Texas Physicians’ Risk of Arrest: Criminal Defense Overview of Federal Anti-Kickback Statute (AKS)

All physicians understand that practicing medicine in Texas today involves continuing, widespread governmental oversight at every level, including extensive regulation by the federal government through a variety of federal statutes. Failure to comply can have devastating results.  Doctors, clinicians, hospital administrators, and others can face damage to their professional and personal reputations with even the rumor of investigation, as well as serious fines and years of imprisonment upon conviction of criminal federal health care laws.

Of particular concern are the risks of criminal indictment alleging fraud on the part of the provider, especially in the aftermath of the passage of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which established a national Health Care Fraud and Abuse Control Program (“HCFAC”).

Texas physicians should understand there are longstanding and extensive law enforcement efforts dedicated solely to investigating potential health care fraud in all sorts of areas of the industry.  As each year passes, from a criminal defense perspective, the likelihood of a medical provider becoming the target of fraud investigators rises.  This is particularly true as global market predictions are health care fraud is projected to jump 27.5% during the calendar year 2022.

Health Care Fraud Joint Strike Forces Are Very Active in Texas

The HCFAC is designed to combat fraud and abuse within the health care industry through the Department of Justice, the Office of the United States Attorney General, the Secretary of the Department of Health and Human Services, and a federal coordination with state and local law enforcement organizations.  Its joint task forces operate in strike force cities of Dallas, Houston, San Antonio and across the country, and they are zealously dedicated solely to the investigation and prosecution of health care fraud.  For more detail, read “Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2020,” published by the Department of Health and Human Services and the Department of Justice in July 2021.

Over the past two decades, these joint operations have grown and expanded into larger and more complicated units working daily to search for and prosecute alleged violations of federal health care fraud statutes by doctors and others in the health care industry.  For example, in 2020 the National Rapid Response Strike Force was created “with a mission to investigate and prosecute fraud cases involving major health care providers that operate in multiple jurisdictions, including major regional health care providers operating in the Strike Force cities, with a focus on investigations and prosecutions of individuals and corporations.”  In 2021, another DOJ announcement was made regarding law enforcement targeting health care fraud involving COVID-19 matters.

Major Federal Criminal Laws Regulating Texas Physicians

There are a number of powerful federal laws that can get a Texas physician in trouble and in need of an aggressive and experienced criminal defense attorney.  These include the Anti-Kickback Statute (“AKS”); the False Claims Act (“FCA”); the Physician Self-Referral Law (“Stark Law”); and the Civil Monetary Penalties Law (“CMPL”).  This article will focus upon one of these federal fraud laws, the Anti-Kickback Statute.

What is the Anti-Kickback Statute?

The federal Anti-Kickback Statute (“AKS”) is found in 42 U.S.C. § 1320a-7b(b) which defines “illegal remunerations” as follows:

(1)  whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind–

(A)  in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or

(B)  in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program,

shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.

(2)  whoever 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–

(A)  to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or

(B)  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 a Federal health care program,

shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.

From a criminal defense perspective, this is a broadly-written and complicated statute filled with specific elements that the prosecution must establish with admissible evidence beyond a reasonable doubt.  The defense lawyer’s perspective breaks it down, element by element. Doctors should understand each of these complexities and how a federal investigation will look for detailed facts within their financial records to correspond with these elements.

Doctors should also be aware that in many AKS cases, federal prosecutors are notorious for combining charges of Anti-Kickback Fraud with other felony charges such as money laundering or conspiracy.  These investigations can quickly become a spider web of factual investigation supporting a variety of serious federal criminal charges.

Criminal Defense: Wide Net of the AKS

From the defense lawyer’s viewpoint, the AKS defines it as a felony if there is sufficient evidence of the following elements of the crime: (1) knowing and willful (2) payment or remuneration that (3) induces or rewards (4) patient referrals or the generation of business which (5) involve anything covered and payable by the federal government through a federal health care program.

Unfortunately, doctors and health care providers can run afoul of the AKS in many ways and without understanding what they are doing can be viewed as a felony crime by law enforcement.  Things that happen in commonplace business dealings, like discounts or bonuses, may be seen as illegal kickbacks for physicians and a basis for federal arrest. See, e.g., Hood, John C. “Are Good Deeds Being Punished?: Independent Charity Patient Assistance Programs and the Anti-Kickback Statute.” Fla. L. Rev. 72 (2020): 639.

The criminal aspects of practicing medicine must be understood by the doctor.  For instance, while friends at a cocktail party or on the golf course may relate stories of great success by rewarding those who have referred them business, physicians cannot fall prey to that temptation.  According to the AKS, a doctor paying or rewarding someone in any manner for a referral is a felony act.

The net is wide. For instance, it is considered to violate the AKS if a doctor receives what the government considers to be overly generous compensation for acting as a medical director. Speaking engagements, no matter how prestigious, may be studied as possible illegal kickbacks.   Waiving copayments can also be a basis for an AKS arrest, regardless of whether or not the physician does so on a routine basis or after considering the circumstances of an individual patient.

If the federal government opines that the doctor is being paid above fair market value for an office lease in a medical complex, this may be viewed as an illegal kickback under federal law.  Of importance, the defense lawyer may also have to deal with a payment that has a legitimate basis but which the government is alleging to violate the AKS because its purported motivation is to influence or sway the physician to use the company’s products (think pharmaceutical manufacturers or suppliers).

Felony Conviction and Sentencing for Anti-Kickback Violations

If a provider is arrested, charged, prosecuted, and convicted of violating the federal anti-kickback statute, then that physician can face years behind bars despite an unintentional or mistaken assumption that the transactions were acceptable and even if it is a first-time offense.

Under 42 U.S.C. § 1320a-7b, violation of the AKS is a felony offense carrying a maximum fine of $25,000 and a maximum incarceration in a federal prison institution of five (5) years per violation.

Since these are federal cases, the criminal defense attorney must be adept at dealing with the distinction between sentencing in state and federal courts in Texas.  In federal court, the physician who is convicted for violation of the AKS will face sentencing by a federal judge under the guidance and direction of the United States Sentencing Guidelines (“USSG”).

The defense lawyer will need to advocate pursuant to the USSG at the sentencing hearing on behalf of the convicted provider and an experienced advocate at these determinations is extremely vital for the physician and their loved ones.

• For more on health care fraud convictions and the sentencing guidelines, read our discussion in Federal Crimes and Sentencing Guidelines: Health Care Fraud.

Criminal Defenses for Allegations of Violating Federal Anti-Kickback Statute

Defending against federal anti-kickback charges can be an intensive and complex representation for many reasons, including an understanding not only of federal jurisdictional practice (not every lawyer is licensed to practice in federal court), but an overlapping knowledge of the health care industry and the practicalities of practicing medicine in Texas today.

A complete legal defense in any AKS matter must include a detailed analysis of the prosecution’s case, item by item, as it applies to the elements of the statute itself.  Coupled with this must be a consideration of how each item in the case file was obtained.  Was there any violation of constitutional protections against search and seizure?  Is the evidence authenticated?  Is it in admissible form?  Hearsay evidence cannot be used against a defendant.

Finally, there are specific defenses that may apply in the AKS case that have been legally created to protect doctors against these charges.  These are known as statutory “safe harbors.”

What are AKS Safe Harbors?

Congress has passed legislation that provide defenses to any anti-kickback statute allegations, both in statutory language within the AKS itself as well as directing the Secretary of the Department of Health and Human Services (HHS) to draft federal regulations which detail health care industry business practices or arrangements that cannot form the basis of a federal charge.  These are commonly referred to as the AKS “safe harbors.”

Of course, the federal prosecutor will be anxious to find any exception to the application of Safe Harbor in an individual case.  It is vital that the criminal defense attorney have arguments with supporting evidence that demonstrates the circumstance concretely meets the criteria as a “Safe Harbor” as defined under law or regulation.

Moreover, it is important that the criminal defense lawyer keep up to date with the changing laws regarding federal safe harbors as they apply to the AKS.  Safe harbor defenses may change with each legislative session.

For instance, just this month (on January 1, 2022), a new federal regulation became effective as 42 CFR 1001, entitled “Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees“.

Federal Anti-Kickback Law Criminal Defense Lawyer for Texas Physicians

Each day, physicians in Texas must balance the needs of their patients with the needs of their business practice and a recognition that any new patient may be seen by the government as an illegal referral obtained in violation of the federal anti-kickback statute.  Doctors refer patients to other doctors.  Doctors also refer patients to other health care providers as well as health care suppliers.

When federal monies are involved, even tangentially, then the federal government may investigate any renumeration given or received by a provider that relates to business referrals.

Federal Anti-kickback criminal defense lawyers often have clients who are overwhelmed, shocked, and angered by accusations that they have illegally paid or received kickbacks in violation of the AKS.  What they viewed as professional and proper the prosecution may argue is felonious.

A Texas federal AKS case can be complicated, and this will be compounded if the AUSA decides to add corresponding felony charges (e.g., money laundering, etc.).  These cases warrant extensive and aggressive representation.

Moreover, any Texas physician with even the suspicion of being under federal investigation for improper payments under the AKS is wise to seek counsel on how best to defend against what may otherwise end up as a serious felony health care fraud conviction.  A proactive stance is advisable in these matters.  See, Chen, Zhen Xing, et al. “Recommendations to protect patients and health care practices from Medicare and Medicaid fraud.” Journal of the American Pharmacists Association 60.6 (2020): e60-e65.

For more on Texas health care fraud defense, read:

• Doctors in Texas Alert: Feds Are Targeting Health Care Fraud Arrests
• Arresting Texas Doctors for Health Care Fraud: What You Need to Know
• Plea Bargaining and Making Deals in Federal Felony Cases: Criminal Defense Overview.

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For more information, check out our web resources, read Michael Lowe’s Case Results, and read his in-depth articles,” Pre-Arrest Criminal Investigations”  and “10 Questions to Ask Before You Hire a Criminal Defense Lawyer.“