The Anti-Kickback Statute and the ‘Bona Fide Employee’ Safe Harbor

The Federal Anti-Kickback Statute has a broad impact on health care business arrangements.

The Anti-Kickback Statute is a criminal and civil statute that prohibits any person from “knowingly and willfully” paying, offering, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in exchange for or to induce the referral of any item or service covered by a federal health care program, or in exchange for arranging for or recommending purchasing, leasing or ordering any good, facility, service or item covered by a federal health care program, including Medicare and Medicaid.

Violations of the Anti-Kickback Statute typically arise in “payment for referral” practices, whereby it is the intent of a party to “reward” referrals of patients.   

Federal Safe Harbors

The federal government adopted “safe harbors” to protect certain arrangements that might otherwise violate the , and subject the participants to potential civil and criminal liability. The “Employee Bona Fide Safe Harbor” excepts from its reach “any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services.”

Congress enacted this exception because it assumed employers would exercise an appropriate degree of supervision over their employees, thereby reducing the potential for abusing the Medicare program. Furthermore, the OIG stated that the employee exception permits an employer to pay an employee in whatever manner he or she chooses for, having that employee assist in the solicitation of program business and applied to bona fide employee-employer relationships.

The employee safe harbor regulation defines the term “employee” pursuant to 26 U.S.C. 3121(d)(2). Under this statute, an employee is any worker that satisfies the common law rules for establishing employer-employee relationship.

Factors for determining common law employees include employer control, supervision, and training of the employee. In addition, the courts have held that substance is more important than form, and that the following factors should be considered when analyzing if an individual or entity qualifies under the bona fide employee safe harbor:

      1. the hiring party’s right to control the manner and means by which the product is accomplished;
      2. the skill required;
      3. the source of the instrumentalities and tools;
      4. the location of the work;
      5. the duration of the relationship between the parties;
      6. whether the hiring party has the right to assign additional projects to the hired party;
      7. the extent of the hired party’s discretion over when and how long to work;
      8. the method of payment;
      9. the hired party’s role in hiring and paying assistants;
      10. whether the work is part of the regular business of the hiring party;
      11. whether the hiring party is in business;
      12. the provision of employee benefits; and
      13. the tax treatment of the hired party. Finally, no one factor is determinative; “all of the incidents of the relationship must be assessed and weighed.”

Federal Anti-Kickback Convictions

The Eleventh Circuit upheld anti-kickback convictions for per-patient payments made to two Florida Department of Health and Rehabilitative Services employees for referring patients to a drug treatment program funded by Medicaid.

The court concluded that the HRS employees did not fit within the employee safe harbor because they were not providing “covered items or services” as required by the statute, but they were simply paid for referrals to the program.

In addition, they did not receive regular salary checks from the drug treatment program at their place of employment, but instead received checks clandestinely with false category codes or in cash in parking lots and other locations to avoid detection by co-workers.

The Fifth Circuit held that the evidence presented did not support defendant’s affirmative defense that the individuals were bona fide employees, because employer did not have sufficient control over the manner and means of the work performed by employees to characterize this as a bona fide employment relationship.

The court determined that there was no evidence that employees:

      • received any training or direction about marketing;
      • kept regular office hours;
      • had offices; and
      • the referral sources were not provided by the DME company.

Instead, the defendants relied on their personal and professional contacts to obtains referrals. Thus, the DME company did not have sufficient control over the manner and means of the work performed by defendants to amount to a bona fide employment relationship.

At Chapman Law Group, We Will Give You the Guidance You Need for National Criminal and Healthcare Fraud Matters

Allegations of Anti-Kickback Statute violation can result in criminal and/or civil liability, but we at Chapman Law Group are here to help. Our criminal division can assist you in navigating the complex world of health care laws, rules and regulations.

In addition, our national medical compliance lawyers will make sure, through routine audits of physician’s offices and health care entities that you are staying within guidelines. We are experts in the Anti-Kickback Statute and Stark LawHIPAA complianceDEA compliance, the Medicaid and Medicare audit process, Medicare exclusion, and all other areas of health care compliance.

Our extensive, 35-year experience in key areas of regulatory compliance in healthcare includes:

We represent licensed medical professionals across the U.S., including:

Our offices are in DetroitMiami and Sarasota, Florida; Los Angeles/Southern California; and ChicagoLet us put our know-how to work for you: Contact us for an analysis of where your health care practice stands.

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