Beyond the federal anti-kickback statute

In its campaign against the corruption of medical decision making and illegal kickbacks generally, the Department of Justice (DOJ) has increasingly come to rely upon two pieces of legislation together with the Federal Anti-Kickback Statute (the AKS): the Federal Travel Act and the Eliminating Kickbacks in Recovery Act (EKRA).

It is undeniable that healthcare providers participating in federal healthcare programs should be keenly aware of the legal and financial penalties that accompany a violation of the AKS—DOJ’s principal mechanism by which it prosecutes the payment or receipt of remuneration to induce or reward referrals of items or services reimbursable by a federal health care program. But how might the government pursue legally questionable remuneration schemes that do not implicate the use of federal funds in the manner of Medicare or Medicaid, and what other statutory provisions should healthcare practitioners who engage with a broad mix of payors be aware of?

The Travel Act

The Travel Act provides that “whoever travels in interstate or foreign commerce or uses the mail or any facility in interstate or foreign commerce” with the intent to “distribute proceeds of an unlawful activity” or “promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on of an unlawful activity” shall be subject to criminal penalties.[1] When defining “unlawful activity,” the statute lists “extortion, bribery, or arson in violation of the laws of the State in which committed or of the United States.”[2] By allowing federal prosecutors to incorporate state commercial bribery statutes into a Federal Travel Act charge, the Travel Act’s scope is much broader than that of the AKS. In fact, many state commercial bribery statutes are designed to criminalize bribes that merely involve a fiduciary relationship—i.e., a doctor’s fiduciary duty to his or her patients.

United States v. Greenspan provides an example of a health care bribery prosecution employing the Travel Act. There, a New Jersey family doctor was convicted for substantive violations of the Federal Travel Act for his role in the solicitation and receipt of bribes from a diagnostic laboratory in exchange for referring specimens to that lab for testing. Though the scheme implicated payments made by both private insurers and Federal health care programs, New Jersey’s commercial bribery statute—which prohibits the acceptance of “any benefit as consideration for knowingly violating or agreeing to violate a duty of fidelity to which he is subject as … a physician”—served as a predicate to the Travel Act charge, for which Greenspan was ultimately convicted.

Additionally, earlier this fall, the DOJ announced that a diagnostic laboratory sales representative was sentenced to 168 months in prison and ordered to pay $4.69 million in restitution for his role in a multi-million dollar health care fraud scheme. The sales representative was convicted earlier this year on counts relating to health care fraud, wire fraud, and conspiracy to violate the Anti-Kickback Statute and Travel Act based on two primary arrangements. In the first, the sales representative arranged for a prescriber’s medical assistant to be placed on the payroll of a laboratory in exchange for that prescriber’s referrals to the laboratory. The laboratory subsequently paid the representative a commission based upon the orders issued to the lab by that prescriber. In the second, the sales representative was found to have paid prescribers to issue medically unnecessary prescription orders for highly reimbursed compounded prescription medication. In addition to paying prescribers to issue the prescriptions, the sales representative also paid patients who agreed to receive the compounded medication. The sales representative was paid a commission from the pharmacy for the referrals this scheme generated. The Travel Act was implicated in these arrangements as the payments made to prescribers in exchange for prescribing compounded medication, as well as for referrals for laboratory testing, constituted unlawful activity under the New Jersey Commercial Bribery Statute.

Eliminating Kickbacks in Recovery Act (EKRA)

In furtherance of the government’s effort to curb the effect of kickbacks on patient steering, overutilization, and medical decision making, Congress also passed EKRA in 2018. EKRA prohibits, knowingly and willfully soliciting, receiving, paying, or offering remuneration in exchange for referring to, inducing a referral of an individual to, or using the services of a recovery home, clinical treatment facility, or laboratory.[3]

Although prosecutions have been somewhat limited to date, DOJ has begun signaling its intent to ramp up enforcement against illegal remuneration schemes pursuant to EKRA in recent Federal district court cases. However, these cases have been lacking in uniformity of their application of EKRA. For example, in S&G Labs Hawaii, LLC v. Graves, the United States District Court for the District of Hawaii found that a laboratory marketer’s commission-based compensation did not violate EKRA because the marketer was not paid to refer individual patients to the laboratory. Instead, the marketer’s compensation was based on “client accounts,” which were comprised solely of health care providers. In contrast, in U.S. v. Scheana, the United States District Court for the Northern District of California found that S&G Labs Hawaii was not reliable precedent for evaluating marketing relationships under EKRA. Importantly, that court found that EKRA is implicated even where a laboratory’s marketers are not positioned to make referrals, and instead only obtained referrals for the laboratory indirectly from the physicians to whom they marketed. The court held that the plain meaning of “to induce a referral of an individual,” includes situations where a marketer causes (or arranges for) a referral to be made by a physician, and the law does not contain a requirement of interaction between the marketer and the individual patient directly.

Unlike the Federal Travel Act, EKRA contains several safe harbors that health care providers must consider when assessing their own practices’ compliance with the law.

Conclusion

As illustrated by Greenspan and Scheana, it is critical that all stakeholders, including, but not limited to, health care providers, laboratories and their marketing agents, understand the implications of the Federal Travel Act and EKRA on their business arrangements and review their compliance within the parameters of these laws. This is especially true considering the government’s ability to prosecute beyond the AKS using the Travel Act or EKRA, which apply irrespective of payment source. Therefore, arrangements that exclude Federal beneficiaries will still face direct scrutiny under these laws. Although compliance with the AKS remains crucial, all stakeholders must additionally ensure that their activities comport with the Travel Act and EKRA, as enforcement agencies are utilizing these statutory regimes to prosecute health care arrangements outside the Federal payor context.

It is imperative that stakeholders take affirmative measures to confirm that their models will survive scrutiny under Federal and state law. Securing competent healthcare counsel to review, develop or restructure marketing arrangements can help ensure compliance with not only the AKS, but also the Travel Act and EKRA.

Arielle T. Miliambro, Esq., Maria F. Paniscotti, Esq., Matthew Benzoni, Esq., are attorneys with Frier Levitt.

[1] 18 U.S.C. § 1952(a).

[2] 18 U.S.C. § 1952(b).

[3] 18 U.S.C. § 220(a)-(b).