The Three Federal Statutes Used to Target Healthcare Providers

Let me start with a statement of the obvious and a brief overview of federal law. As for the obvious, if the U.S. Department of Justice (DOJ) is asking questions about your practice, you’re having a very bad day. And you need a lawyer.

In the government’s battle against fraud and abuse, there are three statutes with which you should be familiar. The first is the False Claims Act (FCA). The second is the Anti-Kickback Statute or AKS. And the third is the Physician Self-Referral or Stark law. An additional tool sometimes used is the wire fraud statute.

The FCA provides for both civil and criminal penalties. Fraud allegations may arise from AKS or Stark law violations. AKS is a criminal law prohibiting a wide range of “remuneration.” Finally, Stark prohibits self-referrals for many government-funded services.

On that background, let’s look at four recent cases highlighted by DOJ. The first case is a bit unusual in that it’s a guilty verdict from a jury trial. Jose Goyos was part of a scheme that tricked doctors into submitting $67 million in unnecessary genetic testing. Medicare paid over $52 million. He and 20 defendants await sentencing for wire fraud and money laundering. They face up to 30 years in prison.

The next two cases are judgments based on guilty pleas. Lourdes Navarro enabled Matias Clinical Laboratory to perform over $350 million in unnecessary viral testing, even though only COVID testing had been ordered. Navarro pleaded guilty to conspiracy to commit healthcare and wire fraud. She faces up to 20 years in prison.

The next case is David Lu, an owner of two New York state pharmacies. Lu pleaded guilty to billing Medicare for $25 million in unnecessary prescriptions through bribes and kickbacks. In this case, the payments to doctors were in the form of rent and office staff.

The final case involves a settlement with the government arising from a whistleblower claim. In this case, Cardiac Imaging Inc. and its CEO Sam Kancherlapalli agreed to pay more than $85 million to resolve allegations that they paid cardiologists excessive fees. The fees allegedly exceeded fair-market value and covered services not actually provided. Cardiac Imaging and Kancherlapalli were also required to enter into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG).

We can learn several things from these cases.

First, criminal trials continue to be less common than guilty pleas and settlements. Convictions, regardless of trial or plea, may carry a stiff prison sentence. Remember, there’s no parole from federal prison.

Second, some of the schemes involved outright trickery. Providers need to be aware of who they’re dealing with, and to whom they are providing some form of authorization. Ensure that your contracts offer the right to audit contractor billing practices.

Third, if a vendor offers compensation connected to the purchase of its product or services, be very cautious. AKS and Stark are very broad, with carefully circumscribed exceptions. Always make sure your relationship is reduced to a comprehensive writing covering every aspect of the transaction.

Fourth, if the compensation seems to be too good to be true or more generous than expected, there’s probably a catch. That catch may be a violation of AKS or Stark. You need a fair market assessment from a third party.