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Kickback Training – What It Doesn’t Cover

Effective training prepares contractors and providers to recognize more than kickbacks. The example below reveals that not all kickback violations are intuitively obvious. What seems a clear violation to those familiar with anti-kickback and false claims statutes, may seem just a straightforward business arrangement to someone unfamiliar with them. After all, what is wrong when providers perform the activities for which they are reimbursed, no one lies, and no false documents are created?

The Example

Medicare pays a doctor $6 to draw and analyze a blood sample. Alternatively, the doctor could send the sample to a lab for analysis. A manual lab performs a battery of tests individually at a cost to Medicare of $214. An automated lab performs the same battery simultaneously at a cost of $35. No rule requires a physician to select one type of lab instead of the other.

The owner of the manual lab pays a handling fee of $35 to doctors for submission of the blood sample to the manual lab. When doctors prefer to use the manual lab, the $35 travels through a dummy corporation created solely to pass the payment from the lab to the doctors. The lab also stops billing patients a co-insurance cost unless they have supplemental insurance. Through this arrangement, the lab owner pays more than $73,000 to doctors, one of whom receives more than $24,000.

Is it a Violation?

Seems a clear kickback, right? Not so fast. A unanimous panel of the Fifth Circuit reversed convictions of doctors and the lab owner for kickbacks and fraud in US v. Porter. The panel thought the conduct might be unethical, but it was neither fraudulent nor a kickback because no rule restricted what the lab could do with the money it received. Convictions were set aside and the indictment dismissed.

But wait, you say, Porter was decided in 1979. True, but the point remains that three federal judges thought nothing was wrong when they considered the case as a matter of first impression under the original kickback statute. If a trio of fully-briefed federal appellate judges did not see a problem, is it surprising that untrained healthcare providers and contractors would have trouble? Although Porter was criticized at the time by, for instance, the Sixth Circuit in US v. Hancock, what constitutes a violation became clearer when the statute was broadened to prohibit “any remuneration” in addition to kickbacks.

Train to Recognize “Any Remuneration”

Even the panel in Porter recognized that its decision might be affected by revisions Congress passed in 1977. As a result of those revisions, the statute can be violated as a result of “any remuneration” received, solicited, offered, or paid. The conduct is not limited to a kickback, bribe, or rebate.

Contractors and providers should be trained to recognize more than kickbacks. They need to examine anything they solicit, receive, offer, or pay while participating in federal programs.

Jacquelyn Desch contributed to this article.

© Copyright 2017 Squire Patton Boggs (US) LLP

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About this Author

Thomas E. Zeno, Squire Patton Boggs, Healthcare Fraud Lawyer, Economic Crimes Attorney
Of Counsel

Thomas Zeno has more than 25 years of experience in the US Attorney’s Office for the District of Columbia. During that time, Tom investigated and prosecuted economic crimes involving healthcare, financial institutions, credit cards, computers, identity theft and copyrighted materials. As the office’s Healthcare Fraud Coordinator for the last eight years, Tom supervised investigation strategies of agents from the Federal Bureau of Investigation, the Department of Health and Human Services, the Drug Enforcement Administration and the Medicaid Fraud Control Unit regarding...

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