Preventing fraud and abuse

How to keep your practice in compliance with laws such as the federal Anti-Kickback Statute.

What you need to know about fraud and abuse regulations

Even if your dental practice does not participate in federal programs such as Medicaid, Medicare Advantage or TRICARE, you should understand program regulations that deal with fraud and abuse. Certain fraud and abuse rules may apply to private insurance programs, too. Here are key insights to help you create an effective compliance plan for your practice.

FAQ on fraud and abuse laws

Discount or rebate programs — including those that offer points, gifts, or special rewards — may violate the federal Anti-Kickback Statute (AKS) when they appear to offer compensation for referral of federal health care program business. A discount or rebate program might fit within a "safe harbor" of compliance with the AKS if certain requirements are met, but many will not qualify for this protection. Use careful scrutiny when considering any program offered by a manufacturer that offers points, gifts or other rewards.

What does the federal Anti-Kickback Statute (AKS) cover? What are the penalties for violation?

The AKS is a federal law designed to prohibit the exchange of compensation for referral of business covered by a federal health care program.¹ This law applies even if compensation is merely offered or solicited, but not exchanged.

The AKS imposes both criminal and civil sanctions. A violation can result in a fine of up to $25,000 per claim submitted, imprisonment for up to five years, and exclusion from participation in federal healthcare programs. Civil monetary penalties may apply in cases of "reckless disregard” or "deliberate ignorance."

For a court to find a violation of the AKS, each of the elements of a kickback arrangement must be found: (a) a referral(s); (b) an inducement; and (c) proof of prohibited intent.

The government has strengthened enforcement of fraud and abuse laws such as the AKS.² The Affordable Care Act has made it easier for the Department of Health and Human Services' Office of Inspector General (OIG) to prosecute AKS violations; for example, by making it easier for the government to prove that a defendant intended to violate the law. The Physician Payment Sunshine Act requires certain manufacturers to publicly report various kinds of gifts and payments to practitioners, which could lead to an increase in investigations. AKS violations are often alleged by whistleblowers, who have a financial incentive because they can participate in any recoupment.

¹The AKS imposes criminal and civil penalties against any individual or entity that:

[K]nowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person:

(A) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in Part under [Medicare or a state health care program], or

(B) to purchase, lease, order or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in Part under [Medicare or a state health care program]. 42 U.S.C. §1320a-7b; Social Security Act §1128B.

The AKS also contains a reciprocal provision making it illegal to solicit or receive remuneration in return for a prohibited referral or for purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering any good, facility, service or item for which payment may be made in whole or in part under Medicare or a state health program.

56 Fed. Reg. 35,952 (1991); 42 C.F.R. § 1001.952 et seq.

² According to the Office of the Inspector General website, “efforts to combat fraud were consolidated and strengthened under Public Law 104-191, the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The Act established a comprehensive program to combat fraud committed against all health plans, both public and private. The legislation required the establishment of a national Health Care Fraud and Abuse Control Program (HCFAC), under the joint direction of the Attorney General and the Secretary of the Department of Health and Human Services (HHS) acting through the Department's Inspector General (HHS/OIG). The HCFAC program is designed to coordinate Federal, State and local law enforcement activities with respect to health care fraud and abuse. The Act requires HHS and Department of Justice (DOJ) detail in an Annual Report the amounts deposited and appropriated to the Medicare Trust Fund, and the source of such deposits."

What constitutes a “safe harbor” within the AKS?

A safe harbor is a defined set of permissible conduct that will not be viewed as a violation of a given law. The Department of Health and Human Services' Office of Inspector General (OIG) has published safe harbor regulations that define which payments do not create a basis for criminal prosecution, civil monetary penalties or exclusion from Medicare or state health programs under the AKS. To come within the safe harbors, an arrangement must meet all the requirements of each applicable safe harbor.

Because the safe harbors are narrow, many arrangements do not meet safe harbor requirements. However, failure to meet safe harbor requirements does not automatically make a transaction illegal. Instead, arrangements outside the safe harbors must be reviewed on a "facts and circumstances" basis — by reviewing the facts of a particular arrangement in light of the AKS, along with similar cases and administrative rulings interpreting the AKS.

How can I be sure that discounts and rebates our practice accepts fit within safe harbor rules?

The AKS includes a safe harbor for certain discount and rebate arrangements.³ Specifically, the discount safe harbor applicable to most dental practices requires that the arrangement meet all of the criteria listed below.

As applied to the dental practice (i.e., the buyer):

A) The discount must be made at the time of the sale of the good or service, or the terms of the rebate must be fixed and disclosed in writing to the buyer at the time of the initial sale of the good or service;

B) The discount must be on the same type of goods and services (and not tied to the purchase of another good or service);

C) The buyer (if submitting the claim) must provide, upon request by the Secretary of the U.S. Department of Health and Human Services or a state agency, information provided by the seller as specified below.

As applied to manufacturer or supplier (i.e., the seller):

(A) Where the seller submits a claim or request for payment on behalf of the buyer and the item or service is separately claimed, the seller must fully and accurately report the discount on the claim or request for payment to Medicare or a state health care program and the seller must provide, upon request by the Secretary of the U.S. Department of Health and Human Services or a state agency, information provided by the offeror of the seller's obligation to report the discount and to provide information as requested; or

B) where the buyer submits a claim, the seller must: (i) fully and accurately report such discount on the invoice, coupon or statement submitted to the buyer; (ii) inform the buyer in an effective manner of its obligations to report such discount; and (iii) refrain from doing anything that would impede the buyer from meeting its reporting obligations.

³The OIG defines "discount" as a reduction in the amount a buyer (who buys either directly or through a wholesaler or a group purchasing organization) is charged for an item or service based on an arms-length transaction. The term discount does not include (and thus the safe harbor does not protect): (i) cash payments; (ii) furnishing one good or service without charge or at a reduced charge to induce the purchase of a different good or service; (iii) a reduction in price applicable to one payer but not to Medicare or a State health care program; (iv) a routine reduction or waiver of any coinsurance or deductible amount owned by a program beneficiary; (v) warranties; (vi) services provided in accordance with a personal or management services contract; or (vii) other remuneration, in cash or in kind, not explicitly described above. Rebates are defined as any discount which is not given at the time of sale.

Can manufacturers and suppliers do anything to avoid risking AKS violations?

Because the AKS imposes liability on both sides of a prohibited transaction, certain manufacturers or suppliers may minimize the risk of AKS violations by restricting participation in promotional discount programs to items or services that are not covered by federal healthcare programs. One way of accomplishing this is to require the participating dental practice to certify or otherwise assure that the items or services received through the reward program will not be provided to federal healthcare program beneficiaries.

How can my practice avoid violations of AKS and other fraud and abuse laws?

If you submit claims to federal health care programs, you should review your practice’s participation in discount programs and develop policies on gifts and other remuneration. Policies should apply not only to manufacturers and suppliers, but also to gifts and remuneration from individuals, businesses and professionals that may direct referrals to your practice. Doing this will help minimize risk under the AKS and other laws designed to protect federal health care programs from fraud and abuse.

You and your team should also know about state and federal fraud and abuse laws and align your compliance program with them. For more information about federal fraud and abuse programs, visit the OIG website. To develop a fraud and abuse compliance program for a small practice, download the General OIG Compliance Program for Individual and Small Group Physician Practices.