Legal Strategies to Beat Healthcare Kickback Scheme Allegations

Legal Strategies to Beat Healthcare Kickback Scheme Allegations

Healthcare kickback schemes are unfortunately common, but providers accused of participating in them have several legal strategies to fight the allegations. While avoiding liability requires a nuanced understanding of the law, some general principles can help. This article outlines key laws prohibiting kickbacks, trends in enforcement, common kickback schemes, and most importantly, practical strategies for providers to respond if accused.

The Main Laws Prohibiting Kickbacks

Three key federal laws address healthcare kickbacks 1:

  • False Claims Act (FCA) – Prohibits knowingly submitting false claims to federal healthcare programs. Violations are subject to civil penalties and treble damages. Kickbacks can render claims “false” under the FCA by tainting their legitimacy.
  • Anti-Kickback Statute (AKS) – Criminalizes knowingly paying or receiving remuneration to induce federal healthcare program referrals. Violations are felonies punishable by fines up to $25,000 and 5 years imprisonment. The law covers any form of kickback.
  • Stark Law – Prohibits physicians from referring Medicare patients for certain designated health services to entities with which they have a financial relationship. Violations result in denial of payment and potential civil monetary penalties.

These laws often overlap in kickback cases. For example, a kickback could violate both the AKS criminally and the FCA civilly if it also causes false claims. Providers should understand all three statutes when facing allegations.

Trends in Anti-Kickback Enforcement

Enforcement of federal anti-kickback laws has increased substantially in recent years. Some trends include 2  3:

  • More criminal prosecutions under the AKS, including prison sentences for individuals
  • Increased use of the FCA and its whistleblower provisions
  • Higher civil settlements and judgments
  • Greater scrutiny of financial relationships between referral sources
  • Focus on areas like pharmaceuticals, genetic testing, and opioids

The COVID-19 pandemic has also produced new kickback schemes for regulators to pursue 1. 

Overall, the risks of noncompliance are higher than ever.

Common Kickback Schemes

Some frequent kickback schemes that draw scrutiny include 1 3 :

  • Billing for unnecessary services – Ordering excessive tests or procedures that aren’t medically needed to generate federal healthcare program reimbursement.
  • Waiving copays or deductibles – Routinely waiving what programs require patients to pay encourages referrals and may violate the AKS.
  • Free or discounted items/services – Providing free goods or services to referral sources like physicians or patients could be illegal remuneration.
  • Sham medical directorships – Paying physicians more than fair market value for nominal services may conceal kickbacks for referrals.
  • Joint ventures – Investing in entities to which providers refer patients creates inherent risk of improper financial incentives.
  • Space/equipment rentals – Below fair market value rents between referral sources are suspect.
  • Personal services contracts – Paying above fair market value for vague services like “consulting” or “marketing” invites scrutiny.

Providers should proactively evaluate such arrangements for compliance rather than assume they are protected or commonly accepted practices. Even technical violations can trigger substantial liability.

Responding to Kickback Allegations

If faced with kickback allegations, providers have several potential defenses and strategies 4 5:

Argue the Remuneration Wasn’t “Knowing and Willful”

The AKS and Stark Law require proof the defendant knew the conduct was unlawful and still chose to violate the law. Mistake of law can be exculpatory. Providers may argue they relied on counsel’s advice that an arrangement was proper and lacked intent to violate the AKS or Stark Law. However, such advice of counsel defenses face high legal hurdles. The better approach is ensuring arrangements comply upfront.

Challenge the Referral Link

Prosecutors must connect remuneration to actual referrals under the AKS and Stark Law. If the government cannot prove an arrangement actually induced referrals as intended, there may be no violation. Defendants can argue the financial connection did not improperly influence referrals. But ambiguous or weak referral links invite scrutiny.

Dispute the Fair Market Value of Remuneration

Paying below fair market value for services or goods is not necessarily an illegal kickback. Defendants may counter allegations by presenting evidence their compensation was consistent with market rates. But opinions on fair market value often differ, and prosecutors may argue any amount below market rate reflects improper intent.

Claim an Exception or Safe Harbor

Regulatory exceptions and safe harbors exclude certain practices like investment interests, space rentals, personal services contracts, and more from AKS liability despite remuneration if specific criteria are met. Arguing an arrangement fits in a safe harbor is an important defense strategy. However, provisions are interpreted narrowly, so technical flaws can defeat safe harbor claims.

Contest FCA Damages Calculations

Even if an anti-kickback violation is found, defendants can still fight the alleged scope of false claims and total damages. Not all claims associated with a kickback scheme may be provably false or related to the misconduct. Rigorously contesting the government’s methodology for estimating total damages is key.

Seek Settlement

Once violations are detected, settling allegations often makes sense to limit penalties and avoid exclusion from federal healthcare programs. Settlements may be possible pre-trial or even post-conviction on appeal. Cooperating with authorities and demonstrating remedial efforts can aid settlement. Though settlements require admitting liability, the consequences of losing at trial are typically more severe.


Healthcare kickback laws are complex, but several overarching strategies exist for providers accused of violations. Preventing problems through proactive compliance is ideal. Once allegations arise, quickly retaining experienced legal counsel is critical. With sound representation, providers can raise a variety of factual and legal arguments to rebut kickback charges or at least mitigate the penalties. The key is taking potential issues seriously and addressing them head on. With vigilance and proper advice, healthcare providers can fight kickback allegations while continuing caring for patients.