Health Law Blog - Healthcare Legal Issues

Can Private Health Care Be Carved Out of Anti-kickback Application?

Anti-Kickback Statute Advisory Opinion Clarifies

Medicare Carve Out Does Not Insulate Payment Arrangement

The anti-kickback statute makes it a criminal offense knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the anti-kickback statute is violated, By its terms, the statute ascribes criminal liability to parties on both sides of an impermissible “kickback” transaction, , For purposes of the anti-kickback statute, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.
Clients often ask whether the Anti-kickback Statute covers payment arrangements that do not involve a Federal Health Care program.  In other words, the question is whether Federal Health Program beneficiaries can be “carved out” of the payment arrangement so that the Anti-kickback Statute is not applicable to the proposed financial arrangement.  The answer to this question is…..wait for it….no.  You cannot get around the Anti-kickback Statute by carving out Federal Health Care Programs from your payment arrangement.

This was confirmed by the Office of Inspector General in a recent Advisory Opinion regarding an arrangement between a DME Supplier of continuous positive airway pressure blower units, masks and supplies and an Independent Diagnostic Testing Facility.  The arrangement originally was structured to “carve out” Federal Health Care beneficiaries from the payment arrangement.  The OIG rather clearly found that “carve out” arrangements do not protect and arrangement from scrutiny under the Anti-kickback Statute.  The OIG’s wording best describes the reasoning behind this finding:

The Existing Arrangement covers services provided to non-Federally insured patients only,. Thus, as a threshold matter, we must address whether the “carve out” of Federal business is dispositive of the question of whether the Existing Arrangement implicates the anti-kickback statute, It is not. The OIG has a long-standing concern about arrangements pursuant to which parties “carve out” Federal health care program beneficiaries or business generated by Federal health care programs from otherwise questionable financial arrangements, Such arrangements implicate and may violate the anti-kickback statute by disguising remuneration for Federal business through the payment of amounts purportedly related to non-Federal business. Here, IDTFs participating in the Existing Arrangement may still influence referrals of Federal health care program beneficiaries to the Requestor for DME. Thus, we cannot conclude that there would be no nexus between the Requestor’s payments to the IDTF for services provided to non-Federal patients and referrals to the Requestor of Federally insured patients.

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John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
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