The High Cost of Healthcare Non-Compliance

Anti-Kickback Statute and Stark Law violations lead to fines, prison time, and exclusion from Medicare and Medicaid programs.

Anti-Kickback Statute and Stark Law violations lead to fines, prison time, and exclusion from Medicare and Medicaid programs.

You don’t want to see your healthcare organization appearing in headlines for compliance violations.

The Anti-Kickback Statute, Stark Law, and other healthcare regulations are designed to protect patients and prevent waste, fraud, and abuse in government healthcare programs. In some industries, rewards for referrals are acceptable, but paying for a patient referral in healthcare is a federal crime. Patient care and clinical outcomes suffer when treatment protocol decisions and patient referrals are based on financial incentives, not the patients’ best interests. Physicians are supposed to decide on the most appropriate treatment for their patients without considering their own financial interests.

The penalties for non-compliance are severe: hefty fines, exclusion from the federal healthcare programs, prison time, and reputational damage. Because fines for noncompliance are no longer always insurable, healthcare executives are now being held personally liable when some significant gaps in oversight are discovered.

Healthcare organizations that violate federal guidelines can be excluded from participation in Medicare and Medicaid. Revenue from federal programs can account for up to half of a hospital’s income, so exclusion from these programs can put hospitals out of business. Even alleged violations can be costly given that regulatory agencies are authorized to suspend federal payments to providers under investigation.

RELATED WHITE PAPER: The Process Revolution—Advancements in Healthcare Contracting

The Anti-Kickback Statute (AKS) is a criminal law that prohibits the knowing and willful payment of remuneration to induce or reward patient referrals or the generation of business for any item or service payable by federal healthcare programs. Penalties for non-compliance (for each violation): criminal fines up to $25,000, civil fines up to $50,000, and up to five years in prison. Under the Civil Monetary Penalties Law (CMPL), physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of the remuneration. The AKS covers the payers of kickbacks—those who offer or pay remuneration (e.g., drug or medical device companies)—and the recipients of those kickbacks (e.g., providers). Each party’s intent is a key element of their liability under the AKS.

The Physician Self-Referral Law, aka the Stark Law, prohibits physicians from referring patients to receive designated health services payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. Penalties for noncompliance: civil penalties of up to $15,000 per incident, or up to $100,000 for willful circumvention.

Centers for Medicare & Medicaid Services (CMS) Reporting for Physician Time & Effort. CMS requires a participating health system’s physicians to submit, attest to, and certify the amount of time and effort they’ve expended, as well as report their compensation for services rendered. In extreme cases of non-compliance, health systems could lose their accreditation from The Joint Commission and may no longer be certified to provide Medicare and Medicaid services.

The Physician Payments Sunshine Act (“Sunshine Act”) requires drug and medical device companies to disclose to CMS any payments or other transfers of value made to physicians or teaching hospitals for research, meals, travel, gifts, speaking fees, and more. Manufacturers must submit annual data on payments and transfers to covered recipients into Open Payments, CMS’s national disclosure program (the database that is consulted for Sunshine Act compliance). Physicians then have 45 days to review the Sunshine Act data—and approve or dispute its accuracy and completeness prior to the data becoming available to the public. The Sunshine Act also requires certain manufacturers and group purchasing organizations (GPOs) to disclose any physician ownership or investment interests held in those companies.

The SUPPORT Act extends the Sunshine Act to include reporting requirements for payments or transfers of value to additional health professional affiliates: physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, and certified registered nurse anesthetists. Starting January 1, 2021, drug and medical device manufacturers, and the affected healthcare providers, will need to start tracking payments or transfers of value to these additional health professionals. Correspondingly, CMS’ Open Payments is expanding in 2021 to include those five new provider types.

Penalties for Sunshine Act non-compliance: knowingly failing to submit payment information to Open Payments will result in a civil money penalty of not less than $10,000, but not more than $100,000, for each payment. The penalty will not exceed $1,000,000. Combined, penalties may not exceed $1,150,000.

Until recently, Sunshine Act enforcement has been lax, with only minor fines, if any, handed down. However, on October 29, 2020, the U.S. Department of Justice announced a $1.1 million settlement with a medical device manufacturer for violating the Sunshine Act. The government claimed that the company 1) paid kickbacks to induce a neurosurgeon to use its products; and 2) failed to report the full value of its payments to that neurosurgeon for 74 events held at a restaurant owned by the physician. Instead of reporting the total amount paid to the restaurant, as required by the Sunshine Act, the company allegedly reported to CMS only the attributed value of the food and drinks consumed by each physician attending the events. The company agreed to pay a total of $8.1 million to resolve the alleged violations of the Anti-Kickback Statute (AKS), plus an additional $1.1 million to resolve the alleged Sunshine Act violations.

TractManager’s Compliance Suite helps healthcare organizations stay in compliance and out of the headlines by identifying potential compliance violations before they happen. Compliance Suite simplifies the tracking and reporting of provider time/activity, gifts, and conflicts of interest.

To learn more, download our new Compliance Guide for detailed explanations on how to navigate healthcare contracting compliance.


Brooke Brown, RN, BSN

Vice President of Product Management

Brooke Brown joined TractManager’s Contract Management division in 2017


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