3 Federal Laws That Could Land Your Medical Practice on the Wall of Shame

Posted on 28 Mar, 2018 |comments_icon 0|By Elizabeth

How knowledgeable are you of Federal regulations governing your practice? Are you equipped to safeguard your organization from violating the Physician Self-Referral Law (Stark Law), the Anti-Kickback Statute (AKS), and the False Claims Act (FCA)?

Various government agencies—the Department of Justice (DOJ), the Department of Health & Human Services Office of Inspector General (OIG), and the Centers for Medicare & Medicaid Services (CMS)—investigate and enforcing these laws. And the cost of violations has skyrocketed in recent years. In addition to exorbitant civil monetary penalties, you could incur criminal penalties, exclusion from the Federal healthcare programs, and/or the loss of your medical license from your State medical board.

Nail Down the Physician Self-Referral Law (Stark)

The Physician Self-Referral Law, commonly referred to as the Stark Law, prohibits physicians from referring patients to receive designated health services (DHS) payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.

Financial relationships include both ownership/investment interests and compensation arrangements. For example, if you invest in an imaging center, the Stark Law requires the resulting financial relationship to fit within an exception or you may not refer patients to the facility and the entity may not bill for the referred imaging services.

Designated health services (DHS) include:

  1. Clinical laboratory services
  2. Physical therapy services
  3. Occupational therapy services
  4. Outpatient speech-language pathology services
  5. Radiology and certain other imaging services
  6. Radiation therapy services and supplies
  7. Durable medical equipment and supplies
  8. Parenteral and enteral nutrients, equipment, and supplies
  9. Prosthetics, orthotics, and prosthetic devices and supplies
  10. Home health services
  11. Outpatient prescription drugs
  12. Inpatient and outpatient hospital services


The Stark Law is a strict liability statute, which means proof of specific intent to violate the law is not required. The Stark Law prohibits the submission, or causing the submission, of claims in violation of the law’s restrictions on referrals. Penalties for physicians who violate the Stark Law include fines and exclusion from participation in the Federal healthcare programs.

Tenet Healthcare Added to the Wall of Shame

Infringement of Stark violations make the headlines this month, trumpeting devastating PR for healthcare organizations that may or may not be guilty.

Trouble began for Tenet Healthcare Corp.’s Detroit Medical Center (DMC) when it laid off 14 nonphysician practitioners (NPPs) the previous month. Various DMC employees were told by executive leadership that the layoffs were due to a compliance issue. A number of employees then went public with what they believe prompted the cutback.

In addition to declining admissions and earnings, Tenet Healthcare apparently began to question its practice of allowing the NPPs to service private practice physicians at some of its six hospitals, as this allowance might run afoul of Federal Anti-kickback, False Claims Act, and Stark Law regulations.

As lawyers explained to Crain’s Detroit Business, if private physicians also billed for inpatient services they didn’t perform, but rather DMC-employed NPPs provided the services free or for less than market value to the doctors, the activity could be construed as an inducement for patient referrals.

“The biggest issue in that arena is an employed [NPP] who is working for a hospital or health system could not give something of value to a private physician without billing that provider fair market value for that service,” said Bruce Muma, M.D., chief medical officer with the Henry Ford Physician Network.

“If a private doctor in a hospital is delivering care to patient and if they use a [NPP] for their work, and they bill for that service, it could violate Stark laws and be inurement by reimbursing doctors for referrals,” Muma said.

Steer Clear of Anti-Kickback Statute Infringements (ASK)

The AKS is a criminal law that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal healthcare programs (e.g., drugs, supplies, or healthcare services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. In some industries, it is acceptable to reward those who refer business to you. However, in the Federal healthcare programs, paying for referrals is a crime. The statute covers the payers of kickbacks-those who offer or pay remuneration- as well as the recipients of kickbacks-those who solicit or receive remuneration. Each party’s intent is a key element of their liability under the AKS.

Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal healthcare programs. Under the CMPL, physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration.

Safe harbors protect certain payment and business practices that could otherwise implicate the AKS from criminal and civil prosecution. To be protected by a safe harbor, an arrangement must fit squarely in the safe harbor and satisfy all of its requirements. Some safe harbors address personal services and rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees.

As a physician, you are an attractive target for kickback schemes because you can be a source of referrals for fellow physicians or other healthcare providers and suppliers. You decide what drugs your patients use, which specialists they see, and what healthcare services and supplies they receive.

Many people and companies want your patients’ business and would pay you to send that business their way. Just as it is illegal for you to take money from providers and suppliers in return for the referral of your Medicare and Medicaid patients, it is illegal for you to pay others to refer their Medicare and Medicaid patients to you.

Kickbacks in healthcare can lead to:

  • Overutilization
  • Increased program costs
  • Corruption of medical decision making
  • Patient steering
  • Unfair competition


The kickback prohibition applies to all sources of referrals, even patients. For example, where the Medicare and Medicaid programs require patients to pay copays for services, you are generally required to collect that money from your patients. Routinely waiving these copays could implicate the AKS and you may not advertise that you will forgive copayments. However, you are free to waive a copayment if you make an individual determination that the patient cannot afford to pay or if your reasonable collection efforts fail. It is also legal to provide free or discounted services to uninsured people.

Besides the AKS, the beneficiary inducement statute (42 U.S.C. § 1320a-7a(a)(5)) also imposes civil monetary penalties on physicians who offer remuneration to Medicare and Medicaid beneficiaries to influence them to use their services.

The government doesn’t need to prove patient harm or financial loss to the programs to show that a physician violated the AKS. A physician can be guilty of violating the AKS even if the physician actually rendered the service and the service was medically necessary. Taking money or gifts from a drug or device company or a durable medical equipment (DME) supplier is not justified by the argument that you would have prescribed that drug or ordered that wheelchair even without a kickback.

March 1st—Today’s Breaking News

“U.S. District Judge Virginia Hopkins entered judgment in the amount of $14,708,630.06 on behalf of whistleblower Barry Taul, who uncovered and reported an illegal kickback and false billing scheme that defrauded the Alabama Organ Center and taxpayers,” reports Jonathan Thomas of AlabamaNews.net.

Mr. Taul became aware of the scheme while employed at Abanks Mortuary & Crematory, which had an arrangement with the Alabama Organ Center to provide tissues for life-saving transplants and medical research. But Taul discovered a history of kickback payments made by his employer to both the director and associate director of the Alabama Organ Center, in exchange for contractual referral business. Taul also uncovered false charges amounting to $60,000 per month paid by the Alabama Organ Center to Abanks and its owner, Jed Nagel.

“The final judgment,” according to AlabamaNews.net, “ordered damages in the amount of $1,769,710.02, which were trebled pursuant to 31 U.S.C. § 3729(a). As a result, the Court entered judgment in the amount of $5,309,130.06 against both defendants [Abanks and Jed Nagel]. The jury found 1,709 violations of the False Claims Act, leading the court to assess a civil penalty in the amount of $5,500 per claim and enter a civil penalties judgment of $9,399,500 against both defendants.

“Should Know” Means You Must Know the False Claims Act (FCA)

The civil FCA protects the government from being overcharged or sold shoddy goods or services, such as illegal claims for payment to Medicare or Medicaid that you know or should know are false or fraudulent.

Filing false claims may result in fines of up to three times the programs’ loss plus $11,000 per claim filed. Under the civil FCA, each instance of an item or a service billed to Medicare or Medicaid counts as a claim, so fines can add up quickly. The fact that a claim results from a kickback or is made in violation of the Stark Law also may render it false or fraudulent, creating liability under the civil FCA, as well as the AKS or Stark Law.

Under the civil FCA, no specific intent to defraud is required. The civil FCA defines “knowing” to include not only actual knowledge but also instances in which the person acted in deliberate ignorance or reckless disregard of the truth or falsity of the information. Further, the civil FCA contains a whistleblower provision that allows a private individual to file a lawsuit on behalf of the United States and entitles that whistleblower to a percentage of any recoveries. Whistleblowers could be current or ex-business partners, hospital or office staff, patients, or competitors.

There also is a criminal FCA. Criminal penalties for submitting false claims include imprisonment and criminal fines. Physicians have gone to prison for submitting false healthcare claims. OIG also may impose administrative civil monetary penalties for false or fraudulent claims, as discussed below.

Just Days off the Press—Nonprofit Community Hospital Settles Out of Court

Brattleboro Memorial Hospital (BMH) paid the state of Vermont and the federal government just under $1.7 million in response to allegations of FCA violations that it submitted false claims to Medicare and Medicaid.

“BMH knowingly submitted or caused to be submitted a number of outpatient laboratory claims lacking documentation necessary to support reimbursement by Medicare and Medicaid,” said the U.S. Attorney’s Office for the District of Vermont, referring to a period of activity between 2012 and 2014.

BMH responded to the notice in a press release, admitting it had received overpayments resulting from this billing issue. They also stated, “There have been no allegations that the services billed for were not provided or unnecessary; only that they were not properly documented. In reaching this settlement agreement, BMH does not admit to any intentional wrongdoing.”

United States Attorney Christina E. Nolan issued the cautionary last word, saying “We will hold accountable those who knowingly or recklessly bill the government for health care services without proper documentation to support their claims.”

Learn More

Is your staff adequately trained to avoid AKS, Stark, OSHA, FCA, MACs, RACs, EMTALA, and HIPAA violations?

From start to finish, The Physician Practice Compliance Sourcebook will equip you to plan and execute a compliance program that meets Federal legal requirements.

To navigate the troublesome incident-to billing—and master compliant NPP services and coding—pick up your copy of TCI’s Nonphysician Practitioner Handbook 2018.


There’s more to the story of DMC nurse layoffs

Whistleblower Receives $14.7 Million For Uncovering Billing Scam

BMH settles false claims allegation



Elizabeth works on an array of projects at TCI, researching and writing about modern reimbursement challenges. Since joining TCI in 2017, she has also covered the nuts and bolts of cybersecurity, compliance with federal laws, and how to tap into the advantages of telehealth services.

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