DOJ Expands Reach By Prosecuting Kickbacks Involving Private Insurance Payors

August 09, 2022

Healthcare companies may need to be mindful that the federal government has started investigating and prosecuting referral-based arrangements for private insurance claims under the Travel Act and the Eliminating Kickbacks in Recovery Act.

Atlanta, Ga. (August 9, 2022) - Healthcare companies may need to be mindful that the federal government has started investigating and prosecuting referral-based arrangements for private insurance claims under the Travel Act and the Eliminating Kickbacks in Recovery Act (EKRA). While the Anti-Kickback Statute (AKS) has historically been the basis for enforcement actions in the healthcare industry for alleged kickbacks where only federal funds are involved, healthcare companies ought to reassess their referral-based arrangements for private insurance claims under this new trend.

The Travel Act, codified in 18 U.S.C. § 1952, criminalizes the use of any facility in interstate commerce to promote or facilitate any unlawful activity, which includes bribery as defined by state law, with the intent to promote or facilitate any unlawful activity. Hence, federal criminal investigations that are commenced under the Travel Act would construe kickbacks in the healthcare industry as state law bribery and criminalize such behavior without the safe harbors offered in AKS.

Most notably, in 2021, the U.S. Department of Justice used the Travel Act to convict and sentence surgeons and other healthcare professionals in United States v. Beauchamp in the Northern District of Texas because that the defendants executed a scheme to offer kickbacks to physicians who steered their commercially insured patients to their hospital, Forest Park Medical Center. The matter is currently on appeal before the U.S. Court of Appeals for the Fifth Circuit, with oral arguments having been heard on August 1, 2022.

Recently, in a District of Massachusetts case, an unsealed affidavit in support of an application for a federal search warrant revealed that the federal government may be investigating claims that referral-based payments for commercial insurance patients may be construed as bribes, in violation of Texas and Massachusetts anti-bribery laws. The case initially began when a whistleblower alleged SpineFrontier paid surgeons for product evaluations to induce those surgeons to use their products and the federal government intervened. Later, DOJ indicted SpineFrontier and some of its physicians on alleged violations of AKS, but additionally began a separate investigation into whether SpineFrontier engaged in another scheme where an attorney would refer his clients to certain physicians using SpineFrontier devices in return for a percentage of the patient’s payment for surgery.

EKRA, codified in 18 U.S.C. § 220 and passed in 2018 as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act, prohibits the soliciting, receiving, paying, or offering of any renumeration – including any kickback, bribe, or rebate – to induce a referral to a recovery home, clinical treatment facility, or laboratory, and covers both commercial and government payors. The government’s use of EKRA has been limited thus far, focusing on brokers who pay kickbacks to patients to recruit them to substance abuse facilities, recovery homes, or laboratories where they are subjected to unnecessary services. This focus, however, is expected to broaden as the U.S. Department of Health and Human Services has not yet exercised its authority to institute any regulatory safe harbors.

Healthcare companies should consider ways to assess and reduce the risk that their financial arrangements may be viewed as inducements for healthcare items or services. One way would be to conduct an internal assessment on whether healthcare items or services are in fact provided at fair market value, and ensure that the fair market value standard is met. Another way would be to ensure relevant employees receive proper training into why and how financial arrangements cannot take into account the volume or value of any referrals or business. A clear policy in this area also should be considered. 

The attorneys of Lewis Brisbois’ Healthcare Regulatory & Compliance Practice and its Government Investigations & White Collar Criminal Defense Practice, which includes former federal prosecutors, can help advise healthcare companies and reduce the risk that financial arrangements may be alleged to involve inducements to refer or recommend healthcare items and services. For more information on this topic, contact the author or editor of this alert.

Author:

Steven H. Lee, Partner and Vice-Chair of the Government Investigations & White Collar Defense Practice

Editor:

Eric J. Neiman, Managing Partner - Portland, OR