Upon reading this article, you will be able to answer the following questions.
What is the Anti-Kickback Statute?
Who is affected by the Anti-Kickback Statute?
What are the penalties for a violation of the Anti-Kickback Statute?
Are there any exceptions to a violation of the Anti-Kickback Statute?
What can EMS providers do to help avoid a violation of the Anti-Kickback Statue?
The Anti-Kickback Statute and Its Application to Private and Municipal EMS Providers
As municipal departments become more involved in providing emergency medical services and inter-facility transports, discounts or provision of free services or items that result in charges below cost may trigger the federal Anti-Kickback Statute (“Anti-Kickback Statute”). Because of the complexity of the Anti-Kickback Statute, EMS providers—whether privately owned or municipal—are encouraged to carefully evaluate proposed transactions and arrangements for fraud and abuse compliance.
The Anti-Kickback Statute
The Anti-Kickback Statute was enacted in 1972 to protect patients and federal health care programs from fraud and abuse. The Anti-Kickback Statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program. The statute assigns criminal liability to parties on both sides of an impermissible “kickback” transaction where the required elements are met, including that of intent. For purposes of the Anti-Kickback Statute, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.
Any person or entity in a position to generate federal health care program business for an ambulance supplier, directly or indirectly, is a potential referral source, including, but not limited to, 911 or equivalent emergency medical dispatch systems, responders, hospitals, nursing facilities, assisted living facilities, home health agencies, physician offices and patients. EMS providers furnishing ambulance services may also be sources of patient referrals for hospitals, other receiving facilities, and second responders.
Due to the broad range of transactions potentially implicated by the Anti-Kickback Statute, there are several statutory exemptions for certain types of payments, and the U.S. Department of Health & Human Services’ Office of Inspector General (“OIG”) has adopted certain “safe harbors” to exempt arrangements from the Anti-Kickback Statute, provided that they fall within parameters defined to minimize the risk for potential fraud and abuse. Some of the safe harbors include: (1) ambulance restocking arrangements; (2) personal services and management contracts; (3) employees; (4) certain investment interests; (5) space rentals; (6) equipment rentals; and (7) discounts.
OIG Advisory Opinions
A request for an OIG Advisory Opinion may be requested by the parties to a proposed arrangement. OIG’s response may offer insight into how it may view a particular transaction or arrangement under the Anti-Kickback Statute, but it may only be relied upon by the requestor(s) of the Advisory Opinion. Also note that some Advisory Opinions speak to the lack of enforcement of an Anti-Kickback Statute violation, which is distinct from whether the arrangement itself presents an Anti-Kickback concern. Below are some summaries of some relevant OIG Advisory Opinions.
Ambulance Provider Discounts
In a 1999 Advisory Opinion, an EMS provider proposed to provide inter-facility transports at a discount to a skilled nursing facility (“SNF”). See Advisory Opinion 99-2 (Mar. 4, 1999), available at http://oig.hhs.gov/fraud/docs/advisoryopinions/1999/ao99_2.htm. The EMS provider planned to charge Medicare for Part B transports at full Medicare rates. In concluding that the proposed deal was not acceptable under the Anti-Kickback Statute, the OIG noted that arrangements providing discounts to potential referral sources that are also not provided to Medicare are suspect, especially where the discounts result in charges below the cost of providing services, or where discounted rates are only offered to those who also offer the opportunity for non-federal health care program business. In other words, discounts that are below the ambulance provider’s cost or other types of discounts may independently give rise to an inference that the ambulance provider and the facility (such as a SNF) may be “swapping” discounts on Medicare Part A business in exchange for more profitable Medicare Part B business, from which the ambulance provider can recoup losses incurred on the discounted business potentially through overutilization or abusive billing practices.
Municipal Arrangements for EMS Services
Municipalities may provide EMS services through a local fire department or a private EMS company. Because fraud and abuse issues may arise in an arrangement with a municipality, all EMS providers are encouraged to carefully evaluate proposed arrangements for compliance with the Anti-Kickback Statute. Examples of issues that EMS providers have sought guidance on from OIG include whether copays or deductibles may be waived by an EMS provider, and whether services or items may be provided at or below cost.
In 2001, a municipal fire department that owned and operated an ambulance service requested an advisory opinion from OIG regarding whether its treatment of local taxes as payment of EMS transport copayments and deductibles violated the Anti-Kickback Statute. The fire department provided emergency medical services free of charge to residents and did not bill the residents or their insurers; however, the fire department billed non-residents and their insurers for EMS. The fire department sought OIG guidance as to whether it could bill its residents and their insurers only to the extent of their insurance coverage (commonly referred to as “insurance only” billing), including federal health care programs, and whether it could treat the revenues received from local taxes as payment of copayments and deductibles otherwise owed by residents. The OIG stated that the proposed insurance only billing by a state or local government entity, such as a municipal fire department, is not viewed as furnishing free services. Accordingly, since Medicare does not require the fire department to collect copayments or deductibles from residents, OIG concluded that the arrangement did not violate the Anti-Kickback Statute. See Advisory Opinion 01-10 (July 20, 2001), available at http://oig.hhs.gov/fraud/docs/advisoryopinions/2001/ao01-10.pdf.
In another 2001 Advisory Opinion, the OIG found a similar arrangement potentially impermissible and subject to sanctions under the Anti-Kickback Statute because it differed in one significant respect: the municipality was contracting with a private EMS company for the provision of services to residents, rather than providing the services itself. In this Advisory Opinion, the municipality required the private ambulance company to waive copayments and deductibles, including those for Medicare, for residents and the OIG found that this could violate the Anti-Kickback Statute. See Advisory Opinion 01-12 (July 20, 2001), available at http://oig.hhs.gov/fraud/docs/advisoryopinions/2001/ao01-12.pdf.
OIG, in a 2006 Advisory Opinion, found that an exclusive arrangement between a city and an EMS provider to provide non-emergency inter-facility ambulance transport services presented low risk of fraud or abuse of federal health care programs. The EMS provider proposed to pay the city an annual set fee of $50,000 that would partially offset the city’s costs of operating inter-facility dispatch services and of monitoring/supervising of the ambulance provider’s inter-facility transport services. The OIG found that the risk of fraud and abuse was low since the proposed arrangement was not likely to increase federal health care program costs, would not result in steering of business since patients were being transported between prearranged facilities, and the arrangement served the public, rather than private interests. See Advisory Opinion 06-12 (Sept. 25, 2006), available at http://oig.hhs.gov/fraud/docs/advisoryopinions/2006/Adv-Opn06-12B.pdf.
A 2013 OIG Advisory Opinion concluded that an EMS provider’s response to a city’s RFP for an exclusive contract for ambulance and inter-facility transport services potentially could violate the Anti-Kickback Statute due to its inclusion of items or services at no charge or nominal value, such as free defibrillators and free EMS training and classes for city personnel. This Advisory Opinion serves as a reminder for ambulance companies to be on the lookout for potential inducements in RFPs and contracts—particularly ones that call for free or discounted items or services to be provided by the ambulance company to the municipality as a condition of being awarded the contract. See Advisory Opinion 13-18 (Nov. 21, 2013), available at http://oig.hhs.gov/fraud/docs/advisoryopinions/2013/AdvOpn13-18.pdf.
Penalties for Anti-Kickback Violations
Criminal penalties for violating the Anti-Kickback Statute may result in fines up to $25,000 and imprisonment for up to five (5) years per violation. See 42 U.S.C. § 1320a-7b(b). Criminal conviction also results in mandatory exclusion from participation in federal health care programs. See 42 U.S.C. § 1320a-7(a). Even absent a criminal conviction, individuals who violate the Anti-Kickback Statute may still face exclusion from federal health care programs at the discretion of the Secretary of Health and Human Services. See 42 U.S.C. § 1320a-7(b).
The government may also assess civil money penalties for violation of the Anti-Kickback Statute. Civil penalties may result in treble damages plus $50,000 per violation. See 42 U.S.C § 1320a-7a(a)(7). False Claims Act liability may also be implicated. Although the Anti-Kickback Statute does not afford a private right of action, a violation of the Anti-Kickback Statute serves as a vehicle whereby individuals may bring qui tam actions. See 31 U.S.C. §§ 3729–3733.
Potential transactions and arrangements involving EMS providers and other entities—whether they are municipalities or private health care providers—pose opportunities for growth and improved patient quality of care, but may also face an increased risk of scrutiny due to the regulated nature of health care and the Anti-Kickback Statute. A robust compliance plan and employee training, coupled with careful review of any proposed transactions and arrangements (including, if necessary, working with legal counsel to seek guidance or an OIG Advisory Opinion) may help ensure that your company does not get tripped up by an unintentional violation of the Anti-Kickback Statute.
For additional assistance or to have your individual questions answered, contact attorney Wendy Arends at 608-257-3911.
The April 26, 2016 EMS Live in Wisconsin podcast interviewed attorney Wendy Arends about the Anti-Kickback Statute as it relates to private and municipal ambulance services. >> Click to listen now.
About the Authors
Thomas Shorter is a shareholder in the firm's Madison office and Chair of the Health Care Team. Tom represents hospitals, physicians' groups, research institutions and health care related organizations, as well as other businesses, providing counsel on health care, corporate, labor and employment and regulatory matters.
For clients in the health care industry, Tom handles matters regarding Medicare compliance, Health Insurance Portability and Accountability Act (HIPAA), Emergency Medical Treatment and Labor Act (EMTALA), Physician Self-Referral (Stark), and Anti-Kickback.
Additionally, Tom is also called upon by other organizations to handle management-side legal corporate and employment issues, including the Family and Medical Leave Act (FMLA), Fair Labor Standards Act (FLSA) compliance, Individuals with Disabilities Education Act (IDEA), Section 504, and Americans with Disabilities Act (ADA).
Wendy Arends is a senior associate in the firm’s Madison office where she advises businesses, organizations and trade associations regarding their interactions with local, state and federal government. Her practice focuses on matters involving antitrust and consumer protection, health care, and international trade compliance. Prior to joining Godfrey & Kahn, Wendy practiced for more than four years at a large national law firm in Washington, D.C. where she worked on a variety of complex commercial litigation and regulatory matters.
