Fraud and Abuse

Fraud and abuse in health care is multi-faceted and complex. Medical practices considering a transaction with fraud and abuse implications are encouraged to seek the advice of legal counsel familiar with these laws and supporting regulations, advisories, policy statements, and fraud alerts.

The Fraud and Abuse Anti-Kickback law, 42 USC 1320a-7b, and the Stark Ethics-in-Patient Referral law, 42 USC 1395nn, are the most prominent pieces of fraud and abuse legislation. The Federal Civil False Claims Act, 31 USC 3829-3733, also is a significant fraud and abuse statute that physician practices should be aware of.

Both the Anti-Kickback statute and the Stark law must be examined to assure legality of an anticipated transaction; a legal transaction under the Anti-Kickback statute may be illegal under the Stark law and vice versa.

The definitions and exceptions under each of these statutes and their implementing regulations are critical. In addition to exceptions, enforcement regulations under the Anti-Kickback statute have identified certain "safe harbors." A "safe harbor" specifies various payment and business practices that potentially implicate otherwise prohibited inducements but are somewhat innocuous. To date the OIG has identified 22 safe harbors. 42 CFR 1001.952. The OIG has said that an arrangement that meets an applicable safe harbor generally is fully protected from both criminal and civil liability under the Anti-Kickback statute yet failure to come fully within a safe harbor does not necessarily mean that the transaction is illegal.

The federal Department of Health and Human Services (HHS) enjoys enforcement authority for both of these laws; the Office of Inspector General (OIG), is the primary enforcement agency for violations of the Anti-Kickback statute and the Centers for Medicare and Medicaid Services (CMS) is the primary enforcement authority for Stark violations. The Department of Justice (DOJ) has enforcement authority for criminal violations of the fraud and abuse laws.

The False Claims law imposes liability upon anyone who knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government.

Anti-Kickback Law

The Anti-Kickback law, an intent-based criminal statute, says that any person who knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service or to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under Medicare, Medicaid or other federal health programs violates federal law and is subject to criminal penalties, civil money penalties, and program exclusion.


U.S. Department of Health & Human Services Office of the Inspector General

Stark Law

The Stark law, a civil statute, prohibits physicians from billing for Medicare or Medicaid services flowing from a prohibited referral. Physicians may not refer Medicare and, in certain instances, Medicaid patients to an entity for defined designated health services (DHS) if the physician or an immediate family member of the physician has a financial relationship with the entity unless an exception applies. "Designated health services" include clinical lab; physical therapy; occupational therapy; radiology; radiation therapy services and supplies; durable medical equipment and supplies; parental and enteral nutrients, equipment and supplies; prosthetics, orthotics, and prosethetic devices and supplies; outpatient prescription drugs; and inpatient and outpatient hospital services. Stark I addressed only clinical labs; Stark II addresses the remainder of the designated health services.


Centers for Medicare & Medicaid Services

American Medical Association

Iowa Medical Society

Health insurers also watch for fraud. The BlueCross BlueShield Association touts its efforts at detecting and eliminating fraud. IMS met with Wellmark officials regarding its special investigations unit (SUI) and fraud initiatives to emphasize fairness in reporting and process considerations for physicians. View the two letters of correspondence below.