of the payments they made to Hong.
Lastly, the court cited the Anti-Kickback Statute itself to find that no actual furnishing of services is necessary for a violation to occur. The court explained the statute prohibits the “arranging for the furnishing of any item or service.” Further, the court pointed to the statute’s purpose: “to address ‘the potential for unnecessary drain on the Medicare system.’” Thus, even though the physical therapy companies provided almost none of the physical therapy presented in the claims to Medicare, Hong still violated the statute. Accordingly, the court upheld Hong’s conviction with respect to the illegal remunerations under the Anti-Kickback Statute.
United States v. Vernon, 723 F.3d 1234 (11th Cir. 2013)
Case summary: Chris and Jeff Vernon were executives of an Alabama specialty pharmacy, MedfusionRx LLC, which filled prescriptions for factor medication. Specialty pharmacies fill critical and expensive medications and provide limited healthcare services to their clients. Factor medication is a type of medication filled by specialty pharmacies and is used to treat chronic illnesses, like hemophilia.
Alabama Medicaid covered healthcare services, including the cost of factor medication, for low-income or disabled state residents. In order to get reimbursed by Medicaid for the factor medication, specialty pharmacies were required to provide hemophilia patients with a myriad of ancillary services to go along with filling their prescription. Complying pharmacies would be reimbursed by Medicaid the average sales price, plus 6%, and additional furnishing and dispensing fees for factor medication.
MedfusionRx, through Chris and Jeff, arranged with Hemophilia Management Specialties (HMS), through Lori Brill and Leroy Waters, to refer hemophilia patients to MedfusionRx in exchange for 45%–50% of the profits MedfusionRx received as a result of Alabama Medicaid’s generous reimbursement calculation. Based on these arrangements, Chris and Jeff Vernon were convicted under the Anti-Kickback Statute for illegal remunerations for referral services; however, Chris Vernon successfully moved for a judgment of acquittal.
Opinion issued: July 26, 2013
Link to full text: https://casetext.com/case/united-states-v-vernon-2
On appeal, the government argued that enough evidence existed to show Chris Vernon knowingly and willfully paid money to Brill to induce her to refer patients to MedfusionRx to fill their factor medication. First, the government established that payments were made between MedfusionRx and HMS as evidenced by checks Chris signed to Brill under his capacity as CFO. Regarding knowledge and willfulness, Chris was privy to communications between Jeff, in-house counsel, and outside counsel showing the defendants attempted, and failed, to bring their arrangement with HMS within the Anti-Kickback Statute’s safe harbor.
The court rejected Chris’s assertion that Brill, because she was a nonphysician, did not refer patients under the statute, explaining that the prohibition on illegal referrals was not limited to physicians under subsection  Further, Brill, as a “patient advocate,” was in a position to have overwhelming influence over where her clients filled their factor prescriptions. Lastly, the court rejected Chris’s argument that because the evidence of payment occurred after HMS’s clients had already established a relationship with MedfusionRx, no referrals were taking place (i.e., the patients were existing clients of MedfusionRx). The court explained that adopting Chris’s reasoning “would lead to the absurd result that the first kickback payment for a referral is unlawful, but future kickback payments for the same patient are lawful.”: “Whoever knowingly and willfully offers or pays any remuneration...to induce such person to refer an individual to a person” (emphasis added).
In appealing his conviction, Jeff specifically argued that Waters was a bona fide employee of MedfusionRx and thus fell within the statute’s safe harbor. Ample evidence existed, however, that Waters’ employment agreement was a sham. Waters, who was a hemophiliac himself, brought himself and other patients to MedfusionRx. Although Waters had an employment contract, he almost never visited MedfusionRx’s headquarters, had no interaction with other employees, and spent most of his time gambling. The employment contract was instead a furtive agreement meant to conceal illegal remunerations for patient referrals.
Lastly, Jeff argued that he relied in good faith on the advice of counsel when he entered and continued the illegal arrangement with HMS. The court found that Jeff had not fully disclosed all material facts to MedfusionRx’s in-house counsel when attempting to draft a written agreement with HMS. Further, the arrangement with HMS was not disclosed to in-house counsel until after the illegal conduct had begun. Also, upon outside counsel’s determination that MedfusionRx’s arrangement with HMS was likely unlawful, the defendants failed to change their conduct.
Accordingly, the court affirmed the convictions of Jeff and reversed Chris’s judgment of acquittal.
United States ex rel. Louis Longo v. Wheeling Hosp., Inc., No. 19-cv-192 (N.D.W. Va. 2020)
Case summary: Wheeling Hospital CEO Ronald Violi and his consulting company, R & V Associates Ltd., violated the Anti-Kickback Statute by paying physicians for patient referrals. Violi was hired as Wheeling Hospital’s CEO to turn around the hospital’s financial situation. In doing so, Violi contracted with physicians who provided hefty revenue from patient referrals under federal healthcare plans. Physicians were compensated well above market value for their productivity, and compensation was computed considering the “downstream revenue” from their patient referrals. Wheeling Hospital would enter into a $50 million settlement agreement with the Department of Justice.
Opinion issued: September 9, 2020
In its corporate settlement press release, the Department of Justice cited the purpose of the Anti-Kickback Statute in preventing the type of behavior Wheeling Hospital engaged in. Assistant Attorney General Jeffrey Bossert Clark said, “‘Improper financial arrangements between hospitals and physicians can influence the type and amount of health care that is provided.’” Scott W. Brady, the U.S. Attorney for the Western District of Pennsylvania referred to the trust Medicare and Medicaid patients must have in their healthcare providers, and enforcement of the Anti-Kickback Statute helps ensure providers do not breach that trust.