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Court cracks down on personal service safe harbor

The Anti-Kickback Statute (AKS) makes it illegal to encourage referrals for Medicare services in exchange for renumeration or other types of payment. There are some exceptions, referred to as safe harbors. One example is the personal services and contracts safe harbor. This basically allows for groups to have payment arrangements with other vendors when that arrangement is not impacted by the volume or value of referrals or other generated business.

Cases often test the reach of this safe harbor, checking to see what types of relationships qualify and which are considered a violation. A recent case involving medical device giant Medtronic provides an example. In this case, a whistleblower filed a lawsuit to accuse the medical device manufacturer of offering illegal kickbacks in exchange for increased purchases of its device. The whistleblower, a physician, explained that Medtronic would hire a physician to train other physicians on how to use the device. Instead of a relationship that qualified under the safe harbor, as argued by Medtronic, the physician contended that the payment of the trainer physician was actually an illegal kickback.

Why would a physician file this type of lawsuit?

The government incentivizes physicians and others who have access to this type of information to file lawsuits by sharing a portion of any winnings if the case is successful.

What happened in this case?

Medtronic moved to have the case dismissed stating the physician failed to show that the payment was not in line with market rates. The court disagreed, stating even if Medtronic’s arguments was true, a fair market value payment could still qualify as an illegal kickback.

How does this case impact similar issues in Texas?

Although the case is out of California and not likely precedent in Texas cases, it still provides some guidance on how courts may handle similar issues. As a result, it is a good idea for those going through similar allegations to be aware of this and similar cases when building their defense to the allegations.

Attorney John Rivas is responsible for this communication