Face Challenges Confidently

Interplay Between Stark and the Kickback Statute

Thursday, June 7th, 2018

By: Jeffrey S. Baird, Esq.

The Federal Anti-Kickback Statute (“AKS”) prohibits knowingly and willingly offering, paying, soliciting, or receiving, directly or indirectly, anything of value if the purpose is to induce the recipient to refer, order, recommend, or purchase an item or service for which payment may be made under a federal health program…or to arrange for someone else to do so. Any person (or any entity) can be a referral source: physician, nurse, PT, marketing company, kindergarten teacher, etc. Because of the breadth of the AKS, the Office of Inspector General (“OIG”) has published a number of “safe harbors.” If an arrangement complies with a safe harbor, then as a matter of law the arrangement does not violate the AKS. If an arrangement does not comply with a safe harbor, then it does not mean that the arrangement automatically violates the AKS; rather, it means that the parties to the arrangement will need to closely examine the arrangement in light of the language of the AKS, court decisions, and other published guidance.

The Stark law and Federal Anti-Kickback Statute

The Federal Stark Physician Self-Referral Statute (“Stark”) prohibits physicians from referring Medicare/Medicaid patients to a provider in which the physician has a financial (ownership or compensation) relationship for the furnishing of “designated health services.” Designated health services include outpatient prescription drugs. There are a number of exceptions to Stark, including the nonmonetary compensation exception (“NCE”). The NCE allows the pharmacy to provide gifts to a physician so long as all of the gifts in a calendar year do not exceed a certain dollar amount in value. For 2018, the dollar amount is $407.

When a pharmacy provides meals and other gifts to physicians and their employees, it is important to note that (i) Stark only applies to the physicians…not to their employees and (ii) the AKS applies to both the physicians and their employees.

Thus, when dealing with the physician, both statutes must be satisfied. When dealing with the physician’s employees, only the AKS must be satisfied. There is not an NCE to the AKS. Technically, this means that the pharmacy can spend $407 in 2018 on the physician and satisfy Stark…but still violate the AKS. However, if the NCE is satisfied, then it is highly unlikely that the government will assert a violation of the AKS.

Avoiding non-compliance with the AKS

As previously mentioned, only the AKS applies to the employees and the AKS does not contain the NCE. Therefore, what can be spent on the employees? This is where the pharmacy must be reasonable. The pharmacy cannot spend so much money on employees that it looks like the pharmacy is trying to take away the independent judgment of the employees. The more that the pharmacy spends on employees, the more the kickback risk increases. Conversely, the less that the pharmacy spends on employees, the more the kickback risk decreases.

Jeffrey S. Baird, Esq. is Chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas. He represents pharmacies, home medical equipment companies, and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization. He can be reached at (806) 345-6320 or jbaird@bf-law.com.