Overview of the Anti-Kickback Statute (AKS)

The Anti-Kickback Statute (AKS) is a federal criminal law that prohibits the exchange of remuneration for referrals in federally funded healthcare programs. The purpose of the AKS is to protect patients and public funds by eliminating financial incentives that could improperly influence medical decision-making.

Key Provisions of the Anti-Kickback Statute

The AKS is codified at 42 U.S.C. § 1320a-7b(b). At its core, it prohibits:

1. Knowingly and willfully
2. Offering, paying, soliciting, or receiving
3. Any remuneration
4. To induce referrals for items or services covered by a federal healthcare program (e.g., Medicare, Medicaid) (42 U.S.C. § 1395nn(e)(3)).

The AKS prohibits the quid pro quo exchange of something of value (remuneration) for a federally reimbursed referral. Under the Patient Protection and Affordable Care Act (PPACA) of 2010, a violation of the AKS is per se a violation of the False Claims Act (FCA) (31 U.S.C. § 3729 et seq.).

Intent Requirement of AKS

Civil Intent Standard

For civil violations, the intent standard is lower. Under 42 U.S.C. § 1320a-7b(h), a defendant may be liable even if they did not have actual knowledge of the AKS or specific intent to violate it. Instead, liability attaches when a person acts in deliberate ignorance or reckless disregard of the law. This standard applies in False Claims Act (FCA) cases (31 U.S.C. § 3729(b)(1)) and Civil Monetary Penalties Law (CMPL) cases (42 U.S.C. § 1320a-7a).

Criminal Intent Standard

For criminal violations, the government must prove that the defendant acted “knowingly and willfully” (42 U.S.C. § 1320a-7b(b)). Courts have interpreted “willfully” in different ways:

• Some courts require proof that the defendant knew their actions were illegal.
• Others hold that it is sufficient to show that the defendant intended to engage in wrongful conduct, even if they did not know about the AKS specifically (United States v. Starks, 157 F.3d 833 (11th Cir. 1998); United States v. Davis, 132 F.3d 1092 (5th Cir. 1998)).

Under PPACA (2010) enhancements, ignorance of the law is not a defense (Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 6402(f), 124 Stat. 119 (2010)). A defendant cannot escape liability by claiming they were unaware that their conduct was illegal.

Remuneration Under the AKS

The term “remuneration” is broadly defined to include anything of value. This includes:

• Cash kickbacks
• Gifts or lavish meals
• Excessive compensation
• Above-market rent
• Free services or perks
• Improper consulting agreements

Because of its broad scope, any arrangement where a healthcare provider’s referral decisions might be influenced by compensation or perks is likely considered remuneration under the AKS.

Safe Harbors Under the AKS

The AKS includes “safe harbors”—exceptions that protect legitimate business arrangements from liability.

Statutory Safe Harbors (42 U.S.C. § 1320a-7b(b)(3))

Congress created certain statutory exceptions for:

• Bona fide employment relationships (42 U.S.C. § 1320a-7b(b)(3)(B))
• Properly disclosed discounts (42 U.S.C. § 1320a-7b(b)(3)(A))
• Payments to group purchasing organizations (GPOs) (42 U.S.C. § 1320a-7b(b)(3)(C))

Regulatory Safe Harbors (42 C.F.R. § 1001.952)

The HHS-OIG has created additional safe harbors, including:

• Fair market value office space/equipment rentals (42 C.F.R. § 1001.952(b) & (c))
• Personal services agreements (e.g., consulting, medical directorships) (42 C.F.R. § 1001.952(d))
• Investment interests in large publicly-held healthcare companies (42 C.F.R. § 1001.952(a))
• Legitimate employee salaries (42 C.F.R. § 1001.952(i))
• Local transportation assistance (42 C.F.R. § 1001.952(bb))

To qualify for protection, all conditions of the safe harbor must be met (e.g., payments must be at fair market value, in writing, not tied to referral volume, etc.).

To Induce Referrals: The “One Purpose” Test

Courts overwhelmingly apply the “One Purpose Test”, which holds that:

• If even one purpose of the remuneration is to induce referrals, the AKS is violated.
• This remains true even if there are many other legitimate purposes.

This test was first established in United States v. Greber, 760 F.2d 68 (3d Cir. 1985) and remains the prevailing standard. The “Primary Purpose Test”, which requires that the primary intent be improper, is rarely applied.

Penalties for AKS Violations

Violations of the AKS can result in criminal, civil, and administrative penalties.

Criminal Penalties

• Felony conviction
• Up to 10 years in prison (42 U.S.C. § 1320a-7b(b) (as amended by the 2018 SUPPORT Act))
• Fines of up to $100,000 per violation (as increased under 21st Century Cures Act).

Civil and Administrative Penalties

• Civil Monetary Penalties (CMPs) up to $50,000 per violation (42 U.S.C. § 1320a-7a(a)).
• Treble damages under the False Claims Act (FCA) (31 U.S.C. § 3729).
• Automatic liability under the FCA for claims resulting from an AKS violation (PPACA § 6402(f)).
• Exclusion from federal healthcare programs (42 U.S.C. § 1320a-7(b)).

State-Level Consequences

• Loss of medical license
• Professional discipline by state medical boards
• State Medicaid fraud enforcement actions

Examples of AKS Violations

In United States v. Madison, No. 6:22-CR-00003-JDK (E.D. Tex. Jan. 15, 2025), a hospital CEO’s was convicted of conspiring to violate the AKS, sentenced to 36 months in federal prison and faced False Claims Act liability exceeding $5.3 million.

1. 1) knowingly and willfully entered into agreements with physicians that disguised illegal kickbacks as investment returns, showing intent to induce referrals (United States v. Starks, 157 F.3d 833, 839 (11th Cir. 1998)).
2. Offering, Paying, Soliciting, or Receiving – As CEO, Madison facilitated and authorized payments to referring physicians under sham contracts, effectively paying for referrals in violation of 42 U.S.C. § 1320a-7b(b).
3. Any Remuneration – The payments, structured as “investment distributions” and “management fees,” constituted remuneration under the AKS, as they provided financial benefits in exchange for referrals (42 C.F.R. § 1001.952(d)).
4. To Induce Referrals for Federal Health Program Services – The scheme involved Medicare-reimbursed lab tests, and the payments were contingent on physicians generating referral business, making them unlawful under the One Purpose Test (United States v. Greber, 760 F.2d 68, 72 (3d Cir. 1985)).

Additional examples of violations of the AKS statute are listed below.

1. Physician Kickbacks – A pharmaceutical company offers physicians “consulting fees” to prescribe its drug (criminal violation).
2. Illegal Referral Agreements – A hospital pays above-market rent to a physician group for office space, linked to referral volume (civil violation).
3. Sham Speaker Fees – A device manufacturer pays surgeons to give educational talks, but the talks are never actually conducted (criminal and FCA violation).

Conclusion

The Anti-Kickback Statute is a broad and aggressively enforced law that criminalizes any quid pro quo where referrals are “bought.” While the statute is intentionally broad, safe harbors exist to permit legitimate healthcare transactions. Understanding intent, remuneration, and safe harbors is critical to compliance with the AKS.