Safe Harbor, Safe Passage Under the Anti-Kickback Statute
November 11, 2016 |For providers contemplating a business arrangement with a potential referral source for items or services reimbursable under a federal health care program, fitting that arrangement within a recognized safe harbor under the Anti-Kickback Statute (“AKS”) is the “holy grail,” for it ensures that the arrangement will be immunized against civil and criminal enforcement actions. And while such absolute protection requires that all elements of the safe harbor be fully satisfied, a review of Advisory Opinions issued by the Department of Health and Human Services, Office of Inspector General (“OIG”) reveals many examples of arrangements not falling “squarely” within a particular safe harbor that nonetheless avoided administrative sanctions because some or most elements of a safe harbor were satisfied and/or other characteristics of the transaction persuaded OIG that the arrangement posed a minimal risk of fraud and abuse.[1] Those are applied examples of the common refrain, often repeated by OIG and the courts, that failure to comply with a safe harbor provision does not mean that an arrangement is automatically unlawful, that compliance with safe harbors is “voluntary” and that arrangements not satisfying a safe harbor must be analyzed on a case-by-case basis to determine whether the AKS actually has been violated.[2]
True enough, but one must be careful not to fall into the trap of believing that this basic and non-controversial principle necessarily means that AKS safe harbors are always just a starting point for a more granular AKS analysis. Indeed, for some business arrangements, proceeding in such a manner risks drawing attention away from serious compliance difficulties that should be driving the analysis from the outset. For example, if a health care entity is contemplating a joint venture with a physician practice group and it is clear that one purpose of the remuneration being exchanged is to capture the patient referrals of the practice group for the overall economic benefit of the joint venture, then the AKS is already directly implicated by the transaction at its inception. In such a scenario, consideration of the AKS safe harbors is not so much an analytical starting point as it is a last ditch effort to save a transaction that will otherwise constitute a criminal violation of the statute. Similarly, it would be a serious mistake, when faced with a proposed transaction that involves an exchange of remuneration to induce referrals, to rationalize or justify the arrangement by reference to concepts like “fair market value” or “commercial reasonableness” that often appear as elements of regulatory safe harbors.[3] Those concepts cannot salvage an illicit arrangement that does not otherwise satisfy all the elements of any recognized safe harbor. Put another way, paying “fair market value” for a referral stream is not protected conduct under the AKS, and while some might view such a payment as “commercially reasonable,” it is most assuredly not lawful.
OIG has sought to clarify how the safe harbors should be interpreted and has emphasized that the legality of an arrangement must be analyzed against the “proscriptions of the statute”:
The issue of the scope and effect of the safe harbors is important and often misunderstood. We addressed this issue in our preamble to the 1991 final rule:
This (safe harbor) regulation does not expand the scope of activities that the statute prohibits. The statute itself describes the scope of illegal activities. The legality of a particular business arrangement must be determined by comparing the particular facts to the proscriptions of the statute.
The failure to comply with a safe harbor can mean one of three things. First * * * it may mean that the arrangement does not fall within the ambit of the statute. In other words, the arrangement is not intended to induce the referral of business reimbursable under (a Federal health care program); so there is no reason to comply with the safe harbor standards, and no risk of prosecution.
Second, at the other end of the spectrum, the arrangement could be a clear statutory violation and also not qualify for safe harbor protection. In that case, assuming the arrangement is obviously abusive, prosecution would be very likely.
Third, the arrangement may violate the statute in a less serious manner, although not be in compliance with a safe harbor provision. Here there is no way to predict the degree of risk. Rather, the degree of risk depends on an evaluation of the many factors which are part of the decision-making process regarding case selection for investigation and prosecution. Certainly, in many (but not necessarily all) instances, prosecutorial discretion would be exercised not to pursue cases where the participants appear to have acted in a genuine good-faith attempt to comply with the terms of a safe harbor, but for reasons beyond their control are not in compliance with the terms of the safe harbor. In other instances, there may not even be an applicable safe harbor, but the arrangement may appear innocuous. But in other instances, we will want to take appropriate action. . . .[4]
In order to avoid misunderstandings, it is best to begin any AKS analysis by determining, in the first instance, whether the statute is even implicated. Does the arrangement involve an exchange of remuneration with a referral source? Are any of those referrals for items or services reimbursable by a federal health care program? If the answer to these questions is “no,” then there is no point in proceeding further, as the AKS is not implicated. If the answer to both questions is “yes,” then the statute is potentially implicated, and it makes sense to examine whether the arrangement under consideration fits within any recognized safe harbor. If no safe harbor is available, or the parties cannot satisfy all elements of any safe harbor, the arrangement will be unlawful if the intent and purpose of the transaction is to induce referrals. That said, the actual intention of the parties is frequently ambiguous, and even when an arrangement does not satisfy a safe harbor, it may be possible to mitigate the compliance risk associated with the transaction by adopting policies and controls designed to reassure a future regulator that there is no actual intention to induce referrals and that the risk of abuse is otherwise minimal.[5]
In the final analysis, the safest course when analyzing an arrangement under the AKS is to start by honestly evaluating the elements of the transaction against the basic statutory proscriptions of the AKS, and then, if appropriate, to examine whether any safe harbor protections exist that might apply to insulate the transaction from liability. If the transaction implicates the statute and does not qualify for safe harbor protection, then the task quickly becomes an exercise in risk assessment and management in deciding whether the nature of the proposed arrangement poses more than a minimal risk of fraud and abuse.
