It is becoming more common for schools to partner with healthcare entities and/or individual providers so that students can be treated at the school or directly referred to a provider for little to no cost to the students. These school-based clinics and/or providers partner with the schools to provide primary medical care, mental/behavioral health care, dental/oral health care, health education and promotion, substance abuse counseling, case management, and/or nutrition education to students. Overall, these partnerships are well intended and have a positive impact on student’s health and academic achievement. However, schools must ensure that they are properly entering into these partnerships with healthcare entities. A myriad of legal issues can present themselves when a school decides to partner with a healthcare entity, including the Anti-Kickback Statute (“AKS”). Schools should be aware of the AKS requirements, penalties, and any applicable exceptions when entering into an agreement with a healthcare entity or provider.
What is the Anti-Kickback Statute (“AKS”)?
The AKS is set forth in 42 U.S.C. § 1320a-7b(b), and provides for criminal penalties for acts involving Federal health care programs. The law is designed to discourage referrals of patients that encourages “overutilization” of the Medicaid and Medicare programs. The statute states in part:
Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in case or in kind to any person to induce such person— (A) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or (B) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than ten years, or both.
In addition to the criminal penalties, a person or entity who is found to have violated the AKS may also be subject civil monetary penalties for violation of the FCA and exclusion from participation in the Medicare and Medicaid programs for a knowing and willful violation of the statute pursuant to 42 U.S.C. 1320a – 7(b)(7).
The Anti-Kickback statute is extremely broad and remuneration can include almost anything of value. This includes kickbacks, rebates, above/below market rent or lease payments, furnishing of supplies or equipment for free or above market value, waivers of payments due, and above or below market credit arrangements. The AKS is an intent based statute and many courts, including the 7th Circuit, have interpreted the AKS broadly and adopted the “one purposes” test; thus, a payment is illegal under the AKS where one purpose of the payment is to induce referrals. U.S. v. Borrasi, 639 F.3d 774 (7th Cir. 2011).
Are there any “exceptions” to the AKS?
Due to the AKS’ broad application, several “safe harbors” were promulgated to specify that various payments and business practices would not be subject to liability under AKS even though they would be capable of inducing referrals of business. More specifically, these safe harbors were promulgated “to limit the reach of the [AKS] statute somewhat by permitting certain non-abusive arrangements, while encouraging beneficial or innocuous arrangements.” There are several safe-harbors that could protect schools and the healthcare entities/providers they contract with. Each safe-harbor has its own requirement and applicability could only be determined on a case-by-case basis. However, the following are examples of the safe-harbors that could apply to the agreements schools may enter into:
1. Space rental. Often times, a school will rent out a space in its building where healthcare services could be provided to students. The rental could be at little or no cost to the provider. In order for the space rental safe-harbor to apply, schools would have to ensure they meet certain requirements. Per 42 C.F.R. § 1001.952(b), remuneration does not include any payment made by a lessee to a lessor for the use of premises, as long as all of the following six standards are met—
- The lease agreement is set out in writing and signed by the parties.
- The lease covers all of the premises leased between the parties for the term of the lease and specifies the premises covered by the lease.
- If the lease is intended to provide the lessee with access to the premises for periodic intervals of time, rather than on a full-time basis for the term of the lease, the lease specifies exactly the schedule of such intervals, their precise length, and the exact rent for such intervals.
- The term of the lease is for not less than one year.
- The aggregate rental charge is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.
- The aggregate space rented does not exceed that which is reasonably necessary to accomplish the commercially reasonable business purpose of the rental.
2. Federally Qualified Health Centers (“health center”). Schools often partner with health centers to provide students with care. This is an excellent option for schools because health centers offer services to low-income individuals, accept Medicaid, and generally do not turn individuals away for their inability to pay. Per 42 C.F.R. § 1001.952(w), remuneration does not include the transfer of any goods, items, services, or donations or loans from any person or entity to a health center, as long as the following standards are met:
- The transfer is made pursuant to a contract, lease, grant, loan, or other agreement that is in writing, specifies the amount of goods, items, services, or donations or loans to be provided by the person or entity, and is signed by both parties;
- The goods, items, services, donations, or loans are medical or clinical in nature or relate directly to services provided by the health center as part of the scope of the health center’s Section 330 grant;
- The health center reasonably expects the arrangement to contribute meaningfully to the health center’s ability to maintain or increase the availability, or enhance the quality, of services provided to the population served by the health center, and the health center documents the basis for the reasonable expectation prior to entering the arrangement;
- At reasonable intervals, but at least annually, the health center must re- evaluate the arrangement to ensure that the arrangement is expected to continue to satisfy the standard set forth in the standard above, and must document the re-evaluation contemporaneously;
- The individual or entity does not require the health center (or its affiliated health care professionals) to refer patients to a particular individual or entity, or restrict the health center (or its affiliated health care professionals) from referring patients to any individual or entity;
- Individuals and entities that offer to furnish goods, items, or services without charge or at a reduced charge to the health center must furnish such goods, items, or services to all patients from the health center who clinically qualify for the goods, items, or services, regardless of the patient’s payor status or ability to pay;
- The agreement must not restrict the health center’s ability to enter into agreements with other providers or suppliers of comparable goods, items, or services, or with other lenders or donors;
- The health center must provide effective notification to patients of their freedom to choose any willing provider or supplier. Additionally, the health center must disclose the existence of any transfer made pursuant to a contract, lease, grant, loan, or other agreement to a patient who inquires; and
- The health center may elect to require that an individual or entity charge a referred health center patient the same rate it charges other similarly situated patients not referred by the health center or that the individual or entity charge a referred health center patient a reduced rate.
- The health center may, at its option, elect to require that an individual or entity charge a referred health center patient the same rate it charges other similarly situated patients not referred by the health center or that the individual or entity charge a referred health center patient a reduced rate (where the discount applies to the total charge and not just to the cost-sharing portion owed by an insured patient).
How can schools ensure compliance with the AKS?
Schools must evaluate every potential partnership with a healthcare entity/provider to determine whether there are potential AKS violations. Schools should always review the agreements to ensure certain language is included which protects both parties. It is important to lay out the intent of the parties, ensure that the healthcare entity/provider is going to comply with all fraud and abuse laws, and include some very strong indemnity and release of liability language in the agreement. Certain safe-harbors require specific language to be included in the agreements; however, regardless of whether a safe-harbor requires certain language in the agreement, schools should ensure that specific provisions are included in the agreements. The following are a few examples of provisions that should be included in agreements:
- Nothing in this agreement requires, is intended to require, or provides payment or benefit of any kind (directly or indirectly) for the referral of individuals or business to either party. Neither party shall track such referrals for purposes relating to setting the compensations of their professionals or influencing their choice.
- The Parties agree and understand that neither Party is offering or soliciting remuneration to/from the other Party for patient referrals. Nothing in this Agreement restricts the ability of patients to choose their own provider and each Provider shall inform its patients of their freedom to choose any willing provider.
- Each Party agrees that it will at all times operate in compliance with all federal, state, and local laws, rules, and regulations relating to its activities hereunder, including but not limited to instructions issued by the Centers for Medicare and Medicaid Services, the False Claims Act (FCA), the Anti-Kickback Statute (AKS), the Physician Self-Referral Law (Stark law), the Exclusion Authorities, and the Civil Monetary Penalties Law (CMPL).
Even where the school is certain that the partnership with a health care provider is solely to help students, the school must ensure that it is protected. Allegations of AKS violations are costly and time-consuming to defend. A written agreement, approved by a school attorney, always should be in place for these affiliations. For more information about this topic, you are welcome to contact any Lewis Kappes school attorney or the Lewis Kappes health care attorneys: Thomas R. Ruge & Alessa Quiñones-Ortiz.
*Disclaimer: This article is made available for educational purposes only and is not intended as legal advice. Further, the example contract provisions are not intended to be the recommended provisions for all agreements.
Disclaimer: This article is made available for educational purposes only and is not intended as legal advice.