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What is a Kickback?

In the world of healthcare, federal law makes it illegal to offer or receive a kickback in exchange for referring or arranging for the furnishing of any item or service that will be covered by a federal healthcare program. The Anti-kickback Statute can be found at 42 U.S.C. 1320a–7B.

But what is a kickback? The statute makes it illegal to “solicit or receive any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in-kind.” This means a kickback can be any type of remuneration, benefit or compensation, whether direct or indirect, hidden or secret.

The anti-kickback statute has two overarching purposes.

First, the law is designed to prevent over-utilization of federal healthcare programs. This means doctors and other providers should only prescribe services and items that are medically necessary. A doctor should order an MRI test because the patient needs the MRI test, not because the doctor gets a kickback every time he orders the test.

Second, the law is designed to make sure the patient receives the goods or services that are best for the patient, not the one that is best for the doctor. Doctors often have a choice of goods or services to prescribe for a given patient. The doctor should prescribe the medication, diagnostic test, or surgical implant that he or she truly believes is best for the patient – not the one that will pay the doctor the best kickback.

Who typically pays a kickback? Any provider of healthcare services who is dependent upon someone else to refer that business. Common examples might include: pharmaceutical companies, diagnostic imaging companies, home healthcare agencies, radiation oncology centers, diagnostic laboratory testing companies, specialty physicians, hospitals, and countless others.

Who typically receives the kickback? Anybody in a position to refer patients for further medical treatment or testing. Common examples include: other doctors, hospitals, nursing homes, and countless others.

With that in mind, here are some common kickback schemes:

Company A makes a cash payment to a doctor in exchange for ordering a certain test, prescribing a certain medication, or prescribing home healthcare services. Better yet, Company A makes the payment with an American Express gift card, which is more difficult to trace.

A hospital pays a doctor a salary above fair market value in exchange for referrals the doctor makes to the hospital.

A laboratory testing company provides free computers or other testing equipment to a doctor’s office in exchange for the doctor’s agreement to send its specimens to that laboratory.

A home health agency agrees to “rent” office space within an assisted-living facility in exchange for the facility’s agreement to arrange for home health referrals.

A dialysis center agrees to hire a physician as medical director for a salary above fair market value in exchange for the physician’s agreement to make referrals to the center.

A pharmacy agrees to waive a patient’s co-payment obligation in exchange for the patient’s agreement to use that pharmacy.

A pharmaceutical company agrees to pay a doctor expensive speaking or research fees in exchange for the doctor’s agreement to recommend a certain medication.

Kickback schemes can be varied and complex. If you know about an illegal kickback scheme, contact one of our lawyers for a free consultation. You may be eligible to become a whistleblower and may be entitled to receive a portion of any recovery made by the Government.

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