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Employment Exceptions From Anti-kickback Statute

Employee Exception to the Anti-Kickback Statute

Are There Limitations on the Protection?

employment exception safe harbor regulationsBoth the Anti-Kickback Statute and the Stark Law contain exceptions that apply to employer/employee relationships.  The Stark Law exception contains several additional requirements and limitations that vary based on whether the physician is an employee of the group practice, or of a hospital or other provider of designated health services.

The Anti-Kickback Statute contains a fairly broadly worded exception which is generally been interpreted to exempt any remuneration made from an employer to a bona fide employee from consideration under the Anti-Kickback Statute’s criminal and civil prohibitions.  However, close examination of the wording of the exception, together with recent case law, may begin to demonstrate some limitations on the protection that is provided by the Anti-Kickback Statute’s employment exception.

The statutory exception under the Anti-Kickback Statue has been in place for over 35 years.  It is not a safe harbor under the safe harbor regulations but is directly included within the statute itself.  This has significant implications for the government’s burden of proof once a bona fide employee arrangement is established.  The Anti-Kickback Statute employment exception states that remuneration “shall not apply…to any amount paid by an employer to an employee for employment in the provision of covered items and services.”  The exception applies only to “bona fide employment relationships.”

Some of the limitations of the statutory exception may be included in the wording of the statutory provision itself.  The employment exception states that “remuneration” does not include amounts paid for “employment in the provision of covered items and services.”  On the other hand, a comparable safe harbor addressing employment arrangements that is included in the safe harbor regulation protects amounts paid to employee for “employment in the furnishing of” covered items and services.

Historically, most attorneys reviewing the employment exception have assumed that it provides complete insulation for employment arrangements.  This is contrary to statements from the Office of Inspector General which indicates that the scope of the exception may be more limited to payment for the provision of covered services rather than all payments.  Strictly interpreted, the statutory protection may not apply to payment that is made to an employee for administrative or other types of services that are not covered services under the Medicare and Medicaid programs.  This statutory language leaves open whether payment for services that are not covered services are included within the Anti-Kickback Statute’s exception.  There is no answer to this question as there has been no further interpretation or case law.  It is worthy to note however, that there could be limitations to the employee exception which should be considered when structuring arrangements; particularly when those arrangements could be abusive except for the fact that payment is being made to an employee.

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John H. Fisher

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