In 1972, U.S. Congress passed Federal anti-kickback laws to protect patients from medical referrals based upon the healthcare provider receiving a kickback or financial incentive, rather than on medical necessity. Following the federal government’s lead, states, including Michigan, enacted their own anti-kickback statutes. Michigan has at least five specific statutes which expressly forbid kickbacks. Michigan’s anti-kickback statutes seek to prohibit illegal patient referrals between healthcare providers and entities providing healthcare services for financial reasons (i.e. kickback). Anti-Kickback laws apply to all Michigan providers of healthcare services including, but not limited to, physicians, dentists, pharmacists and pharmacies, nursing homes and hospitals.
In general, kickbacks include the practice whereby a person or business pays someone to find new clients or referrals and/or pays that person a percentage of the increased transactions resulting from those referrals. Michigan’s self-referral laws, similar to federal “Stark Laws,” address situations in which the healthcare provider has a business interest in the facility to which he/she makes referrals.
Below are five Michigan anti-kickback statutes with a brief description of each. You should contact an attorney for detailed information about compliance with anti-kickback laws.
It is a felony to: (1) solicit, offer, or receive a kickback or bribe in connection with the furnishing of goods or services for which payment is or may be made under the Medicaid program; (2) make or receive the payment; or (3) receive a rebate of a fee or charge for referring an individual to another person for the furnishing of the goods and services. Violations are punishable by up to four years in prison, a fine of up to $30,000, or both.
It is a felony to solicit, offer, pay, or receive a kickback or bribe in connection with the furnishing of goods or services for which payment is or may be made by a healthcare corporation or health care insurer. It is also unlawful to receive a rebate of a fee or charge for referring an individual to another person furnishing health care benefits. Violations are punishable by up to four years in prison, a fine of up to $50,000, or both.
A rebate or discount from a drug manufacturer or from a company that licenses or distributes the drugs of a drug manufacturer to a consumer for his or her own use does not violate the Michigan Health Care False Claims Act.
A rebate or discount from a medical supply or device manufacturer or from a company which licenses or distributes medical supplies or devices to a consumer for his or her own use does not violate the Michigan Health Care False Claims Act.
Dividing fees for referral of patients or accepting kickbacks on medical or surgical services, appliances, or medications purchased by or on behalf of patients constitutes unethical business practices which may result in disciplinary proceedings. This provision applies to physicians and other health professionals.
Any physician or surgeon who divides fees with, or promises to pay part of his or her fee to, or pays a commission to any other physician or surgeon or person who consults with or sends patients for treatment or operation, is guilty of a misdemeanor punishable by up to six months in prison or a fine of not more than $750. The first conviction may result in loss of license. A second conviction will result in loss of license.
A person licensed to practice medicine shall not receive a fee or other remuneration from a clinical laboratory or intermediary for submitting specimens from a patient to a clinical laboratory.
Anti-kickback laws regularly affect the daily practices of Michigan’s healthcare professionals. The business of healthcare generates frequent referrals back and forth between providers of goods and services, and sometimes these relationships provide for unlawful financial incentives. All healthcare practitioners should understand whether their inbound and outbound referral patterns are making them susceptible to liability under the anti-kickback laws because the penalties for non-compliance are severe.
Kickbacks take many different forms, some obvious, like providers who accept cash in exchange for referrals. Others are more subtle, such as a hospital giving providers reduced office rent in exchange for the informal agreement to refer patients to the hospital. It is surprisingly easy to unintentionally run afoul of Michigan’s anti-kickback laws.
The FBI and state authorities actively enforce the anti-kickback laws. In 2012, eight individuals, including four Michigan licensed physicians and one Michigan licensed physician’s assistant, were prosecuted for violating the anti-kickback statutes1. These individuals owned and operated medical clinics, outpatient rehabilitation facilities, and home healthcare companies that paid employees and outside healthcare providers for patient referrals.
Even unintentional anti-kickback violations are prosecuted because the statutes do not require willful or knowing conduct. In a 1998 case, the court held that the prosecution does not need to show that the defendant had corrupt intentions in receiving the referral fee but, rather, it is only required to show that the defendant intended to receive a referral fee2.
You are invited to contact the Chapman Law Group if you have questions concerning how to comply with, and how to handle, the consequences of violating these laws. If you have a particularly entrepreneurial healthcare business in Michigan, whereby you are regularly establishing new and cutting-edge payment arrangements, then you should speak with the Chapman Law Group to obtain guidance on how to avoid arrangements that subject you to anti-kick-back laws.
Healthcare practitioners must have a working understanding of the anti-kickback laws, including the types of activities that receive exemptions or “safe harbors.” Safe harbor refers to activities viewed as acceptable practices and depends on the circumstances of the case. For example, the splitting of income by a dental practice organized as a partnership does not constitute fee splitting4.
A knowledgeable healthcare attorney can discuss your practices with you and help you determine if and how you can meet safe harbor provisions. Chapman Law Group can speak with you about safe harbors and any other concerns you have about the anti-kickback law.
Given the severe penalties under Michigan’s anti-kickback laws, healthcare professionals and providers should contact a Michigan health care attorney, like Chapman Law Group, to ensure that their referral relationships are legitimate and do not lead to exposure under the law.
1. Nine Health Care Professionals, Including Five Doctors, Charged in Kickback Scheme, available at: http://www.fbi.gov/detroit/press-releases/2012/nine-health-care-professionals-including-five-doctors-charged-in-kickback-scheme
2. People v. Motor City Hospital and Surgical Supply, Inc., 227 Mich. App. 209
3. SUMMARY OF FRAUD AND ABUSE STATUTES & REGULATIONS MICHIGAN, American Health Lawyers Association, Fraud and Abuse Practice Group.
4. Toole v. Michigan State Board of Dentistry, 306 Mich. 527