For many businesses, offering rewards for referrals may be good practice. However, in the medical or healthcare field, this “scratch my back, I’ll scratch yours” attitude is illegal. Under the Anti-Kickback Statute (AKS), paying for referrals or recommendations is subject to serious fraud penalties, including fines, jail time, and exclusion from federal programs.

Healthcare providers, nursing homes, managed care organizations, home health providers, pharmacies, durable medical equipment (DME) manufacturers, hospitals, labs, pharmaceutical or drug companies, and all other healthcare organizations that do not fully comply with these restrictions may face serious consequences.

What Is the Anti-Kickback Statute?

The Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)] is one of the most important anti-fraud laws in healthcare. It is designed to prevent financial influence or interference in healthcare decision-making and prevent patient abuse that stems from connecting medical decision-making directly to the profit motive.

Under the AKS, offering or receiving remuneration of any kind is illegal in order to generate or reward patient referrals, or business of any kind that is payable by federal health care programs including Medicare, Medicaid, TRICARE, and VA health programs. An example of this might look like payments or gifts given to doctors in order to induce them to prescribe certain drugs or recommend certain medical devices (DME), or medical procedures to Medicare, Medicaid, TRICARE, and VA health patients.

Medical necessity is not a defense against violating the AKS. Likewise, the government does not have to show that it has been harmed in order to bring a fraud or False Claims Act claim under the AKS. This is a strict liability standard for healthcare organizations.

For instance, as a healthcare organization, you can be held accountable for accepting payments or remuneration from a pharmaceutical company or other healthcare provider or organization even if you can show you would have prescribed the drug anyway to a patient, and it even helped their condition. Accepting or offering the kickback is what induces liability, not patient outcome. However, each party’s intent is considered when bringing AKS allegations.

What Is a “Safe Harbor” Provision?

Obviously in the healthcare industry there is still some necessary crossover between businesses. Many hospitals offer in-house laboratory or diagnostic services in order to ease the logistical burden on sick patients.

Likewise, some medical professionals might invest in ambulatory surgical centers or other arrangements outside of their immediate purview.

Because of this, there are exceptions to AKS violations called “safe harbors.” These situations, when they meet all of the criteria of the Safe Harbor Provision, do not induce liability under the Anti-Kickbacks Statute.

What Are Examples of Kickbacks in Health Care?

Kickbacks are unlawful inducements, limited only by the imagination of fraudsters, and can take many forms. Under the False Claims Act, they commonly include:

Cash, Bonuses, or Other Financial Incentives

Offering or receiving cash payments in exchange for patient referrals is a clear violation of the AKS. However, some healthcare organizations attempt to disguise unlawful inducements by calling them bonuses or financial incentives to employees, gifts to other providers or organizations, or waivers of copay or deductibles to patients.

Gifts

Gifts can be offered directly to healthcare providers in the form of lavish meals or travel to exotic or expensive destinations, and more.

Compensation for “Speaking Engagements”

One of the most common fraud schemes is hiring doctors or other healthcare providers to participate in panels, studies, or speaking engagements at so-called events or pharmaceutical conferences.

For example, in the GlaxoSmithKline lawsuit in 2012, United States prosecutors alleged that GSK sponsored dinners, lunches, and spa treatments for doctors who partook in “speaking programs” in order to promote prescriptions of Paxil in children and adolescents.

Meanwhile, Paxil carries a black box warning connected to heightened risk of suicidal thinking and behavior in patients under 18. These all-expenses paid speaker programs were unlawful inducements to healthcare providers to write more prescriptions for this risky drug.

Reduced Overhead Costs

Discounted rental spaces or staff salaries being covered by the healthcare company or organization are both examples of reduced overhead costs. Others might be gifts of rental cars, transportation vouchers, or other ways to lower operating costs. If these are offered as unlawful inducements to increase spending under federal healthcare programs and are not subject to a safe harbor, then the AKS has been violated.

“Discount” Programs

Discount programs walk a fine line under the AKS. Examples include doctors who waive patient fees (or copays) or forgive collections on deductibles. Offering routine copay waivers or advertising discounts to patients may be illegal under the AKS if the patient is covered by Medicare, Medicaid, TRICARE, or VA health.

Who Must Comply with the Anti-Kickback Statute?

The Anti-Kickbacks Statute applies to healthcare providers, nursing homes, managed care organizations, home health providers, pharmacies, durable medical equipment (DME) manufacturers, hospitals, labs, pharmaceutical or drug companies, and all other healthcare organizations.

Because the AKS governs both accepting as well as offering financial inducements, it applies to entities and individuals who accept or receives remuneration connected to health care services insured by the federal government.

What Are the Penalties for Violating the Anti-Kickback Statute?

The Anti-Kickback Statute (AKS) is a criminal statute, meaning that those convicted with it can face imprisonment, as well as penalties of up to $50,000 per kickback plus three times the amount of the remuneration. Healthcare organizations that violate the AKS may also be liable under the False Claims Act.

Therefore employees of healthcare providers, nursing homes, managed care organizations, home health providers, pharmacies, durable medical equipment (DME) manufacturers, hospitals, labs, pharmaceutical or drug companies, and all other healthcare organizations, who are aware of unlawful inducements being provided may be valid relators or whistleblowers and entitled to a share of the government’s recover for such violations.

Important Cases Involving Health Care Kickbacks

Some recent and notable cases involving kickbacks in healthcare include:

• Inventory management system was offered for free to customers who converted their practice to contracting with ASD Specialty Healthcare (DBA Besse Medical) as well as who purchased branded Wet AMD drugs. The case settled for $1.67 million in 2024. The relator or whistleblower received a share of this recovery as a reward for reporting the fraud to the government.
• United Therapeutics paid $210 million to resolve allegations that it violated the False Claims Act by paying kickbacks to Medicare patients through an alleged independent charitable foundation. Had there been a whistleblower, they would have received a share of the recovery.
• Smart Pharmacy Inc. and other parties agreed to pay at least $7.4 million to resolve allegations that they unnecessarily added the antipsychotic drug aripiprazole to topical compounded pain creams to boost federal reimbursement for the compounded creams and waived patient copayments. The relators or whistleblowers will receive a share of the recovery.

What to Do If You Suspect Your Employer Is Engaged in a Kickback Scheme

If you work in the medical or healthcare field and have information about your employer either offering or accepting kickbacks you can report it. Whistleblowers or relators are eligible for a confidential and free evaluation of their concerns if they go through a healthcare fraud law firm, with experience representing False Claims Act qui tam whistleblowers or relators.

They may even qualify for certain financial rewards for reporting and protections against retaliation. Speaking up is the right thing to do in order to protect patient safety, avoid criminal liability, and reduce federal program costs for all participants. It also helps to keep the healthcare programs funded by taxpayers solvent for years to come.