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Allegations Show Pitfalls of AKS Compliance

The Department of Justice (DOJ) recently announced a plea agreement regarding an alleged $73 million scheme to defraud Medicare that illustrates some of the pitfalls of compliance with the Anti-Kickback Statute (AKS). DOJ alleged that the owners of a clinical laboratory, Panda Conservation Group, LLC, and a telemedicine company, 1523 Holdings LLC, conspired to pay kickbacks in exchange for work arranging telemedicine providers to order genetic testing at Panda’s laboratories. While the parties had an agreement for IT and consultation services, DOJ alleged that this contract was a “sham” to hide the kickback payments and that the telemedicine company abused temporary, pandemic-responsive amendments to telehealth restrictions to refer beneficiaries to the laboratory for expensive and medically unnecessary cancer and cardiovascular genetic testing.

The Anti-Kickback Statute (42 U.S.C. § prohibits a person from knowingly offering, paying, soliciting, or receiving anything of value to induce or reward referrals for services covered by a Federal Healthcare Program. A Federal Healthcare Program is any program that provides health benefits, whether directly or through insurance, which is funded by the United States Government or any State health care program. A violation of the Anti-Kickback statute is a criminal offence and can carry severe penalties, including fines, prison sentences, and potential exclusion from participation in Federal Healthcare Programs in the future.

Since some referrals are necessary to optimize patient care, the Statute provides exceptions called “safe harbors” that permit certain arrangements that follow specific requirements. In the event an arrangement does not meet a safe harbor requirement, the arrangement will be considered on a case-by-case basis. Special care must be taken structure arrangements to comply with the AKS and its safe harbors.

The recent increase in popularity of telehealth services creates new risks for Anti-Kickback Statute compliance. The technology that enables telehealth services is a powerful tool for providers to enhance patient care. However, it also creates risk when the telemedicine company is in a position to refer patients to a provider that also purchases its technology services. Frequently, these arrangements will strive to fit the personal services and management contracts safe harbor or one of the other safe harbors based on fair market value. However, the allegations above show that regulators may look beyond the contractual terms and examine other aspects of the arrangement.  Ultimately, understanding and navigating the Anti-Kickback Statute is a complex, but essential, aspect of healthcare compliance.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters. If you or your healthcare entity has any questions pertaining to the Anti-Kickback Statute or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or

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