Providers Facing Heightened Kickback Scrutiny

June 5, 2019, Matt Curley, McKnight's Long-Term Care News - As long-term care providers are increasingly well aware, practices that may often be viewed as the norm in other industries are typically entirely off limits when they involve healthcare services paid for by government healthcare programs.

Conferring benefits on referral sources in the form of above-market arrangements, sweetheart deals, or other perks may very well land healthcare providers in hot water.  Recent cases reinforce the notion that long-term care providers should pay particular attention to the government’s efforts to police arrangements and business practices that implicate the federal Anti-Kickback Statute and similar regulatory prohibitions.  

Fraud’s legal framework

The Anti-Kickback Statute criminalizes the payment or attempted payment of remuneration to induce or reward referrals involving goods or services payable by federal healthcare programs.  Remuneration may include anything of value and can take many forms, including cash, free rent or rent that is above or below market rates, and excessive compensation for directorship or consultant arrangements.

The Anti-Kickback Statute covers both those who pay and offer to pay such remuneration, as well as those who would receive that remuneration.  And, while intent must be shown, it is typically sufficient for the government to show that merely one purpose of the remuneration was to induce referrals rather than showing that the primary or main purpose of the remuneration was to do so.

Those found to have violated the Anti-Kickback Statute face fines and penalties as well as imprisonment.  Anti-Kickback Statute violations also can give rise to civil enforcement risk under the False Claims Act, which may result in treble damages and significant per claim penalties with respect to claims tainted by kickbacks.

Recent long-term care fraud cases

Long-term care providers have often been the target of enforcement efforts focused on alleged violations of the Anti-Kickbacks Statute.  Earlier this month, a South Florida nursing facility owner was convicted for his role in a wide-ranging fraud scheme involving alleged kickbacks paid to physicians in exchange for patient admissions, described by the U.S. Department of Justice as “the largest healthcare fraud scheme ever charged.”

DOJ announced that the proof at trial involved evidence that the owner bribed physicians to admit patients to his facilities, and then cycled the patients through those facilities, without providing appropriate medical care or by providing medically unnecessary services, which were then billed to government healthcare programs.

The defendant will be sentenced in this case in the coming months and faces the possibility of a significant prison sentence given the amount of the alleged loss.   

This case is just the most recent prominent example of an enforcement action against long-term care providers.  While perhaps unique given the size of the alleged scheme, the long-term care industry certainly has experienced its share of similar enforcement actions.

In mid-2018, the former CEO of the largest nursing home company in Indiana was sentenced to more than nine years in prison for his role in a kickback scheme in which he and his co-conspirators were alleged to have funneled more than $19 million in fraudulent payments and kickbacks to themselves through various shell companies.

The schemes at issue were varied. In some instances, vendors of the nursing home company inflated their bills to fund kickbacks to the nursing home company CEO.  In other instances, the CEO simply demanded that vendors pay kickbacks to him in exchange for him selecting them to service the company’s large number of facilities. 

Situations that are less obviously fraudulent also attract the interest of government regulators and False Claims Act whistleblowers.  Many such cases have focused on alleged sham or suspect medical directorship agreements between physicians and skilled nursing facilities, hospice, and home health providers.

In such cases, physicians are alleged to have performed little or no services under their medical directorships or to have received payments that are far in excess of fair market value for services actually provided.  In exchange for such payments, physicians are alleged to have funneled patients to those providers often without regard to whether patients actually needed those services.

Such arrangements expose both physicians and long-term care providers to significant risk of civil, criminal, and administrative enforcement.

Mitigating fraud and compliance risk

Potential violations of the Anti-Kickback Statute raise several concerns for regulators, including the prospect of patient harm stemming from medically unnecessary care or the compromising of the clinical judgment of practitioners involved in problematic arrangements, and the resulting increased costs to federal healthcare programs.

As a result, long-term care providers should expect that regulators will continue to pursue enforcement actions involving potential kickbacks vigorously.  

As a result, long-term care organizations should consider enforcement an ever-present part of their operating landscape.  Some best practices to lower the risk of fraud include:

  • Closely scrutinize arrangements whereby anything of value is provided to or received from persons or entities in a positon to influence or generate referrals implicating government healthcare programs.
     
  • Evaluate whether any purpose of such arrangements is to influence or generate business involving those programs.

  • Recognize that even a legitimate business purpose will not legitimize such an arrangement if there is also an illegal purpose associated with the arrangement.  While the Anti-Kickback Statute and associated regulations include various safe harbors for common business practices such as leases and personal services, the arrangement at issue must fit squarely within the Anti-Kickback Statute’s safe harbor provisions.  

  • Monitor relevant cases and review enforcement actions by the government, and Fraud Alerts and advisory opinions issued by HHS Office of Inspector General.  Staying current with respect to such developments helps long-term care providers identify key risk areas involving the Anti-Kickback Statute.  

While such proactive efforts may not eliminate all enforcement risk, they should be central components of any long-term care provider’s compliance program.