Kickbacks are Illegal … So What is a Kickback… It’s More Than You Think!

Physicians or other medical providers are not allowed to induce or encourage referrals for medical services that are paid by federal health programs.  This prohibition covers Medicare patients, Medicaid patients, and any other health program paid for by federal funds.  If a physician or medical provider uses any payment or compensation to encourage a patient to come to their office or to encourage another medical provider to refer patients to their office or facility, it is considered a kickback.

The Courts Test for What is a Kickback

According to federal law a kickback is any remuneration, in cash or in kind, directly or indirectly, overtly or covertly, that is paid in return for patient referrals.  (42 USC 1320a-7b) In determining if a payment to a physician or other medical provider is a kickback, the courts use the “One Purpose Test”.  According to this test, if “one purpose” is to encourage patient referrals then it is a kickback.  Even if the physician was being compensated for some service rendered, if one purpose of the payment is to induce referrals it is considered a kickback.  This can be true for payments made for medical directors or interpreting physicians.  If the physician is in position to refer business to the medical provider making the payment, the payment and the relationship may be suspect.  As the courts use this broad interpretation of the definition of a kickback, the risk of a violation increases.

A kickback can be in many forms.  Some examples of kickbacks are cash in any form including free rent, vacations, meals, and payments for services not actually performed.  In certain cases, payments made above market value for services rendered or services that were not necessary have been the basis for prosecution.  The federal government is increasing and enhancing their investigation and prosecution of Medicare and Medicaid Fraud.

Possible Penalties for Anti-Kickback Violations

Penalties for a violation of the Anti-Kickback Statute (AKS) are severe.  The penalties are not only assessed for the medical provider that pays a kickback; the penalty is also assessed on the medical provider who receives a kickback.  The penalty is assessed for each kickback.  According to Office of Inspector General (OIG), violations can carry criminal and administrative sanctions.  These penalties include fines, jail terms, and exclusion from Medicare, Medicaid and other federal health programs.  Each violation can carry a fine of up to $50,000.00 plus three times the amount of the kickback.  In addition to monetary sanctions, violators may also be sentenced to up to five years in jail.  In addition to the fines and imprisonment, a violation of the Anti-Kickback Statute (AKS) can also serve as a basis for a False Claim Act violation.   This is a great expansion of the False Claim Act and has served to strengthen the position of the federal government’s enforcement of Medicare and Medicaid Fraud prevention laws.

In addition to the Anti-Kickback Statute (AKS), federal law also prohibits medical providers from offering financial inducement directly to Medicare and Medicaid beneficiaries.  (42 USC § 1320a-7a)  According to the Office of Inspector General’s publication “A Roadmap for New Physicians”, a medical provider may not systematically waive a Medicare or Medicaid beneficiary’s copay in order to encourage the patient to utilize the provider’s office or facility.  It is possible to make concessions for individual patients that can show financial hardship, but this investigation must be documented for the individual.

As the landscape of the health care industry changes through mergers and acquisitions, it is increasingly important to consult with a health care law attorney to ensure that the corporate structures and reimbursements are not in violation of federal law.  Chapman Law Group has experience assisting medical providers through the vast landscape of federal regulations.  Chapman Law Group can review potential service agreements and advise medical providers as to the legality of such agreements.  As the structure of health entities change, it is sometimes necessary to consult with the Office of Inspector General prior to embarking on a new partnership.  The OIG encourages medical providers to seek advisory opinions from their office.  Chapman Law Group can assist in preparing a request to the Office of Inspector General for an advisory opinion.

Comparison of Health Care Fraud Statutes and Penalties (click on chart to enlarge)

Chapman Law Group (CLG) is a professional health care law litigation firm, with offices in Michigan and Florida (Sarasota & Miami). For over 30 years, CLG has defended the rights of health care professionals, providers and corporations involved in the delivery of health care at all levels.  CLG handles claims involving false claims, anti-kickback, Stark, civil monetary penalty, DEA controlled substance act violations, compliance related issues including Medicare, Medicaid and private pay, OIG investigations, audits of all types, professional licensing, state and federal criminal charges, civil and administrative actions, peer review and credentialing issues, HIPAA compliance, and much more involving health care professionals. We believe the dedicated men and women who provide health care deserve an exceptional defense when their integrity and actions are called into question.

Ronald W. Chapman is the founder and shareholder of CLG.  For over 30 years Ron, has focused his practice in the defense of health care providers of all levels of health care including medical malpractice defense, compliance issues, fraud, criminal and civil defense, peer review and credentialing issues, correctional health care law, civil rights law, and all types of health care administrative law matters at the state and federal level in Michigan and Florida.

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Ronald W. Chapman II LL.M.

Chairperson of White Collar Defense & Government Investigations

Michigan Office
1441 West Long Lake Rd., Ste. 310
Troy, MI 48098
Phone: (248) 644-6326

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