Federal Anti-Kickback Statute Provides for 'Safe Harbors'

March 1, 1995

Part 1 of this three-part series on the Medicare fraud and abuse laws reviewed the laws prohibiting self-referrals (ONI, Jan, 1995, ). Part 2 (Feb, 1995) looked at the false claims laws and how to avoid exposure to such claims. This final article discusses the Medicare and Medicaid anti-kickback statute.

Part 1 of this three-part series on the Medicare fraud andabuse laws reviewed the laws prohibiting self-referrals (ONI,Jan, 1995, ). Part 2 (Feb, 1995) looked at the false claims lawsand how to avoid exposure to such claims. This final article discussesthe Medicare and Medicaid anti-kickback statute.

The Medicare and Medicaid anti-kickback statute prohibits a physicianor other entity from knowingly and willfully offering or payingremuneration (anything of economic value) to induce a referralfor which payment may be made under Medicare/Medicaid. The statuteis also violated when a physician or entity demands or receivespayment for referrals for a good, facility, service, or item coveredunder Medicare or Medicaid.

Payment for referrals is prohibited, even if disguised as a legitimatepayment. For example, if a laboratory pays excessive rent (beyondfair market value) to a physician for use of space, the Officeof the Inspector General (OIG) will infer that part of the paymentis for referrals.

Similarly, if a physician accepts payments for serving as an entity'smedical director--and the pay is high and the responsibilitiesminimal--the OIG may believe that the arrangement constitutesa kickback for the physician's referrals.

The OIG has published certain "safe harbors," ie, arrangementsthat will not be pursued as kickbacks. Safe harbors exist forrental of space and equipment, payments under personal serviceand management contracts, payments to bona fide employees, andcertain medical practice purchases. Each safe harbor includesconditions that must be met for the arrangement to be protected(see table), and arrangements that do not meet these conditionsmay present significant risks.

Although the anti-kickback law dates back to 1972, new health-carearrangements may result in new legal concerns. Payments to managementservice organizations (MSOs), through which physicians purchaseadministrative services, may be based on a percentage of the physician'srevenue. If the MSO owners have the ability to refer patientsto a physician under contract with the MSO, then the anti-kickbackstatute might be violated.

For example, if one of the MSO owners was an oncologist who referreda patient to a surgical group that was paying the MSO 40% of itsgross revenues for management services, and the group collected$1,000 for the procedure, then the owners of the MSO would indirectlyobtain $400 as a result of the referral, potentially violatingthe anti-kickback law.

Examples of Safe Harbor Criteria

1. The arrangement should be reflected in a written, signed agreementthat specifies precisely the items or services being provided(including a schedule of use).

2. The arrangement should be for at least 1 year.

3. Aggregate payments should be set in advance, consistent withfair market value, and should not be related to referrals betweenthe parties.