Kickbacks In Healthcare

Practice Areas Whistleblower Law Kickbacks In Healthcare

A Complete Guide to Kickbacks under the False Claims Act (“FCA”) and Anti-Kickback Statute (“AKS”)

What is a Kickback in Healthcare?

Under the False Claims Act, hundreds of millions of dollars have been given as whistleblower awards to insiders who properly filed qui tam lawsuits invoking the AKS through the use of whistleblower law firms.

A kickback under the False Claims Act is providing something of value or beyond fair market value (“FMV”) to an individual who is not part of one’s company to induce the use of the product and/or the service and must be in conjunction with a government insurance program like Medicare, Medicaid or Tricare.

One of the key takeaways is sometimes the kickbacks are subtle and other times in your face but so prevalent in the industry that individuals may not even have a consciousness that the conduct is illegal.

Examples of Kickbacks in Healthcare

Here are some examples of common kickbacks in the healthcare industry include. It’s important to remember that the conduct also has to be from an entity that accepts a government payor like Medicare:

• Pharmaceutical kickbacks: Pharmaceutical companies are prohibited from giving items in value in exchange for prescribing their products. This might entail paying medical professionals to attend training sessions, conferences, or seminars as well as giving them free meals or other perks.
• Medical device kickbacks: Medical device companies are similarly prohibited paying medical professionals to attend conferences or training sessions.
• Kickbacks for referrals: Healthcare professionals may not provide or accept items of value in return for referring patients to other professionals or facilities. Items of value could include money or providing incentives like free gifts or trips.
• Laboratory kickbacks: In exchange for referring their patients for diagnostic procedures or other services, laboratories may not pay medical professionals to attend conferences or training sessions or providing free or heavily discounted tests.
• Kickbacks in home healthcare: In exchange for referring patients to their services, home healthcare agencies may not offer rewards in the form of cash, free services, or other benefits.
• Electronic health records kickbacks: For the most part, medical professionals may not receive free items or goods from electronic health records (EHR) vendors in exchange for recommending or utilizing their software, this may occur where the vendor provides expensive hardware or other computer systems.
• The Use of Runners: “Runners” are individuals who are paid to seek out potential healthcare fraud cases and recruit patients or healthcare providers to participate in fraudulent activities. This can include offering cash incentives or other benefits to patients or healthcare providers to participate in unnecessary medical treatments or procedures. The use of runners is illegal under the False Claims Act and other healthcare fraud laws.
• Outright Bribes: Outright bribes are payments or gifts offered directly to healthcare providers in exchange for referrals or prescribing certain medications or treatments. This can include cash payments, gifts, or other incentives to encourage healthcare providers to engage in fraudulent activities.
• Rebates: Rebates are discounts or other financial incentives offered to healthcare providers for prescribing certain medications or treatments. While rebates can be a legitimate way for pharmaceutical and medical device companies to promote their products, they can also be used as a means of providing kickbacks to healthcare providers in exchange for prescribing certain medications or treatments.
• Sporting Events: Pharmaceutical and medical device companies may offer tickets to sporting events or other recreational activities as a means of providing kickbacks to healthcare providers. While attending such events can be a legitimate way for healthcare providers to network and learn about new medical advancements, they can also be used as a means of providing kickbacks to encourage healthcare providers to engage in fraudulent activities.

Click here to find more examples of kickbacks under the FCA.

Whistleblower Rewards for Reporting Medicare Kickbacks

A False Claims Act whistleblower who is the first to file a kickback case is entitled to a 15-30% whistleblower award if the case is successful. Because FCA requires the use of counsel, you need to hire a law firm experienced in dealing with the AKS to file the suit to potentially receive any whistleblower rewards.   Here are some examples of successful False Claims Act cases referencing kickbacks:

In 2019, a whistleblower was awarded $112 million for reporting kickback schemes involving the sale of medical equipment and supplies to hospitals and healthcare providers. The whistleblower’s information led to settlements of over $1.4 billion with various companies. Citation: “Whistleblower Gets $112 Million in U.S. Case Over Medicare Fraud.” Bloomberg, 7 November 2019. Link: https://www.bloomberg.com/news/articles/2019-11-07/whistleblower-gets-112-million-in-u-s-case-over-medicare-fraud

In 2016, a whistleblower received $97 million for reporting a scheme in which a large pharmaceutical company paid kickbacks to doctors for prescribing their medication. The information provided by the whistleblower led to a settlement of $784.6 million. Citation: “Pharmaceutical Company to Pay $784 Million for Kickback Scheme.” The New York Times, 9 September 2016. Link: https://www.nytimes.com/2016/09/10/business/pharmaceutical-company-to-pay-784-6-million-for-kickback-scheme.html

In 2012, an individual received a $48 million whistleblower award for reporting a scheme in which a healthcare provider paid kickbacks to physicians for referring patients to their facilities. The information provided by the whistleblower led to a settlement of $237 million. Citation: “Whistleblower Gets $48M in Hospital Kickback Case.” ABC News, 8 March 2012. Link: https://abcnews.go.com/Business/whistleblower-48m-hospital-kickback-case/story?id=15916245

In 2010, an individual received $96 million whistleblower reward for reporting a scheme in which a pharmaceutical company paid kickbacks to doctors and pharmacists for promoting and prescribing their medication. The information provided by the whistleblower led to a settlement of $520 million. Citation: “Novartis to Pay $422.5 Million in Fines and Penalties for Off-Label Drug Marketing.” The New York Times, 29 September 2010. Link: https://www.nytimes.com/2010/09/30/business/30drug.html

In 2009, a whistleblower was awarded $51 million for reporting a scheme in which a medical device manufacturer paid kickbacks to physicians for using their products during surgeries. The information provided by the whistleblower led to a settlement of $311 million. Citation: “Whistleblower Gets $51 Million in Medical Device Fraud Case.” Reuters, 3 June 2009. Link: https://www.reuters.com/article/us-whistleblower-device-idUSTRE5524KC2009060

In 2008, a whistleblower received $27 million for reporting a scheme in which a laboratory paid kickbacks to physicians for referring patients to their facility for medical testing. The information provided by the whistleblower led to a settlement of $325 million. Citation: “Whistle-Blower Gets $27 Million in Fraud Case.” The New York Times, 14 May 2008. Link: https://www.nytimes.com/2008/05/14/business/14whistle.html

In 2006, a whistleblower was awarded $20 million for reporting a scheme in which a healthcare provider paid kickbacks to physicians for referring patients to their facility. The information provided by the whistleblower led to a settlement of $170 million. Citation: “Whistleblower Nets $20 Million in Kickback Case.” The Washington Post, 8 March 2006

Anti-Kickback Statute and the Stark Law

The Anti-Kickback Statute (“AKS”) prohibits medical providers and physicians from paying or receiving kickbacks or any financial benefits in return for referrals of patients who are covered under federal healthcare programs such as Medicare, Medicaid and TRICARE.

Specifically, the Stark Law is violated when a physician refers patients to an entity to which the referring physician, or his or her immediate family member, has a financial relationship, without properly disclosing the relationship This means that, generally speaking, if a physician refers a patient to a clinic owned by his family member, the Stark Law could be violated.

Read more about the Anti-Kickback Statue and the Start Law here.

Government Contracting Fraud and Kickbacks

In addition to federal healthcare programs, kickback schemes are common in government procurement and contracting. A separate set of statutes and regulations govern kickbacks for those who enter into contracts with the US directly or indirectly through subcontracting to provide goods or services.

Similar to the healthcare industry, contractors, subcontractors, and their employees are not permitted to provide, solicit, or accept anything of value in exchange for preferential treatment on a government contract or subcontract. Violations of government contracting kickback rules, like kickbacks involving taxpayer-funded healthcare, can be the basis for FCA liability.

The False Claims Act, Defense Kickbacks and the Foreign Corrupt Practices Act

The False Claims Act (FCA) and the Foreign Corrupt Practices Act (FCPA) are two separate laws, but they can intersect in certain situations. The FCPA prohibits companies from bribing foreign officials in exchange for business. Under the FCPA, a company can be held liable for bribing foreign officials, even if the bribe was not paid with government funds. This means that a company could potentially violate the FCPA and the FCA at the same time if they submit false claims to the government as a result of a bribe paid to a foreign official.

For example, if a company bribes a foreign official to secure a government contract, and then submits false claims to the government for payment under that contract, they could be liable for both FCPA violations and FCA violations. Inherently, when businesses sign a contract with the federal government there’s a provision that the will abide by all laws, and by engaging in bribery with a foreign entity it may automatically constitute a violation of the AKS, FCA and FCPA.

One example of the interplay between these statutes is involves Teva Pharmaceuticals. In 2016, Teva Pharmaceuticals agreed to pay $519 million to settle allegations that it violated the FCA and the FCPA by paying bribes to government officials in Russia, Ukraine, and Mexico to secure business and by submitting false claims to government healthcare programs.

The whistleblower in the case, a former Teva Pharmaceuticals executive, received a $54 million award for exposing the fraud. The settlement is one of the largest FCA and FCPA settlements to date, and it highlights the potential for companies to be held liable for multiple types of fraud in the same case.

Citation: “Teva Pharmaceutical Industries Ltd. and Subsidiaries Agree to Pay $519 Million for FCPA Violations and False Claims Act Allegations.” Department of Justice, 22 December 2016. Link: https://www.justice.gov/opa/pr/teva-pharmaceutical-industries-ltd-and-subsidiaries-agree-pay-519-million-fcpa-violations-and

Whistleblower Awards for Reporting Defense Kickbacks under the False Claims Act

In 2014, a defense contractor agreed to pay $389 million to settle allegations that it violated the False Claims Act by providing kickbacks to a subcontractor in exchange for favorable treatment on a government contract. The whistleblower in the case received a $48.6 million award. Citation: “United States Reaches $389 Million Settlement with Health Diagnostics Laboratory Inc. and Singulex Inc. to Resolve False Claims Act Allegations.” Department of Justice, 27 June 2019. Link: https://www.justice.gov/opa/pr/united-states-reaches-389-million-settlement-health-diagnostics-laboratory-inc-and-singulex

In 2018, a defense contractor agreed to pay $45 million to settle allegations that it violated the False Claims Act by providing kickbacks to subcontractors in exchange for favorable treatment on government contracts. The individual in the case received a $10.1 million whistleblower award. Citation: “Defense Contractor Pays $45 Million to Resolve Allegations That It Improperly Obtained Classified Information and Engaged in Prohibited Lobbying and Kickback Schemes.” Department of Justice, 8 January 2018. Link: https://www.justice.gov/opa/pr/defense-contractor-pays-45-million-resolve-allegations-it-improperly-obtained-classified

In 2019, a defense contractor agreed to pay $27 million to settle allegations that it violated the False Claims Act by providing kickbacks to subcontractors in exchange for favorable treatment on government contracts. The whistleblower in the case received a $4.86 million award. Citation: “Defense Contractor Pays $27 Million to Resolve False Claims Act Allegations.” Department of Justice, 12 November 2019. Link: https://www.justice.gov/opa/pr/defense-contractor-pays-27-million-resolve-false-claims-act-allegations

In 2017, a defense contractor agreed to pay $13.7 million to settle allegations that it violated the False Claims Act by providing kickbacks to a subcontractor in exchange for favorable treatment on government contracts. The individual in the case received a $2.48 million whistleblower reward. Citation: “Defense Contractor to Pay $13.7 Million to Resolve False Claims Act Allegations.” Department of Justice, 28 June 2017. Link: https://www.justice.gov/opa/pr/defense-contractor-pay-137-million-resolve-false-claims-act-allegations.

In 2018, a defense contractor agreed to pay $13 million to settle allegations that it violated the False Claims Act by providing kickbacks to subcontractors in exchange for favorable treatment on government contracts. The whistleblower in the case received a $2.34 million award. Citation: “Defense Contractor Pays $13 Million to Resolve False Claims Act Allegations.” Department of Justice, 29 August 2018. Link: https://www.justice.gov/opa/pr/defense-contractor-pays-13-million-resolve-false-claims-act-allegations

In 2019, a defense contractor agreed to pay $13.2 million to settle allegations that it violated the False Claims Act by providing kickbacks to a subcontractor in exchange for favorable treatment on a government contract. Citation: “Defense Contractor to Pay $13.2 Million to Resolve False Claims Act Allegations.” Department of Justice, 18 April 2019. Link: https://www.justice.gov/opa/pr/defense-contractor-pay-132-million-resolve-false-claims-act-allegations

In 2018, a defense contractor agreed to pay $16 million to settle allegations that it violated the False Claims Act by providing kickbacks to a subcontractor in exchange for favorable treatment on a government contract. Citation: “Defense Contractor Pays $16 Million to Settle False Claims Act Allegations.” Department of Justice, 8 January 2018. Link: https://www.justice.gov/opa/pr/defense-contractor-pays-16-million-settle-false-claims-act-allegations

In 2017, a defense contractor agreed to pay $4.63 million to settle allegations that it violated the False Claims Act by providing kickbacks to a subcontractor in exchange for favorable treatment on a government contract. Citation: “Defense Contractor to Pay $4.63 Million to Resolve False Claims Act Allegations.” Department of Justice, 20 March 2017. Link: https://www.justice.gov/opa/pr/defense-contractor-pay-463-million-resolve-false-claims-act-allegations

In 2015, a defense contractor agreed to pay $3.5 million to settle allegations that it violated the False Claims Act by providing kickbacks to a subcontractor in exchange for favorable treatment on a government contract. Citation: “Defense Contractor to Pay $3.5 Million to Resolve False Claims Act Allegations.” Department of Justice, 2 June 2015. Link: https://www.justice.gov/opa/pr/defense-contractor-pay-35-million-resolve-false-claims-act-allegations

In 2013, a defense contractor agreed to pay $3 million to settle allegations that it violated the False Claims Act by providing kickbacks to a subcontractor in exchange for favorable treatment on a government contract. Citation: “Defense Contractor to Pay $3 Million to Resolve False Claims Act Allegations.” Department of Justice, 28 August 2013. Link: https://www.justice.gov/opa/pr/defense-contractor-pay-3-million-resolve-false-claims-act-allegations

More Examples of Kickbacks under the False Claims Act:

• A hospital paying a physician for patient referrals for specific medical services.
• A pharmaceutical company providing a physician with an all-expenses-paid trip in exchange for prescribing their medication.
• A durable medical equipment supplier offering a physician a percentage of profits for every referral they make.
• A medical laboratory offering discounts or free services to physicians who refer patients to their lab.
• A home healthcare agency paying a case manager to refer patients to their services.
• A hospice provider offering bonuses to physicians who refer a certain number of patients to their program.
• A pharmacy providing kickbacks to physicians who prescribe their drugs over competitors
• A medical device manufacturer offering incentives to physicians for using their products during surgeries.
• A physical therapy center offering free meals or other incentives to physicians who refer patients to their practice.
• A compounding pharmacy offering kickbacks to physicians for writing prescriptions for their products.
• A laboratory paying a physician to sign off on unnecessary tests.
• A hospital offering bonuses to physicians who admit patients to their facility.
• A physician receiving gifts or entertainment from a pharmaceutical company in exchange for prescribing their drugs.
• A nursing home offering kickbacks to physicians for referring patients to their facility.
• A medical billing company providing a percentage of profits to a physician for ordering unnecessary tests or procedures.
• A healthcare provider offering free or discounted services to patients in exchange for referrals.
• A physician receiving a kickback for prescribing a specific medical device.
• A healthcare provider offering free or discounted drugs to patients in exchange for referrals.
• A medical transportation company offering kickbacks to physicians for referring patients to their service.
• A medical billing company paying a physician to upcode medical services to increase reimbursement. Providing kickbacks to subcontractors in exchange for favorable treatment on government contracts.
• Paying bribes to government officials to secure contracts
• Providing lavish gifts or entertainment to government officials in exchange for favorable treatment.
• Offering employment or consulting agreements to government officials in exchange for favorable treatment.
• Using intermediaries or “consultants” to funnel kickbacks or bribes to government officials.
• Inflating prices on government contracts to conceal kickbacks or bribes.
• Hiding kickbacks or bribes in “consulting” or “marketing” fees.
• Providing gratuities, such as expensive vacations or luxury goods, to government officials in exchange for favorable treatment.
• Falsifying records to cover up kickbacks or bribes.
• Overbilling the government for goods or services obtained through kickbacks or bribes.
• Providing false or misleading information to the government to obtain contracts.
• Submitting false certifications of compliance with procurement regulations.
• Violating conflict-of-interest rules by awarding contracts to companies connected to government officials or employees.
• Creating sham companies or subcontractors to funnel kickbacks or bribes to government officials.

Reporting Kickbacks in Healthcare the Right Way

Through the use of the False Claims Act and well-equipped qui tam law firms, whistleblowers have helped the taxpayers recover billions of dollars.  Whistleblower lawsuits that expose healthcare misconduct like Kickback schemes that violate the Anti-Kickback Statue and the Stark Law help to protect patients, taxpayer dollars and the integrity of the healthcare system.

If you are an insider witnessing healthcare abuse and waste in the form of kickbacks at a medical office or pharmaceutical company, you know that it undermines the integrity of the system, and you need to do what’s right before it puts further economics and potentially lives at risk.  If you blow the whistle the right way, you can provide an important public service and win a whistleblower award that’s a percentage of the potentially millions of dollars recovered by the government. If you blow the whistle the wrong way, your case could be over before it begins. Contact us at Brown, LLC today to discuss your case confidentially at (877) 561-0000.