Kickback Schemes

What is a Kickback Scheme in Healthcare?

What is a kickback scheme? A kickback scheme is an illegal arrangement where healthcare providers, pharmaceutical companies, or medical device manufacturers provide payments, gifts, or other valuable incentives to influence medical decisions or patient referrals. These schemes violate federal anti-kickback laws and can result in civil and criminal penalties. Under the qui tam provisions of the False Claims Act, whistleblowers who come forward to report kickback schemes and other health care fraud are entitled to a share of the government’s financial recovery.

How are Healthcare Kickback Schemes Illegal?

A kickback scheme not only compromises medical integrity but also results in inflated healthcare costs that burden patients and taxpayers.Whether federal or private dollars are involved, we trust medical professionals to come up for the treatment options that will best protect patients, not line doctors' pockets or pad company profits.

Accordingly, the federal government takes allegations of a kickback scheme very seriously. “Kickbacks undermine the independence of physician and patient decision-making, and raise healthcare costs,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division, in a press release announcing that pharmaceutical company Pfizer would be paying $23.85 million to settle kickback allegations. FBI Special Agent Harold H. Shaw also commented on the settlement: “Today’s settlement demonstrates the FBI’s commitment to making sure patients receive, and the government pays for, health care that is not compromised by kickbacks.”

The federal government aggressively enforces violations of the Stark Law and the Anti-Kickback Statute, the two main laws that govern a kickback scheme in healthcare. [1][2]

The Anti-Kickback Statute ("AKS") expressly states that AKS violations constitute "false or fraudulent" claims under the False Claims Act, and violations of the Stark Law, also known as the "Physician Self-Referral Law", could also contribute to False Claims allegations if Medicare or Medicaid patients are involved.

Who May Be Involved in a Healthcare Kickback Scheme?

Kickback schemes involve improper financial relationships between at least two different entities. Entities that have been involved in a healthcare kickback scheme include:

• Healthcare Providers:
  • Hospitals
  • Nursing homes
  • Physical therapy clinics
• Companies that sell medical product or provide specialized medical services:
  • Ambulance companies
  • Drug testing & diagnostic laboratories
  • Hospital Staffing companies
  • Medical device companies
  • Pharmaceutical companies
  • Pharmaceutical marketing companies
  • Pharmacies
• Individuals:
  • Doctors, nurses or staff at any of the above

If you suspect you've witnessed examples of kickbacks or believe your organization may be involved in a kickback scheme, it's important to understand that whistleblower protections exist to safeguard those who report these violations.

What Types of Kickbacks Are There?

Understanding the various forms these illegal arrangements can take is crucial for identifying potential violations. Any kind of unearned restitution can qualify as a kickback, so healthcare kickbacks can come in a number of different forms. Common examples of kickbacks in healthcare include:

Alternatively, companies may try to make kickbacks look like legitimate payments for services rendered. For instance, they may offer high payments to doctors and disguise them as speaking fees or research funding grants.

It is also possible for healthcare kickback schemes to take place in the pharmaceutical marketplace outside the hospital setting. Kickbacks in this case could take the form of pharmaceutical companies offering co-pay assistance to Medicare consumers, or pharmacies sharing revenue with healthcare marketing companies in exchange for prescription referrals.

Examples of Healthcare Kickback Cases

Goldberg Kohn has worked on a number of successful healthcare kickback cases over the years. A few examples include:

• Allergan, a pharmaceutical company, settled a case for $13 million in which it was accused of providing services such as business consulting to ophthalmologists in return for them prescribing Allergan eye products.
• Community Health Systems settled a case in which it allegedly admitted Medicare patients in its emergency rooms who did not require admittance in order to bill the government. CHS offered incentives to its physicians to increase fraudulent admissions.
• Omnicare, a long-term care pharmacy, agreed to pay $17.2 million to the government to settle allegations that their purchase of Total Pharmacy included a multimillion-dollar kickback to secure contracts with more than two dozen nursing homes.

Frequently Asked Questions

What is a kickback scheme?

A kickback scheme involves the exchange of money or other benefits in return for referrals or other business favors.

How do kickback schemes relate to healthcare fraud?

In the healthcare industry, kickback schemes can lead to unnecessary or inappropriate medical services, inflated costs, and compromised patient care.

What is the Anti-Kickback Statute?

The Anti-Kickback Statute (“AKS”) prohibits offering remuneration to induce patient referrals for items or services payable by federal healthcare programs. Remuneration can take many forms. For example, kickbacks include:

• A physician offering cash to a hospital in exchange for referrals to the physician.
• A pharmaceutical company paying providers sham consulting fees when the providers have not performed any consulting services, with the understanding that the provider will prescribe the pharmaceutical company’s drugs to patients in exchange. 
• Exchanging referrals for benefits like paid trips or free or below-market office space.

In many fields, it is acceptable to reward those who refer business to you, but the AKS makes knowingly offering or receiving those rewards a crime in federal healthcare programs. However, the AKS also contains several safe harbors under which certain financial arrangements are excepted from liability. Legal counsel can advise on whether one of the AKS’s safe harbors applies to a particular financial arrangement.

Intent is a crucial aspect of the AKS as the statute only covers conduct that is knowing and willful. The AKS also features safe harbors carving out specific business practices that do not constitute a kickback under the AKS. 

Whistleblowers with inside information about referral schemes involving federal healthcare programs can use AKS violations as a foundation for an FCA suit.

What are some examples of kickback schemes in healthcare?

Examples include:

• A doctor receiving payments for referring patients to a particular lab.
• A pharmaceutical company providing incentives to doctors for prescribing their drugs.
• A medical device company giving gifts to hospitals for using their products.

What are the penalties for violating the Anti-Kickback Statute?

Violations of the Anti-Kickback Statute can result in criminal penalties, civil fines, and exclusion from federal healthcare programs.

Who can report a kickback scheme?

Anyone with knowledge of a kickback scheme can report it, including employees, competitors, or anyone else with inside information.

How do I report a kickback scheme?

You can report a kickback scheme to the Department of Justice, the Office of Inspector General (OIG) for the Department of Health and Human Services, or by filing a qui tam lawsuit under the False Claims Act.

What information should I include when reporting a kickback scheme?

When reporting a kickback scheme, you should include as much detail as possible, such as the names of the individuals or entities involved, the dates of the activity, the specific benefits exchanged, and any supporting documentation.

What is the Stark Law?

The Stark Law prohibits physicians from referring patients for certain designated health services to entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.

How does the Stark Law differ from the Anti-Kickback Statute?

The Stark Law is a strict liability statute, meaning that intent is not required to prove a violation, while the Anti-Kickback Statute requires proof of intent to induce referrals.

What is NOT a kickback scheme?

Legitimate discounts or rebates that are properly disclosed and offered to all customers, or bona fide employment relationships where compensation is not tied to the volume or value of referrals, are not considered kickback schemes.

Contact a Kickback Fraud Lawyer at Goldberg Kohn

For more information on these cases and others, see our Settlements and Other False Claims Act Successes pages. The whistleblower attorneys at Goldberg Kohn are committed to combating kickback schemes and other health care fraud, as well as protecting the rights of whistleblowers. If you suspect an illegal kickback scheme, or would like to discuss a possible False Claims Act case, contact us online to schedule a free, confidential case review with the expert team at Goldberg Kohn.