Health Care Fraud and Abuse Laws Covering Medicare and Medicaid: An Overview

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

A number of federal statutes address fraud and abuse in federally funded health care programs,
including Medicare and Medicaid. These statutes include the False Claims Act, the anti-kickback
statute, the Stark law, as well as additional program-related penalties and exclusions. This report
provides a brief overview of these laws, including examples of prohibited conduct and penalties
for violation.

Basic Civil and Criminal Penalties and Exclusions.........................................................................1
The Anti-Kickback Statute..............................................................................................................2
Stark Law: Physician Self-Referrals................................................................................................3
False Claims Act..............................................................................................................................5
Author Contact Information............................................................................................................6

he issue of health care fraud and abuse¹ has attracted a lot of attention in recent years,
primarily due to the fact that financial losses attributed to it are estimated to be billions of
dollars each year. Based on the fact that the Medicare and Medicaid programs make up the T

largest single purchaser of health care in the world, and over 20% of all U.S. federal government
spending, it is not surprising that these federal health programs have been considered prime ²
targets for fraudulent activity.
The government has an array of statutes that it may use to combat health care fraud. This report
provides a brief overview of selected federal statutes, including program-related civil and
criminal penalties, the anti-kickback statute, the Stark law, and the False Claims Act, that may be ³
used to address fraud and abuse in federal health care programs.

Federal penalties for fraudulent activities in health care include civil and criminal penalties as ⁴
well as permissive and mandatory exclusions from federal health care programs. The basic
Medicare and Medicaid program-related anti-fraud provisions are generally found in Title XI of
the Social Security Act, 42 U.S.C. §§ 1320a-7 et seq.
Under Section 1128A of the Social Security Act (42 U.S.C. § 1320a-7a), the Office of the
Inspector General at the Department of Health and Human Services (OIG) is authorized to
impose civil penalties on any person, including an organization, agency, or other entity, that
knowingly presents or causes to be presented to a federal or state employee or agent certain false ⁵
or fraudulent claims. For example, penalties apply to services that were not provided as claimed,
or claims that were part of a pattern of medical or other items or services that a person knows or ⁶
should know are not medically necessary. In addition, certain payments to physicians to reduce

¹^H^e^a^{lth c}^a^r^e^“^f^r^a^ud”^ha^s^be^eⁿ^de^s^c^rⁱ^be^{d a}^s^aⁿⁱⁿ^te^nti^ona^l^a^tte^m^p^{t to w}^r^ong^f^u^ll^y^c^o^lle^c^t^m^oney^r^e^la^ting^{to m}^e^dic^a^l
^servi^c^e^s^,^w^hⁱ^l^e^“ab^u^s^{e” h}^a^{s b}^een^d^e^scri^b^e^d^{as act}ⁱ^oⁿ^s^w^hⁱ^c^h^{are i}ⁿ^coⁿ^sⁱ^s^t^eⁿ^t^wⁱ^t^h^accep^t^a^b^l^{e b}^u^sⁱⁿ^{ess an}^d^m^e^dⁱ^cal
^p^r^actⁱ^ces.^Ch^{arges o}^f^ab^u^s^{e cu}^st^o^m^ari^l^y^l^ead^t^o^ci^vi^l^suⁱ^t^s^,^w^hⁱ^l^e^accu^satⁱ^oⁿ^s^o^f^f^r^au^d^can^resu^l^tⁱⁿ^ei^t^h^{er ci}^vi^l^o^r
^cri^mⁱⁿ^al^actⁱ^oⁿ^.
²^Ma^{tt A}^lts^hule^r^{, J}^.^K^y^de^{n C}^r^e^e^k^pa^um^a^{nd J}ⁱ^m^Fa^ng^,^H^e^{alth C}^a^r^e^Fr^aud^{, 4}⁵^A^m^{. Cri}^m^{. L}^.^Re^v^.⁶⁰⁷⁽²⁰⁰⁸⁾^(c^iting^A
^C^l^os^e^r^L^ook^{: I}ⁿ^s^p^e^c^t^or^s^G^e^ne^r^a^{l A}^ddr^e^s^s^Wa^s^t^e^,^Fr^a^{ud, A}^bus^eⁱⁿ^Fe^de^r^a^{l Ma}^nda^t^o^r^y^P^r^og^r^a^m^s^{: H}^e^a^r^ing^B^e^f^o^r^e^the^th
^H^ous^e^C^o^m^m^{. on B}^udg^e^t^{, 1}⁰⁸^C^ong^{. 8}²⁽²⁰⁰³⁾⁽^t^e^s^tim^ony^o^f^D^a^r^a^C^o^r^rⁱ^g^a^{n, A}^c^ting^P^rⁱⁿ^cⁱ^pa^{l D}^e^p^u^ty^Iⁿ^s^p^e^c^t^or
^G^e^ne^r^a^{l, D}^e^pa^r^t^m^e^{nt of}^H^e^a^{lth a}ⁿ^{d H}^u^m^a^{n Se}^r^v^ic^e^s⁾^.
³^T^h^is^r^e^por^t^only^a^ddr^e^s^s^e^s^s^o^m^e^of^the^m^o^r^e^c^o^m^m^only^inv^o^k^e^{d s}^t^a^t^ute^s^us^e^d^t^o^a^d^dr^e^s^s^f^r^a^{ud a}^{nd a}^bus^eⁱⁿ^f^e^de^r^a^l
^h^eal^t^h^{care p}^r^o^g^ram^s^.^It^d^o^e^{s no}^t^dⁱ^scu^{ss ever}^y^st^at^u^t^{e t}^h^at^m^a^y^b^eⁱⁿ^vo^kedⁱⁿ^coⁿⁿ^ectⁱ^o^{n w}ⁱ^t^h^h^eal^t^h^{care f}^r^au^d^o^r
^ab^u^s^{e cases.}^Itⁱ^s^al^soⁱ^m^p^o^r^t^aⁿ^t^t^o^no^t^e^t^h^at^m^aⁿ^y^st^at^{es h}^a^v^e^en^ac^t^e^d^f^r^au^d^an^{d ab}^u^s^{e l}^e^gi^sl^atⁱ^oⁿ^.^T^hⁱ^s^rep^o^r^t^do^{es no}^t
^ad^d^r^{ess st}^at^{e l}^a^w^.
⁴^{42 U}^.^S.C^.^§¹³^20a^-^7b(^b)^{. “}^F^e^d^e^r^a^l^he^a^{lth c}^a^r^e^pr^og^r^a^m^”^is^de^fⁱ^ne^{d a}^s⁽¹⁾^aⁿ^y^plaⁿ^or^pr^og^r^a^m^tha^t^pr^ov^ide^s^he^a^lth
^be^ne^f^its^{, w}^h^e^t^he^r^dir^e^c^tly^{, thr}^oug^{h ins}^u^r^a^nc^e^,^or^ot^he^r^w^is^e^,^w^h^ic^{h i}^s^f^unde^d^dir^e^c^tly^{, in w}^hole^orⁱⁿ^p^a^r^t^{, by}^the^Uⁿ^ite^d
^S^t^at^{es G}^o^vern^m^eⁿ^t^[ⁿ^otⁱⁿ^cl^u^dⁱⁿ^g^h^eal^t^hⁱⁿ^su^ran^ce^p^r^o^vⁱ^d^{ed t}^o^f^e^d^e^ral^go^vern^men^t^em^p^l^o^y^ee^s]^o^r⁽²⁾^an^y^st^at^{e h}^eal^t^h
^c^a^r^e^pr^og^r^a^m^,^a^s^de^fⁱ^ne^{d in s}^e^c^tio^{n 1}¹²⁸⁽^h⁾^[⁴^{2 U}^.^S.C^.^§¹³²⁰^a^-⁷⁽^h⁾^]^.⁴²^U^.^S.C^.^§¹³²⁰^a^-^7b(^f⁾^{. Fe}^de^r^a^{l he}^a^{lth c}^a^r^e
^pr^og^r^a^m^s^inc^l^ude^Me^dic^a^r^e^a^nd^Me^dic^aⁱ^d.
⁵^Civ^{il pe}^na^ltie^s^do^no^{t a}^p^p^l^y^{to be}^ne^fⁱ^cⁱ^a^r^ie^s^unde^{r this}^prov^is^io^{n. U}^nde^{r 4}²^U^.^S.C.^§¹³^20a^-7a⁽ⁱ⁾⁽⁵^),^a^be^ne^fⁱ^cⁱ^a^r^y^is
^d^e^fⁱⁿ^e^d^{as an}ⁱⁿ^dⁱ^vi^du^al^w^h^oⁱ^s^elⁱ^gⁱ^b^l^e^t^o^recei^{ve i}^t^e^m^s^o^r^servi^c^es^f^o^{r w}^hⁱ^c^h^p^a^ymen^t^ma^y^b^e^m^a^d^e^unde^r^a^f^e^de^r^a^l
^he^a^{lth c}^a^r^e^pr^og^r^a^m^,^{but e}^x^c^l^ude^s^aⁿ^y^pr^ov^ide^r^s^,^s^u^p^p^lie^r^s^,^or^pr^a^c^t^itione^r^s^.^H^o^w^e^v^e^r^,^it^m^a^y^be^note^d^tha^t^be^ne^fⁱ^cⁱ^a^r^ie^s
^{still m}^a^y^be^subje^c^t^{to c}^r^im^ina^l^pe^na^ltie^{s un}^de^{r 4}²^U.^S.C.¹³^20a^-7^b.
⁶^Se^v^e^ra^{l othe}^{r ty}^pe^{s of}^prohi^bite^d^c^ond^uc^{t su}^bje^c^t^to^cⁱ^v^{il pe}^na^ltie^s^a^r^e^spe^cⁱ^fⁱ^e^d^by^the^sta^t^ute^.^Se^e⁴²^U.S.C^.^§¹³²⁰^a^-
⁷^a^(a)-(b^).

or limit services are also prohibited. This section provides for monetary penalties of up to
$10,000 for each item or service claimed, up to $50,000 under certain additional circumstances,
as well as treble damages.
Section 1128B of the Social Security Act (42 U.S.C. § 1320a-7b) provides for criminal penalties
involving federal health care programs. Under this section, certain false statements and
representations, made knowingly and willfully, are criminal offenses. For example, it is unlawful
to make or cause to be made false statements or representations in either applying for benefits or
payments, or determining rights to benefits or payments under a federal health care program. In
addition, persons who conceal any event affecting an individual’s right to receive a benefit or
payment with the intent to either fraudulently receive the benefit or payment (in an amount or
quantity greater than that which is due), or convert a benefit or payment to use other than for the
use or benefit of the person for which it was intended may be criminally liable. Persons who have
violated the statute and have furnished an item or service under which payment could be made
under a federal health program may be guilty of a felony, punishable by a fine of up to $25,000,
up to five years’ imprisonment, or both. Other persons involved in connection with the provision
of false information to a federal health program may be guilty of a misdemeanor and may be ⁷
fined up to $10,000 and imprisoned for up to one year.
One of the most severe sanctions available under the Social Security Act stems from the authority ⁸
to exclude individuals and entities from participation in federal health care programs. Under
Section 1128 of the Social Security Act (42 U.S.C. § 1320-7), exclusions from federal health
programs are mandatory under certain circumstances, and “permissive” in others (i.e., OIG has
discretion in whether to exclude an entity or individual). Exclusion is mandatory for those
convicted of certain offenses, including (1) a criminal offense related to the delivery of an item or
service under Medicare, Medicaid, or a state health care program; (2) a criminal offense relating
to neglect or abuse of patients in connection with the delivery of a health care item or service; or
(3) a felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a
controlled substance. OIG has “permissive” authority to exclude an entity or an individual from a
federal health program under numerous circumstances, including conviction of certain
misdemeanors relating to fraud, theft, embezzlement, breach of fiduciary duty or other financial
misconduct; a conviction based on an interference with or obstruction of an investigation into a
criminal offense; and revocation or suspension of a health care practitioner’s license for reasons
bearing on the individual’s or entity’s professional competence, professional performance, or ⁹
financial integrity.

One important provision that provides for criminal penalties under Section 1128B of the Social ¹⁰
Security Act is the federal anti-kickback statute. Under this statute, it is a felony for a person to

⁷^{42 U}^.^S.C^.^§¹³^20a^-^7b(^a⁾⁽⁶⁾^.
⁸^It^h^a^{s b}^{een st}^at^ed^t^h^at^excl^u^sⁱ^oⁿ^f^r^o^m^f^e^d^e^ral^h^eal^t^h^{care p}^r^o^g^ram^s^can^b^e^{a “f}ⁱⁿ^an^ci^al^d^eat^h^sen^t^en^ce^{” f}^o^{r t}^h^o^s^{e i}ⁿ^t^h^e
^he^a^{lth c}^a^r^eⁱⁿ^dus^tr^y^w^{ho de}^pe^nd^{on t}^h^e^s^e^pr^og^r^a^m^s^f^o^r^busⁱⁿ^e^s^s^.^H^EA^L^T^H^C^AR^E^F^R^A^{UD A}^ND^A^BU^S^E^:^P^RA^CT^I^C^AL
^P^ER^SPEC^T^IV^ES^{, 32 (}^L^inda^B^a^um^a^{nn e}^d^.²⁰⁰²⁾^.
⁹^Se^e^{42 U}^.^S.C^.^§¹³^20-^7a⁽^b⁾^f^o^r^a^dditi^ona^l^cⁱ^r^c^um^s^t^aⁿ^c^e^s^unde^r^w^h^ic^{h O}^I^G^ha^s^pe^r^m^issⁱ^v^e^a^u^thor^ity^{to e}^x^c^l^ude
^indivⁱ^d^u^a^l^{s a}ⁿ^{d o}^t^he^{r e}ⁿ^t^itie^{s f}^r^om^a^f^e^de^ra^{l he}^a^{lth c}^a^r^e^prog^ra^m^.
¹⁰^{42 U}^.^S.C^.^§¹³^20a^-^7b(^b)^.

knowingly and willfully offer, pay, solicit, or receive anything of value (i.e., “remuneration”),
directly or indirectly, overtly or covertly, in cash or in kind, in return for a referral or to induce ¹¹
generation of business reimbursable under a federal health care program. The statute prohibits
both the offer or payment of remuneration for patient referrals, as well as the offer or payment of
anything of value in return for purchasing, leasing, ordering, or arranging for, or recommending
the purchase, lease, or ordering of any item or service that is reimbursable by a federal health care
program. Persons found guilty of violating the anti-kickback statute may be subject to a fine of up
to $25,000, imprisonment of up to five years, and exclusion from participation in federal health
care programs for up to one year.
There are certain statutory exceptions to the anti-kickback statute. Under one exception,
“remuneration” does not include a discount or other reduction in price obtained by a provider of
services or other entity if the reduction in price is properly disclosed and reflected in the costs ¹²
claimed or charges made by the provider or entity under a federal health care program. Another
exception includes, under certain circumstances, amounts paid by a vendor of goods or services to
a person authorized to act as a purchasing agent for a group of individuals that furnish services
reimbursable by a federal health program. In addition to the exceptions, the Department of Health
and Human Services’ Office of Inspector General (OIG) has promulgated regulations that contain
several “safe harbors” for common business arrangements, under which the anti-kickback ¹³
provision should not be violated. Safe harbors listed by regulation include certain types of
investment interests, personal services and management contracts, referral services, and space
rental or equipment rental arrangements. OIG has indicated that the safe harbor provisions are not
indicative of the only acceptable business arrangements, and that business arrangements that do ¹⁴
not comply with a safe harbor are not necessarily considered “suspect.”

Limitations on physician self-referrals were enacted into law in 1989 under what is commonly ¹⁵
referred to as the “Stark law.” The Stark law, as amended, and its implementing regulations ¹⁶
prohibit certain physician referrals for designated health services (DHS) that may be paid for by

¹¹^Co^u^r^t^s^h^a^{ve exa}^mⁱⁿ^ed^w^h^at^“^kⁿ^o^wⁱⁿ^gl^y^an^d^wⁱ^l^l^f^u^l^l^y^”^m^ean^s^wⁱ^t^h^regard^t^o^t^h^{e an}^tⁱ^-^ki^ckb^{ack st}^at^u^t^{e an}^d^h^a^ve
^reach^ed^var^yⁱⁿ^{g co}ⁿ^c^l^u^si^oⁿ^s^.^F^o^r^exa^m^p^l^e,^t^h^{e Ni}ⁿ^t^h^Cⁱ^rcuⁱ^t^h^a^{s f}^ound^tha^t^“^k^now^ing^l^y^a^{nd w}^illf^ull^y^”^m^e^aⁿ^s^tha^t^the
^g^o^v^e^rⁿ^m^e^{nt m}^u^s^t^pr^ov^e^tha^t^de^f^e^nda^nts⁽¹⁾^kⁿ^e^w^theⁱ^r^c^oⁿ^duc^t^w^a^s^unla^w^f^u^{l (}ⁱ^.e^{., a}^vⁱ^ola^tioⁿ^of^the^aⁿ^ti-^kⁱ^c^k^ba^c^k
^st^at^u^t^{e) an}^d⁽²^{) st}ⁱ^l^l^en^gagedⁱⁿ^t^h^{e co}ⁿ^d^u^c^t^wⁱ^t^h^t^h^{e “sp}^eci^fⁱ^{c i}ⁿ^t^e^nt^{” t}^o^dⁱ^so^b^e^y^t^h^{e l}^a^w^.^H^anle^s^te^r^N^e^tw^or^k^v^.^Sh^ala^l^a^th
^{51 F.3}^d^a^t¹⁴⁰⁰⁽⁹^Cⁱ^r^.¹⁹⁹⁵⁾^.^Iⁿ^Uⁿ^ite^d^St^ate^s^v^.^St^ar^k^s^{, the}^E^l^e^v^eⁿ^{th C}ⁱ^rc^{uit f}^o^uⁿ^d^tha^t^the^“^k^now^ing^l^y^a^nd
^w^ill^f^u^lly^”^s^t^a^nda^r^d^w^a^s^m^e^{t i}^f^de^f^e^nda^nts^kⁿ^e^w^theⁱ^r^c^oⁿ^duc^t^w^a^s^ge^ne^r^a^ll^y^unla^w^f^u^{l, r}^e^g^a^r^d^le^s^s^of^w^h^e^t^he^r^t^h^e^th
^d^e^f^eⁿ^d^aⁿ^t^{s kn}^ew^t^h^e^y^w^e^re^vi^o^l^atⁱⁿ^{g t}^h^{e an}^tⁱ^-ki^c^kb^{ack st}^at^u^t^e.^Uⁿ^ite^{d St}^ate^s^v^.^St^ar^k^s^,¹^{57 F.3}^d⁸³^{3 (}¹¹^Cⁱ^r^.¹⁹⁹⁸⁾^.
¹²^Se^e^{42 U}^.^S.C.^§¹³^20a^-7^b(^{b)(3) f}^o^{r a}^d^d^itio^na^{l e}^x^c^e^p^tio^{ns to}^the^aⁿ^tⁱ^-k^ic^k^b^a^c^k^sta^t^ute^.
¹³^S^{ee 4}²^C^.^F^.^R.^§¹⁰⁰¹^.⁹⁵²^f^o^{r t}^h^e^{safe h}^a^rb^o^r^p^r^o^vⁱ^sⁱ^oⁿ^s^.^F^o^{r a}^dⁱ^scu^ssi^oⁿ^o^f^each^o^f^t^h^{e saf}^e^h^a^rb^o^r^s,^{see Dan}
^M^c^G^uⁱ^r^{e an}^d^M^{ac S}^c^h^eⁱ^d^er,^H^EA^LT^H^C^AR^E^F^RA^UD^{, 44 A}^m^{. C}^rⁱ^m^{. L}^.^R^e^v^.^{633 (}²⁰⁰⁷⁾^.
¹⁴⁶⁴^Fe^{d. R}^e^g^.^63,⁵¹^8,⁶³^,5^{21 (}^N^o^v^.^19,¹⁹⁹⁹⁾^.
¹⁵^T^h^{e S}^t^{ark l}^a^w^,^cr^eat^ed^{as S}^ectⁱ^o^{n 1}⁸⁷⁷^o^f^t^h^{e S}^o^ci^al^S^ecu^ri^t^y^Act^an^d^codⁱ^fⁱ^ed^at⁴²^U.^S^.^C.^§¹³⁹⁵ⁿⁿ^,^w^a^{s creat}^ed^b^y
^the^Om^{nibus Bu}^dg^e^t^Re^c^onc^ilia^ti^{on A}^c^{t of}¹⁹⁸^9,^P.L^.¹^01-²³^9,¹⁰^{3 Sta}^t^.²⁴²³⁽¹⁹⁸^{9). T}^h^e^Sta^r^k^la^w^w^a^{s sig}ⁿ^if^ic^aⁿ^tly
^a^m^e^nde^{d by}^the^Om^{nibus Bu}^dg^e^t^Re^c^onc^ilia^tio^{n A}^c^{t of}¹⁹⁹^{3, P.L}^.¹⁰³^-6^{6, §13}⁵⁶^{2, 10}^{7 Sta}^t^{. 31}²⁽¹⁹⁹³⁾^aⁿ^d^is
^co^mm^oⁿ^l^y^re^f^e^rred^t^o^{as “S}^t^a^{rk II.}^{” Regu}^l^a^tⁱ^oⁿ^s^f^o^{r S}^t^{ark II}^h^a^{ve b}^eenⁱ^ssu^ed^b^y^t^h^{e Cen}^t^{ers f}^o^{r M}^e^dⁱ^{care an}^d
^M^e^dⁱ^caid^S^e^{rvices (CM}^S^{) i}ⁿ^t^h^{ree p}^h^a^ses.^T^h^{e P}^h^{ase III regu}^{lations o}^f^S^t^{ark II w}^e^r^e^recen^tl^y^issu^edⁱⁿ^S^e^ptem^b^e^r
²⁰⁰^7.
¹⁶^“Referral^,^{” as d}^e^fⁱⁿ^e^d^b^y^t^h^{e S}^t^ar^{k l}^a^w^,ⁱⁿ^cl^u^d^e^{s t}^h^{e requ}^est^o^f^{a ph}^y^sⁱ^cⁱ^aⁿ^f^o^{r an}ⁱ^t^e^m^o^r^servi^ce,^as^w^e^l^l^{as an}
^e^s^ta^blis^hm^eⁿ^{t of}^a^plaⁿ^of^c^a^r^e^tha^t^inv^o^lv^e^s^f^u^rⁿ^is^hing^D^H^S^.⁴²^U^.^S.C^.^§1³⁹⁵ⁿⁿ⁽^h)⁽⁵⁾^.

Medicare, Medicaid, or other state health care plans. In its basic application, the Stark law
provides that if a physician (or an immediate family member of a physician) has a “financial
relationship” with an entity, the physician may not make a referral to the entity for the furnishing ¹⁷
of designated health services (DHS) for which payment may be made under Medicare or ¹⁸
Medicaid. A “financial relationship” under the Stark law consists of either (1) an “ownership or
investment interest” in the entity or (2) a “compensation arrangement” between the physician (or
immediate family member) and the entity. An “ownership or investment interest” includes
“equity, debt, or other means,” as well as “an interest in an entity that holds an ownership or
investment interest in any entity providing the designated health service.” A “compensation
arrangement” is generally defined as an arrangement involving any remuneration between a
physician (or an immediate family member of such physician) and an entity, other than certain
arrangements that are specifically mentioned as being excluded from the reach of the statute.
The Stark law includes a large number of exceptions, which have been added and expanded upon ¹⁹
by a series of regulations.These exceptions may apply to ownership interests, compensation ²⁰²¹
arrangements, or both. The most recent final regulations accompanying the Stark law were ²²
published in the Federal Register on August 19, 2008. Commentators have noted that these
regulations make “potentially sweeping” changes to the existing regulations, particularly in terms ²³
of the impact the regulations could haev on physician/hospital relationships.

¹⁷^A^lis^{t of}^“^d^e^s^ig^na^te^{d he}^a^{lth s}^e^r^v^ic^e^s^”^c^aⁿ^be^f^{ound a}^t^{42 U}^.^S.C^.^§¹³⁹⁵ⁿⁿ⁽^h)⁽⁶⁾^.^Se^r^v^ic^e^s^inc^l^ude^c^l^inic^a^l^la^b^o^r^a^tor^y
^s^e^r^v^ic^es^{, phy}^sⁱ^c^a^l^the^r^a^p^y^s^e^r^vⁱ^c^es^{, a}^{nd i}^npa^tie^{nt a}ⁿ^d^out^pa^tie^nt^ho^s^p^ita^{l s}^e^r^v^ic^e^s^.
¹⁸^W^hⁱ^l^e^b^o^t^h^t^h^{e an}^tⁱ^-^ki^ckb^{ack st}^at^u^t^{e an}^{d t}^h^{e S}^t^{ark l}^a^w^ma^y^ap^p^l^y^t^o^ph^y^sⁱ^cⁱ^aⁿ^sel^f^-re^f^e^rr^al^s,^t^h^{e st}^at^u^t^{es d}ⁱ^f^f^e^{r “i}ⁿ
^s^c^ope^a^{nd s}^t^r^u^c^t^ur^a^l^a^ppr^oa^c^h^.”⁶⁴^Fe^d.^R^e^g^.⁶³⁵¹^8,⁶³⁵²^{0 (}^N^ov^.^19,¹⁹⁹⁹⁾^.^T^h^e^aⁿ^ti-^kⁱ^c^k^ba^c^k^s^t^a^t^ute^is^a^c^r^im^ina^l^la^w
^tha^t^r^e^q^u^ir^e^s^im^pr^ope^rⁱⁿ^te^{nt f}^o^r^a^vⁱ^ola^tio^{n a}ⁿ^{d ha}^s^s^t^a^t^u^t^or^y^a^{nd r}^e^g^u^la^tor^y^“^s^af^e^ha^r^bor^s^”^tha^t^doⁿ^o^t^aⁱ^m^{to de}^fⁱ^ne^the
^f^u^{ll ra}^ng^e^of^la^wf^{ul a}^c^tiv^it^y^.^Id^.^;^s^{ee a}^l^so^Lⁱ^nda^A^.^B^a^um^a^nn,^Na^vig^a^tin^g^t^h^{e New S}^a^{fe Ha}^rbo^{rs t}^o^t^h^{e A}ⁿ^tⁱ^-^Ki^ckba^ck
^Stat^ute^,^{12 H}^e^a^lth^L^a^w^y^e^r^{1, 4 (}²⁰⁰⁰⁾^.^T^h^e^Sta^r^k^la^w^,^{on t}^h^e^ot^he^r^ha^nd,^is^a^cⁱ^v^{il la}^w^,^a^{nd a}^tr^aⁿ^s^a^c^t^{ion m}^u^s^t^f^a^ll
^eⁿ^tire^l^y^w^{ithin a}ⁿ^e^x^c^e^p^tio^{n t}^o^be^la^wf^{ul, re}^g^a^rdle^{ss of}^the^pa^rtie^{s’ inte}^nt.^Id^.^T^h^eref^o^r^e,^ev^enⁱ^f^an^arran^g^e^m^en^tⁱ^s
^accep^t^a^b^l^e^unde^r^t^h^e^Sta^r^k^la^w^,^it^m^a^y^vⁱ^ola^t^e^the^aⁿ^ti-^kⁱ^c^k^ba^c^k^s^t^a^t^ute^if^the^r^e^is^im^pr^ope^rⁱⁿ^te^nt^{to i}^nduc^e^r^e^f^e^r^r^a^ls^.
^B^a^um^a^{nn, 12 H}^e^a^lth^L^a^w^y^e^r^a^t^4.
¹⁹^E^x^cep^tⁱ^oⁿ^s^app^lⁱ^cab^l^e^t^o^o^wⁿ^e^rshⁱ^p^arran^g^em^en^t^sⁱⁿ^cl^ude^a^rra^ng^e^m^eⁿ^{ts inv}^o^lv^ing^rura^l^provⁱ^d^e^r^{s, h}^o^spita^l
^ow^ne^rs^{hip, a}ⁿ^{d ow}^ne^rs^hip^of^p^ubl^ic^ly^tra^d^e^d^s^e^c^u^ritie^s^a^{nd m}^u^tua^l^f^unds^{. Se}^e⁴²^U^.^S^.^C.^{§ 1}³⁹⁵ⁿⁿ^(c⁾^a^{nd im}^ple^m^eⁿ^ting
^re^g^u^la^tions.
²⁰^E^x^cep^tⁱ^oⁿ^s^app^lⁱ^cab^l^e^t^o^co^m^p^ensatⁱ^oⁿ^arran^g^em^en^t^sⁱⁿ^cl^u^d^e^o^f^fⁱ^c^e^sp^{ace an}^d^eq^uⁱ^p^m^en^t^ren^t^al^arran^g^e^m^en^t^s^,
^phy^sⁱ^cⁱ^aⁿ^r^e^c^r^uitm^eⁿ^{t, a}^s^w^e^{ll a}^s^bona^fⁱ^de^e^m^ploy^m^e^{nt r}^e^la^tions^hi^ps^{. Se}^e⁴²^U^.^S^.^C^.^{§ 1}³⁹⁵ⁿⁿ⁽^e⁾^aⁿ^{d im}^ple^m^eⁿ^ting
^re^g^u^la^tions.
²¹^Ex^c^e^p^tions^a^p^plic^a^b^le^t^o^bot^{h ty}^pe^s^of^fⁱ^na^nc^ia^{l r}^e^la^tions^hips^un^de^r^the^Sta^r^k^la^w^inc^l^ude^phy^sⁱ^cⁱ^aⁿ^s^e^r^v^ic^e^s
^pe^rf^or^m^e^{d by}^a^nothe^{r phy}^sⁱ^cⁱ^aⁿ^{in the}^s^a^m^e^g^r^{oup pra}^c^tic^e^,ⁱⁿ^-of^fⁱ^c^e^aⁿ^c^illa^r^y^s^e^rvⁱ^c^e^s^{, a}^{nd c}^e^r^taⁱⁿ^s^e^rv^ic^es^pe^rf^or^m^e^d
^unde^r^a^pr^e^p^aⁱ^{d pla}ⁿ^{. Se}^e^{42 U}^.^S.^C^.^§¹³⁹⁵ⁿⁿ⁽^b)^aⁿ^{d im}^ple^m^eⁿ^ting^r^e^g^u^la^tions^.
²²⁷³^Fe^d.^R^e^g^.⁴⁸^,4^34,⁴⁸⁷⁵^{1 (}^A^ug^{. 19,}²⁰⁰⁸⁾^.
²³^Se^e^Ra^m^y^Fa^y^e^{d, Chris}^J^aⁿⁿ^e^y^,^Ma^rc^{i Ros}^e^L^e^vⁱ^ne^{, Sc}^{ott Me}^m^m^o^{tt, A}^l^Sha^y^{, a}^{nd G}^a^{di W}^e^inre^ic^h,^C^M^{S I}^m^ple^m^eⁿ^ts
^Pote^nti^a^lly^‘^S^w^e^e^pⁱⁿ^g’^C^h^an^ge^s^t^o^St^ar^k^Re^g^u^latⁱ^oⁿ^s^,^BNA^Heal^t^h^{Care F}^r^au^d^Repo^rt⁽^S^ep^t^.²⁴^,²⁰⁰⁸^).^On^{e c}^h^an^ge
^m^a^de^by^the^re^g^u^la^{tions tha}^t^po^te^ntia^lly^a^f^f^e^c^t^{s ph}^y^s^ic^ia^n/hospita^{l r}^e^la^tionshi^{ps is t}^h^e^e^x^pa^nde^d^de^fⁱⁿ^ition^of^“^eⁿ^tity^”
^tha^t^f^u^rnishe^{s DHS.}^T^h^e^ne^w^de^fⁱ^nitioⁿ^of^“^eⁿ^tity^”^inc^l^ude^{s (1}^{) pe}^r^s^{ons or}^eⁿ^titie^{s t}^h^a^t^pe^rf^or^m^the^{DHS, a}^s^w^e^{ll a}^s⁽²⁾
^pe^r^s^ons^or^eⁿ^ti^tie^s^tha^t^ha^v^e^pr^e^s^eⁿ^te^{d a}^c^l^aⁱ^m^{to Me}^dic^a^r^e^f^o^r^the^D^H^S^.^P^r^ior^to^the^r^e^g^u^la^ti^ons^,^on^l^y^the^pe^r^s^{on or}
^eⁿ^tity^tha^t^bille^d^Me^dic^a^r^e^f^o^{r the}^{DHS w}^a^{s c}^onside^r^e^d^aⁿ^eⁿ^ti^ty^f^o^{r pur}^pose^s^of^the^Sta^r^k^la^w^.^A^c^c^o^rding^t^o^the
^pr^e^a^m^ble^of^the^ne^w^r^e^g^u^la^tions^,^this^c^h^aⁿ^g^e^w^a^s^m^a^de^{in lig}^{ht of}^t^h^e^c^onc^e^r^{n a}^b^o^u^{t a}^rⁱ^s^k^of^ov^e^r^uti^liz^a^tion^of^he^a^lth
^se^rv^ic^e^s^w^h^e^r^e^se^rv^ic^e^s^w^e^re^f^u^rnishe^{d “}^u^nde^{r a}^rra^ng^e^m^eⁿ^ts”^(e^.g^.,^w^h^e^r^e^aⁿ^eⁿ^tity^o^w^ne^{d by}^one^or^m^o^re^phy^sicⁱ^aⁿ^s
^c^ontr^a^c^t^s^w^{ith a}^hos^pita^{l t}^o^pr^ov^id^e^D^H^S^on^be^ha^lf^of^the^h^o^s^p^ita^l)^.^Se^e^{73 Fe}^{d. R}^e^g^.⁴⁸⁴³⁴^,⁴⁸⁷²¹⁽^A^ug^{. 19, 2}⁰⁰⁸⁾^.
^Co^mmen^t^at^o^r^{s h}^a^{ve st}^at^ed^t^h^at^t^hⁱ^s^ch^an^{ge t}^o^t^h^{e regu}^l^a^tⁱ^oⁿ^s^co^u^l^{d f}^o^{rce t}^h^{e rest}^ru^ct^u^rⁱⁿ^g^o^r^un^wⁱⁿ^dⁱⁿ^{g o}^f^m^aⁿ^y
^p^r^o^vⁱ^d^er-ph^y^si^ci^an^arran^g^e^m^en^t^s^.^S^{ee F}^a^yed^,^et^al^.^,^sup^r^a^.

Violators of the Stark law may be subject to various sanctions, including a denial of payment for
relevant services and a required refund of any amount billed in violation of the statute that had
been collected. In addition, civil monetary penalties and exclusion from participation in Medicaid
and Medicare programs may apply. A civil penalty not to exceed $15,000, and in certain cases not
to exceed $100,000, per violation may be imposed if the person who bills or presents the claim ²⁴
“knows or should know” that the bill or claim violates the statute.

Though laws aimed to protect against health care fraud cover a wide variety of conduct, a large
number of criminal prosecutions, civil recoveries, and other cases brought against federal health ²⁵
care program providers involve false claims. These cases may be brought under the False ²⁶
Claims Act (FCA), a law of general applicability that is invoked frequently in the health care
context. In general, under the FCA, a person who knowingly submits, or causes to be submitted, a
false or fraudulent claim for payment to the U.S. government may be subject to civil penalties and
damages. Health care program false claims often arise in terms of billing, including billing for
services not rendered, billing for unnecessary medical services, double billing for the same
service or equipment, or billing for services at a higher rate than provided (“upcoding”).
Under the FCA, a defendant is liable to the U.S. government if the defendant knowingly presents
a false or fraudulent claim to an officer or employee of the U.S. government for payment, or if the
defendant knowingly makes or uses a false record or statement to get a false or fraudulent claim ²⁷
paid. “Knowingly,” as defined under the FCA, means that the defendant must have had actual
knowledge of the falsity of the information furnished to the government, acted in deliberate
ignorance of the truth or falsity of the information, or acted in reckless disregard of the truth or ²⁸
falsity of the information. Penalties under the FCA include treble damages, plus an additional
penalty of $5,500 to $11,000 for each false claim filed.
Civil actions may be brought in federal district court under the False Claims Act by the Attorney
General or by a person known as a relator (i.e., a “whistleblower”), for the person and for the U.S. ²⁹
Government, in what is termed a qui tam action. The ability to initiate a qui tam action has been

²⁴^F^o^{r a}^d^dⁱ^tⁱ^oⁿ^a^lⁱⁿ^f^o^rm^atⁱ^oⁿ^on^t^h^{e S}^t^{ark l}^a^w^an^d^d^e^scri^p^tⁱ^oⁿ^o^f^each^o^f^t^h^{e S}^t^{ark l}^a^w^ex^cep^tⁱ^oⁿ^s^,^see^CRS^Rep^o^r^t
^R^L³²⁴⁹^4,^M^e^dic^a^re^{: P}^h^y^s^ic^ian^S^e^lf-Re^fe^{rral (}^“^Stark^{I a}ⁿ^d^II”)^,^by^Je^nnif^e^{r O’Sulliv}^aⁿ^.
²⁵^H^EA^L^T^H^L^AW^{, 44 (}^B^a^r^r^y^Fur^r^o^w^{2d e}^d^{. 2}⁰⁰⁰⁾^.^I^t^s^h^oul^{d a}^l^s^o^beⁿ^o^t^e^{d tha}^t^t^h^e^g^o^v^e^rⁿ^m^e^nt^m^a^y^be^a^b^le^to^br^ing^aⁿ
^a^c^{tion f}^o^r^a^f^a^ls^e^c^l^aⁱ^m^unde^r^s^e^v^e^r^a^{l s}^t^a^t^ute^s^othe^r^t^h^aⁿ^the^Fa^ls^e^C^l^aⁱ^m^s^A^c^t.^S^ee,^e.^g^.^,^f^o^o^t^no^t^e^{7 an}^d^acco^m^p^an^yⁱⁿ^g
^te^x^t;^{see a}^l^so¹⁸^U.^S^.^C^.^{§ 13}⁴⁷^.
²⁶^{31 U}^.^S.C^.^§^§³⁷²⁹^-³⁷³^3.
²⁷^{31 U}^.^S.C^.^§³⁷²⁹⁽^b)^.^For^a^dditⁱ^oⁿ^a^l^dis^c^us^sⁱ^on^of^the^Fa^ls^e^C^l^aⁱ^m^s^A^c^{t, s}^e^e^C^R^S^R^e^por^{t R}^L³⁰⁴^63,^C^ons^tit^uti^oⁿ^a^l
^As^pe^c^t^s^{of Q}^u^{i T}^a^m^Ac^tio^ns^:^B^a^c^k^g^r^o^u^nd^an^{d A}^naly^s^is^{of I}^s^s^u^e^sⁱⁿ^Ve^r^m^{ont A}^g^eⁿ^c^y^of^N^a^t^u^r^a^l^Re^s^o^ur^c^e^s^v^.^Uⁿ^ite^d
^S^t^a^t^{es ex rel}^.^St^even^s^{, by}^T^.^J^.^H^a^l^s^te^a^d^.
²⁸^Id^.
²⁹^It^m^a^y^b^eⁿ^o^t^ed^t^h^at^w^hⁱ^l^e^t^h^{e ant}ⁱ^-^ki^ckb^{ack st}^at^u^t^{e co}ⁿ^t^aiⁿ^s^no^qui^t^a^m^prov^isio^{n, i}^t^is^possib^l^e^tha^t^a^vⁱ^ola^tion^of^the
^aⁿ^ti-kⁱ^c^k^ba^c^k^s^t^a^t^ute^m^a^y^lea^d^to^lia^bility^unde^r^the^FCA^.^For^e^x^am^ple^,^s^o^m^e^c^ourts^ha^v^e^f^ound^tha^t^a^vⁱ^ola^tion^of^the
^aⁿ^ti-kⁱ^c^k^ba^c^k^s^t^a^t^ute^c^aⁿ^c^ons^titut^e^a^vⁱ^ola^tion^un^de^{r t}^h^e^FCA^if^the^g^o^v^e^rnm^e^{nt c}^ond^itio^ne^d^pa^y^m^eⁿ^{t of}^a^c^l^aⁱ^m^upon
^t^h^{e cl}^ai^m^aⁿ^t^{’s cert}ⁱ^fⁱ^catⁱ^oⁿ^o^f^co^m^p^lⁱ^aⁿ^ce^wⁱ^t^h^t^h^{e an}^tⁱ^-^ki^ckb^{ack st}^at^u^t^{e an}^{d t}^h^{e cl}^ai^m^aⁿ^t^m^a^d^e^t^hⁱ^s^certⁱ^fⁱ^c^atⁱ^oⁿ^,^w^h^en^,
ⁱⁿ^f^act^,^t^h^{e an}^tⁱ^-^ki^ckb^{ack p}^r^o^vⁱ^sⁱ^oⁿ^w^a^{s vi}^o^l^at^ed^.^S^ee,^e.^g^.^,^Unⁱ^t^e^d^S^t^at^{es ex rel}^.^F^r^an^klⁱⁿ^v.^P^a^rke-Davi^s,¹⁴⁷^F^.^S^u^p^p^.
^2d^39,⁵⁴⁽^D^.^Ma^s^s^.²⁰⁰¹⁾^{, c}^iti^ng^T^hom^ps^{on U}ⁿ^ite^d^Sta^t^e^s^e^x^r^e^{l. T}^hom^ps^{on v}^.^C^o^lum^b^ia^/H^C^A^H^e^a^l^thc^a^r^e^C^o^r^p^.^,¹²⁵^th
^F^.^3d⁸⁹^9,⁹⁰^{2 (}⁵^Cⁱ^r^.¹⁹⁹⁷⁾^.^H^o^w^e^v^e^r^,^othe^r^dis^t^rⁱ^c^t^c^our^ts^ha^v^e^dis^a^g^r^e^e^d^w^{ith this}^us^e^of^the^FC^A^.^S^ee,^e.^g^.^,^Unⁱ^t^ed
^Sta^t^e^s^e^x^re^{l. Ba}^r^m^a^k^v^.^Sutte^{r Co}^rp.,²⁰⁰²^U^.^{S. D}ⁱ^s^t^{. L}^E^X^I^S⁸⁵⁰⁹^(S.D^.N^.Y^.²⁰^02)(s^ta^ti^ng^tha^t^“^I^a^m^{not c}^onv^inc^e^d
⁽^c^onti^nue^d.^..)

viewed as a powerful weapon against health care fraud, in that it may be initiated by a private ³⁰
party who may have direct and independent knowledge of any wrongdoing. Popularity of qui
tam actions brought under the FCA may be attributed partially to the fact that successful
whistleblowers can receive between 15% and 30% of the monetary proceeds of the action or ³¹
settlement that are recovered by the government.
^J^eⁿⁿⁱ^fe^r^St^a^m^aⁿ
^L^e^gⁱ^s^l^at^iv^{e A}^t^torn^e^y
^j^s^ta^m^aⁿ^@^cr^s.lo^c.g^o^v^{, 7-}²⁶¹⁰

^(...c^on^tin^ue^d)
^t^h^at^{a qu}ⁱ^t^a^m^P^l^aiⁿ^tⁱ^f^f^can^u^s^{e t}^h^{e F}^C^A^{as a v}^e^hⁱ^cl^{e f}^o^{r p}^u^r^suⁱⁿ^{g a}^vi^o^l^atⁱ^oⁿ^o^f^t^h^{e ant}ⁱ^-^ki^ckb^{ack st}^a^t^u^t^{e i}ⁿ^t^hⁱ^s
^Circu^it”).
³⁰^H^EA^L^T^H^L^AW^{, 5}⁰^(Barry^Fu^rro^w²^d^ed^{. 2}⁰⁰⁰^).
³¹^P^r^o^s^ecu^tⁱ^oⁿ^uⁿ^d^e^r^t^h^e^F^C^A^m^a^y^al^so^b^e^m^o^r^e^at^t^r^actⁱ^v^e^f^o^r^t^h^{e gover}ⁿ^m^eⁿ^t^.^I^t^h^a^{s b}^{een po}ⁱⁿ^t^e^d^ou^t^t^h^at^t^h^e^t^e^r^m^{s o}^f
^t^h^{e act}^{are rel}^a^tⁱ^v^el^y^si^m^p^l^e^an^d^st^rai^g^h^t^f^o^rward^,^an^d^can^b^e^a^p^plie^{d g}^e^ne^ra^lly^{to a}^{ll ty}^pe^{s of}^he^a^lthc^a^re^prov^ide^r^{s. Se}^e
^Da^yⁿ^{a Bo}^w^eⁿ^M^a^t^t^h^ew^,^A^N^E^CO^NOM^I^C^M^ODE^L^T^O^A^N^A^L^Y^ZE^TH^E^I^MP^A^C^T^O^F^F^AL^S^E^C^LA^IM^S^A^CT^C^AS^E^S^ON^A^CCES^S^T^O
^H^E^A^LT^H^C^A^R^{E F}^O^R^T^H^E^E^LD^E^R^LY^,^D^IS^A^B^LED^,^R^UR^AL^A^N^D^I^NNE^R^-C^ITY^P^OOR^,^{27 A}^m^{. J}^.^L^.^a^{nd Me}^d.⁴^{39 (}²⁰⁰¹⁾^{. F}^u^r^t^he^r^,
^b^ecau^{se i}^tⁱ^s^{a ci}^vi^l^st^at^u^t^e,^t^h^{ere i}^s^an^easi^e^{r b}^u^r^d^eⁿ^o^f^p^r^o^o^f^t^o^m^e^e^t^(“p^r^ep^on^d^e^ran^{ce o}^f^t^h^{e evi}^d^en^ce^{”) as o}^p^p^o^s^ed^t^o^a
^c^r^im^ina^l^s^t^a^t^ute⁽^“^bey^{ond a}^r^e^a^s^oⁿ^a^b^le^d^o^u^b^t”⁾^.^Id^.