In today’s video, we discuss the basics of federal and state anti-kickback and fee-splitting prohibitions.

Hi, I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you navigate healthcare and FDA legal issues so you can launch, or continue to scale, your health and wellness product or service.

Let’s start with definitions.  What is a “kickback?”  Simply put, a kickback is an unlawful inducement to refer a patient for healthcare services.

Under federal law, the federal anti-kickback statute, also known as AKS, can apply to all practitioners, not just physicians, where federal reimbursement monies are involved. The concern is that practitioners might benefit from cross-referrals and be induced by the financial benefit to cross-refer to Medicare-reimbursed practitioners, irrespective of medical benefit to the patient.

States have their own mirror laws, prohibiting kickbacks and fee-splitting.

And note that while the Stark law is subject to exceptions, with kickback prohibitions, you have what’s known as “safe harbors.”  If an arrangement falls within a safe harbor, it is likely that authorities will not pursue enforcement.  However, so much depends on the specific facts and circumstances, which is why it is important to have legal counsel review a proposed arrangement to evaluate the risk that the arrangement will be deemed an unlawful referral, versus falling within a legitimate safe harbor.

When healthcare businesses and medical groups utilize management and marketing services or others, as in the so-called MSO model, the safe harbor typically relied on is the one for Personal Services and Management Contracts.

This safe harbor requires that a whole bunch of criteria to be met:

1, the agreement is in writing and signed by the parties.

2, the agreement covers and specifies all the services to be provided.

3, the agreement specifies any services to be provided on a part-time basis, and the schedule and length and charge for such services.

4, the agreement is for at least a year. Sometimes that can be thorny depending on termination provisions.

5, the aggregate compensation to be paid over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions and it cannot be determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties.

6, the services performed under the agreement do not involve counseling or promotion of a business arrangement or other activity that violates any State or Federal law.

And 7, the aggregate services contracted for do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services.

Another huge safe harbor you’ll find is another huge exception of Stark is the carve-out for bona fide employee.  Compensation must be reasonable, fair market value, based on arms-length negotiations, and not based on the value or number of referrals.

An employee is not an independent contractor.

If the payment is hourly, then it could be seen as one that varies based on value or number of patients, and thus fall outside what’s allowable.

Because most arrangements aren’t cookie-cutter, it takes experienced legal counsel to assess whether your business model is likely or not to trigger serious anti-kickback and fee-splitting enforcement concerns.

If you’re interested in an early read on your healthcare business model, often times you can benefit from a Legal Strategy Session with a member of our experienced Legal Team.

Thanks for watching. If you still have questions, click on the link below, cohenhealthcarelaw.com/contact, to send us a message or book an appointment. Here’s to the success of your healthcare venture, we look forward to speaking with you soon.