Anti-Kickback Statute (AKS)

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Health care attorneys have long questioned whether there are significant Anti-Kickback Statute (AKS) risks associated with financial transactions between Medicare Advantage plans and their participating providers. An ongoing case in the Northern District of Illinois could provide Medicare Advantage organizations with a clear answer regarding the nature of such risks.

United States ex rel. Derrick v. Roche Diagnostics Corp., brought by a qui tam relator under the False Claims Act, involves Roche Diagnostics Corp. (“Roche”), a manufacturer of glucose monitoring products, and Humana, Inc. (“Humana”), an issuer of Medicare Advantage plans (collectively the “Defendants”). United States ex rel. Derrick v. Roche Diagnostics Corp., 318 F. Supp. 3d 1106 (N.D. Ill. 2018). The relator alleges that the Defendants violated the AKS when Roche agreed to settle an overpayment owed by Humana for pennies on the dollar in exchange for the exclusive placement of Roche products on Humana’s formularies. This litigation has been ongoing since 2014 and the trial is set for early 2020.

Prior to the events giving rise to this action, Roche sold glucose monitoring products via Humana’s Medicare Advantage formularies. The relator alleges the following sequence of events. First, in March 2013 Humana notified Roche that it would be terminating its supplier contract with Roche and removed Roche’s products from its formularies. After protracted settlement negotiations, Roche agreed to accept only $11 million of the $45 million overpayment. That same week, Humana placed Roche products back on the Humana formularies and, crucially, also agreed to remove from its formularies all products that competed with Roche. Additionally, Roche “reserved the right to recover the full amount owed if Humana did not satisfactorily perform its obligations” under the debt forgiveness agreement. The relator claims that this exchange of debt forgiveness (remuneration) for formulary placement (recommendation/referral) amounted to an AKS violation.
Continue Reading AKS and Medicare Advantage Plans: Don’t Kickback and Relax!

Health care lawyers have long debated whether the AKS safe harbor provides full protection for employees who are paid to market a supplier’s services.  In Carrel v. AIDS Healthcare Foundation, 898 F.3d 1267 (Aug. 7, 2018), the Eleventh Circuit might have come a step closer to answering this question.  The Carrel court affirmed the dismissal of a False Claims Act suit against the AIDS Healthcare Foundation, Inc. (the “Foundation”), holding that the Anti-Kickback Statute (“AKS”) safe harbor for employment relationships protected bonuses the Foundation paid to employees who referred HIV/AIDS patients to the Foundation for treatment. The outcome of this case was unsurprising given the facts and relevant precedents in the Eleventh Circuit, but highlights an important potential limitation to the AKS’s employment safe harbor.

Carrel Put the Strict Terms of the Employment Safe Harbor to the Test

The AKS criminalizes knowingly and willfully offering, paying, soliciting, or receiving any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program (e.g., Medicare or Medicaid). 42 U.S.C. § 1320a-7b(b). One of the most common AKS safe harbors protects “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.” 42 U.S.C. § 1320a-7b(b)(3)(B). Regulations provide a parallel exemption for “any amount paid by an employer to an employee … for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal health care programs.” 42 C.F.R. § 1001.952(i).

The plaintiffs in Carrel alleged that the Foundation violated the AKS by paying its employees bonuses for each HIV-positive individual they referred to the Foundation for treatment. Specifically, the Foundation had a contract with the State of Florida under which it conducted HIV testing. The contract (funded by the federal Ryan White Act) required the Foundation to refer clients with positive test results to health care providers for treatment, and compensated the Foundation for such referral services. In an apparent effort to incentivize these referrals, the Foundation offered cash bonuses to employees for each HIV-positive patients they successfully directed to the Foundation for follow-up medical care. The bonuses were allegedly not available if the patients received follow-up care from a provider that was not affiliated with the Foundation.
Continue Reading Ruling in the Eleventh Circuit Highlights Both the Breadth and Potential Limitations of AKS’s Employment Safe Harbor

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The Health Law Insider blog provides insights about health care-related laws and regulations from Stoel Rives’ dedicated team of health care lawyers and industry experts. This blog covers the full spectrum of regulatory and compliance issues faced by the health care industry, including data privacy and security, fraud and abuse, reimbursement, health care transactions, antitrust, taxation, and insurance regulation.