Anti-kickback Enforcement Stepping Up

The federal anti-kickback statute has frequently been discussed in the pages of EMS Insider. This law prohibits giving or receiving anything of value to induce the referrals of Medicare patients or other federal healthcare program beneficiaries. The AKS has been applied to a wide array of ambulance service arrangements, as seen in numerous advisory opinions from the Office of Inspector General (OIG). These arrangements have included discounted hospital and nursing home arrangements, hospital restocking of ambulances, the waiver of patient copayments and deductibles, “pay to play” arrangements between ambulance services, cities or counties, and many other types of arrangements.


Although violation of the AKS is a felony that carries with it substantial penalties, including prison time, exclusion from the Medicare program and large civil monetary penalties of up to $50,000 per violation, it seems as if many ambulance services–and the facilities and others with which they do business–have deliberately chosen to disregard the AKS.


Perhaps some violators have reasoned to themselves that their conduct falls in a “gray area” and might be defensible, or perhaps they’ve simply decided it’s worth it to obtain as much business as they can, and take their chances with the feds. Regardless, it seems as if there are still many arrangements throughout the industry that walk a fine line with AKS compliance, or leap right over it, even though the OIG’s first significant warnings under the AKS came back in 1997.


A number of factors have made it extremely unwise for ambulance services to ignore, minimize or take their chances with the AKS. First, spending on healthcare fraud and abuse enforcement is at an all-time high, and the number of agents and investigators to handle complaints and inquiries has never been greater. Second, the healthcare reform law now makes violations of the AKS a basis for liability under the federal false claims act (FCA).


The FCA, as most people know, allows private whistleblowers to institute qui tam suits in the name of the federal government, and to collect up to 30% of any funds recovered by the government. So, even if you decide to “take your chances” with the feds, a disgruntled employee–or a competitor who has been frozen out of a facility contract by another company’s discounted rates–could bring a whistleblower case even without the government on board.


In the context of a FCA case, the monetary damages can include three times the amount of each claim, plus penalties of up to $11,000 per claim. Whether we’re talking about direct enforcement of the AKS by the feds, or a whistleblower case under the FCA, the financial exposure alone can easily reach tens of millions, if not hundreds of millions of dollars, even in a seemingly “routine” ambulance kickback case.


In short, the stakes for an AKS violation are astronomical.


Numerous cases exist where the government–and whistleblowers– are using these incredibly powerful new legal tools to investigate AKS compliance issues by ambulance services. The Department of Justice recently sent a “Civil Investigative Demand”–essentially a subpoena–to an ambulance service seeking a wide variety of documents, making it clear that the ambulance service is being actively investigated for questionable practices in the pricing and potential discounting of its facility contracts.


Consider these specific provisions from the subpoena, where the government is requiring the ambulance service, within 30 days, to turn over the following documents, covering an eight-year period:

  • Quarterly income (profit and loss) statements for an 8 year period;
  • Quarterly balance sheets;
  • Quarterly cash flow statements;
  • Reports reconciling financial statements to ambulance transport contracts;
  • Documents regarding any write-offs, adjustments, waiver or refunds of ambulance charges;
  • A cost analysis supporting any rates charged to SNFs and hospitals;
  • Copies of all contracts with all facilities;
  • Total transport volumes from each contracted facility;
  • Dollar amounts billed to and collected from each contracted facility;
  • The identities of all individuals with whom the ambulance service dealt at each contracted facility; and
  • The identities of the individuals who recommend or approve ambulance contracts at each facility.

In short, the subpoena is a thorough demand for records, documents and other evidence to uncover any possible AKS violations that may exist within any of the arrangements in place between the ambulance service and any of the facilities it serves.


Any ambulance service that believes the possibility of having to defend an AKS investigation or lawsuit is too remote to worry about should consider what it would be like to see their name on the top of a subpoena like this. There is no doubt that some cases may be instigated for the wrong reasons by unscrupulous would-be whistleblowers–for instance, a competitor who is merely seeking to besmirch the reputation of a rival, hoping the mere filing of a suit or initiation of an investigation will cause facilities to drop their contracts and create new business opportunities for competitors. We have seen our share of frivolous allegations made only for competitive advantage.


We’ve also seen plenty of cases where subpoenas are served, only to reveal that the ambulance service had a solid compliance program in place and that its documents, contracts and other arrangements were all in compliance.


But, make no mistake. Where the government sees smoke, it often believes there is fire. Any and every ambulance service must recognize that the AKS covers all types of ambulance services and contains no exceptions for public, nonprofit, hospital-based or independent ambulance services. It covers all entities: private, public or nonprofit.


Some of the best ways for ambulance services to ensure AKS compliance are, first and foremost, to have a comprehensive compliance program in place, led by a knowledgeable and empowered compliance officer.


Second, ambulance services should have a knowledgeable and experienced legal counsel in place to assist them in developing and reviewing their contracts, pricing and arrangements.


Third, ambulance services must remember that their contracts and arrangements are under a microscope–even when they think nobody is paying attention. Potential whistleblowers are everywhere, and the promise of financial rewards is compelling.


Fourth, even in highly competitive markets, remember that some business just isn’t worth it. If, for example, a facility insists on deep discounts in order to secure a contract, a wise business judgment would be to recognize that the contract simply isn’t worth the risk.


Fifth, it’s important to perform a detailed analysis of your agency’s fully-loaded costs, and have a defensible and documented approach to your pricing.


Sixth, as a general rule, make sure the rates you charge to facilities which also refer Medicare patients to you are consistent with your Medicare-approved rates (including copayments and mileage). If your facility rates and your Medicare rates are the same, there is no “discount” being given to the facility that can be seen as an inducement.


Lastly, don’t say one thing in a contract, but then completely ignore it in practice. If you have appropriate rates written in a contract, but then you verbally tell the facility you’ll give them a big “unwritten” discount to win their business, your arrangement is not in compliance merely because your contract says it is. Many more principles are in place to maintain compliance, but these are some basic best practices. Consult with your agency’s legal counsel to review or implement an effective compliance program and ensure consistency with these important legal principles.

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