The AKS prohibits anyone from knowingly and willfully offering, making, soliciting, or receiving any payment in return for (1) referring an individual to another person or entity for the furnishing of any item or service reimbursed by a federal health care program, or (2) recommending or arranging for the ordering of any service reimbursed by a federal health care program. In other words, soliciting or accepting payments for referrals or for otherwise generating Medicare or Medicaid business is as illegal as offering or making such payments.
Because the AKS is so broad and thus can be read to encompass well-accepted and beneficial health care industry business practices, Congress included a number of exceptions and also directed the Secretary of the Department of Health and Human Services (HHS) to promulgate regulations specifying business arrangements that would be immune from enforcement activities, which are known as “safe harbors.” If a business practice falls squarely within a safe harbor, it is not subject to AKS liability, but failure to comply with each element of a safe harbor does not necessarily render the activity illegal.
Congress established the Medicare and Medicaid programs in 1965. Soon thereafter certain unethical provider practices began to develop. Physicians began profiting from the federal government by making unnecessary patient referrals (in exchange for kickbacks) to particular facilities for medical services reimbursed by the federal health care programs, which resulted in rising costs. Problematic arrangements took various forms, including percentage lease agreements and payment of test interpretation fees to physicians who referred testing without performing the interpretation themselves.
To combat these unethical practices, Congress passed the original version of the AKS in 1972. The statute made the receipt of kickbacks, bribes, or rebates in connection with items or services covered by the Medicare and Medicaid programs a misdemeanor punishable by a fine, imprisonment, or both. In 1977, Congress strengthened the AKS by, among other things, broadening the statutory language to also prohibit the offer or receipt of “any remuneration” to induce a referral, elevating the misdemeanor classification to a felony, and increasing the maximum statutory penalties.
In 1980, Congress revised the AKS’s intent standard to require proof that the defendant acted “knowingly and willfully” when committing acts prohibited by the statute. Congress included this heightened standard out of a concern that “criminal penalties may be imposed under [then] current law to an individual whose conduct, while improper, was inadvertent.”
Congress next amended the AKS in 1987 when it passed the Medicare and Medicaid Patient and Program Protection Act (MMPPPA), which made two important changes to the AKS to address complaints that the 1977 amendments effectively prohibited long-standing industry practices necessary to the day-to-day operations of many providers. First, the MMPPPA granted to the Office of Inspector General (OIG) the authority to exclude from participation in various federal health care programs an individual or entity convicted of an AKS violation. Exclusionary authority was designed to provide a civil remedy alternative to criminal prosecution. Second, the legislation directed HHS to promulgate regulations that created additional exceptions to the AKS, referred to as “safe harbors.” On July 29, 1991, the OIG issued the first in a series of regulations implementing the safe harbors.
In 1996, Congress further amended the AKS through the Health Insurance Portability and Accountability Act (HIPAA). HIPAA made three significant changes to the AKS: (1) extending its reach beyond Medicare and state health care programs to apply to services covered by the “federal health care programs”; (2) adding a new exception to the AKS relating to certain risk-sharing organizations; and (3) enhancing communication between the OIG and the public about the applicability of the AKS to certain transactions. Congress also directed the OIG to develop standards related to the new risk-sharing exception and to solicit proposals for new safe harbors, modifications to existing safe harbors, and fraud alerts regarding inappropriate conduct. Finally, HIPAA required the OIG to establish a procedure whereby providers could request advisory opinions regarding the applicability of the AKS or a safe harbor to a given arrangement.
In 1997, Congress again amended the AKS, this time adding a civil monetary penalty. By adding a civil monetary penalty (and thereby lowering the burden of proof that prosecutors had to meet to impose this civil, as opposed to criminal, sanction), Congress provided prosecutors with an additional tool to combat potential fraud. The new provision established penalties of $50,000 for each act committed in violation of the AKS and damages of up to three times the amount of the prohibited remuneration.
Finally, in 2010, the Patient Protection and Affordable Care Act became law and made a number of changes to the AKS, including “expanding” its intent standard and specifying that violations of the AKS may trigger liability under the False Claims Act.
The OIG has built upon the AKS by adopting new safe harbors and revising the original safe harbors promulgated in 1991. This process began in 1999 when the OIG clarified the existing 1991 safe harbors and added additional safe harbors. The preambles to these rules continue to serve as valuable sources of OIG guidance on its interpretation of the AKS and the safe harbors.