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What Are Kickbacks?

Date Published
Feb 06, 2024

In some industries, offering discounts, deals, and special offers to your clients in order to increase sales of your product is considered good business sense. In the medical field, however, offering or accepting kickbacks is illegal, and punishable by federal law. Additionally, whenever government funds are being awarded in a contract, offering or accepting kickbacks is an unacceptable kind of fraud against the taxpayer.

Kickbacks are a serious offense that can result in stiff penalties and even jail time for both those who offer them and receive them. How do you know exactly what qualifies as a kickback? What kinds of laws are in place to penalize those who engage in this kind of incentive scheme? What do you do if you spot them? The whistleblower attorneys at Tycko & Zavareei LLP are available to answer these questions and more during a free legal consultation. Whistleblowers who report on this kind of fraud may be eligible for financial rewards, as well as protections against retaliation when they come forward.

What is a Kickback?

The definition of kickback is a payment made in exchange for preferential treatment. However, kickbacks are not always a direct gift of money, although they can be as simple as cash payments.

Kickbacks in the medical field may also look like exorbitant speaker’s fees; covering the cost of fancy dinners, drinks, hotel stays, airfare; or providing other benefits with tangible or monetary value. Some kickbacks may related to an office’s legitimate business operations, like offering free or discounted rent or advertising. Others may be disguised as payments for goods or services never ordered or received. Kickbacks are perhaps best understood as an attempt to sway decision making based on financial gain or profit.

What is a Kickback Scheme?

Many pharmaceutical companies have been caught red-handed in recent years offering payments to doctors in order to induce them to increase prescriptions of their products to patients. A study from the National Library of Medicine finds that between 2015 to 2017, 67% of all US physicians received payments from pharmaceutical companies. Specialists in fields like medical oncology, orthopedic surgery, and urology received the greatest amounts of payments, exceeding 80%, and the dollar amount of these offers has continued to grow. In 2018, the value of industry payments to US physicians reached $2.18 billion.

The same study found that the most common kinds of payments to doctors and healthcare professionals were:

  1. Cash, typically offered for consulting services and invited lectures
  2. In-kind gifts like meals

Anti-Kickback Law

Kickbacks are prohibited in the field of medicine by the Anti-Kickback Statute. This federal law prohibits healthcare providers from accepting bribes, gifts, or money “knowingly and willfully” in return for Medicare, Medicaid, or any other federal healthcare program reimbursement business. Additionally, the Remuneration Anti-Kickback Statute prevents healthcare providers from offering incentives for others to refer patients to them.

Why Are Kickbacks Illegal?

Kickback schemes work in two ways:

  1. By outright bribery, or offering continued payments in exchange for continued referrals, prescriptions, sales, or more.
  2. By inducing a sense of reciprocity. Even when the payment or incentive offered may make up a relatively small percentage of a recipient’s overall income, the exchange of a kickback creates a sense of give and take, or preferential treatment for one company over another.

In medicine, kickbacks are illegal because neither of these factors should be at play when it comes to making healthcare decisions. Decisions on what is best for patients’ health should not be made based on what will bring the doctor the most profit or fulfill a pre-existing obligation. Patients put an extraordinary amount of trust in their physicians when it comes to making potentially life-saving choices about their care. A doctor or healthcare facility that is allowed to take kickbacks into consideration when making choices for patients is no longer operating wholly in their patients’ best interest.

In government contracts, offering and accepting bribes in an attempt to sway how taxpayer funds are allocated is also illegal. Government contractors provide vital services in fields like infrastructure, waste disposal, construction, water treatment services, correctional facilities, and more. Government officials are not allowed to accept gifts, bribes, or kickbacks in deciding how contracts for these services will be awarded.

What Are the Penalties for Violating the Anti- Kickback Statute?

Violating the Anti-Kickback Statute (AKS) is a serious matter, and may be considered a felony offense. Violation of the AKS is punishable by a fine of up to $25,000, imprisonment for up to five years, or both.

Additional penalties may be assessed per violation, such as civil monetary fines, as well as possible exclusion from future participation in federal and state healthcare reimbursement programs, like Medicare and Medicaid. Whistleblowers may also be able to file a lawsuit under the False Claims Act, which imposes treble damages per violation, with fines linked to inflation rates.

What Are Some Examples of Bribes or Kickbacks?

Anything of tangible benefit given in an attempt to illicitly sway decision making can be a bribe, regardless of its monetary value. There have been reported instances of non-monetary actions like hiring the children or a spouse of a government official in charge of awarding a contract, offering gifts of time or contractors’ services like home property improvement repairs, or even providing sexual favors all in order to secure a contract. Other examples of bribes or kickbacks might include:

  • A non-US based business that offers a US government official a stake in their company’s profits in exchange for permits to open a new branch
  • A medical device manufacturer that offers to pay speaking fees and airline miles in order to promote the use of their product
  • A banking or mortgage company that offers low or no-interest loans to officials in exchange for an agreement to look the other way on illegal fees charged to other lenders

What Are Kickbacks in Healthcare?

Kickbacks in healthcare are unfortunately widespread, and often revolve around attempting to procure additional Medicaid or Medicare funds. Other government reimbursement services, like the VA or TRICARE, may also be targets of kickbacks schemes.

Kickbacks in healthcare may look like aforementioned examples of pharmaceutical companies or medical device manufacturers offering bribes or payments in exchange for preferential use or prescription of their products. However, some kickbacks schemes involve medical providers referring patients to diagnostic services, treatment centers, cosmetic centers, or more in which they have a financial stake.

For instance, one healthcare kickback scheme might revolve around a physician who recommends patients of his or hers who are covered by Medicaid to an addiction treatment center in exchange for payments, a share in the center’s profits, or other financial reward. Whether or not the patients will benefit from the treatment center’s services is not relevant to considering whether or not the referral was an example of a kickback—the salient detail is the physician’s financial relationship with the center, and effort to profit off of the exchange. Unfortunately, many patients will then find themselves taken advantage of by these kinds of kickbacks scheme “mills,” which tend to treat people as a source of profit.

Medicare Fraud Kickbacks

Paying for referrals is a crime under federal healthcare statutes. Medicare is a particularly attractive target for this kind of scam because there are significant funds to be collected, and because there are layers of obfuscation possible throughout the insurance reimbursement process.

Medicare fraud kickbacks most often take place between two healthcare services and professionals, but they can also happen between doctor and patient. One important instance of Medicare fraud kickbacks is physicians offering remuneration to patients who are covered by Medicare in order to keep their business or generate more referrals. Routinely waiving co-pays for Medicare patients in order to induce them to stay with one medical practice is an example of an illegal kickback. Advertising routinely waived co-payments may also be an example of a kickback. Doing so can lead to program over utilization and is an example of patient steering.

What Are Pharmaceutical Kickbacks?

Pharmaceutical companies are one of the worst offenders of medical kickbacks. Many pharmaceutical companies have attempted to induce medical professionals to market their drugs for “off-label” purposes, or uses not approved by the FDA, in order to generate more profit. Some organize conferences, speaker fees, direct payments, and more to doctors who go along with their schemes. Others simply attempt to have their pharmaceutical be the “number one choice” for prescribers, and take illicit actions in order to ensure that their drugs sell.

Doctors can also offer kickbacks back to pharmacies, as well as accepting them. Examples of this might include a doctor who routinely tells their patient to request certain label prescriptions as opposed to generic equivalents because of their financial stake in a company, or if they send patients to fill prescriptions at only one pharmacy.

How Could You Best Identify a Kickback Scheme?

There are many ways to identify kickback schemes, and employees of the illicit firms or individuals offering the bribes often make the best whistleblowers. If you suspect your employer may be involved in a kickback scheme, speak to a kickback fraud attorney in order to learn about what kinds of proof you will need in order to be able to make a whistleblower claim and qualify for protections. Employees who have a deep level of knowledge about the arrangement may be able to offer the best proof possible by sharing what they know. In other situations, bank statements, text messages, restaurant receipts, proof of shares or stock, and more may all be considered as evidence of an illegal kickbacks scheme.

If you suspect your employer is receiving kickbacks, or if you are concerned about how contract or grant funds are being awarded, there are several red flags you may be able to spot as well in order to best identify a kickback scheme.

Signs that there may be an illegal situation at play might include:

  • Are subpar contractors or contractors with a history of shoddy work being considered?
  • How are tours of facilities being arranged, and are only one or two officials being invited repeatedly?
  • What quantity of goods or services are being purchased, and does delivery, pricing, or invoicing all follow standard protocol?
  • Is bid information being fairly and openly advertised?
  • Does your employer or the project manager live unexpectedly beyond their means?
  • Does your employer or the project manager have a separate “shell” account or additional bank accounts they conceal?
  • Are other options or bidders being disqualified for unclear reasons?
  • Is important bidding information being “leaked” to some applicants but not others?

For healthcare specifically, look out for the following:

  • Prescriptions repeatedly made for one pharmaceutical drug or medical device over another, especially if the costs don’t outweigh the benefits over competitors
  • Patients being recommended and prescribed seemingly unnecessary procedures or prescription drugs
  • Physicians speaking at numerous conferences espousing the benefits of a particular drug or medical device
  • Exclusive arrangements made with one laboratory or pharmacy, with staff being discouraged to send patients elsewhere

Reporting Illegal Kickbacks

There are several options available to report illegal kickbacks. If you are a physician who has realized that they have a problematic investment, or if your practice has been billing improperly, you may be able to self-report the situation through the HHS Office of the Inspector General’s (OIG) Provider Self-Disclosure Protocol.

If you are a whistleblower, you can report your information through the HHS OIG Fraud Hotline, whether by phone, fax, or online. You will have the option to report anonymously through this method.

Finally, for your best opportunity at collecting the highest whistleblower reward possible, contact an anti-kickback fraud attorney. You can file anonymously under the firm’s name and receive experienced counsel about what kinds of evidence you will need to build a strong case for your whistleblower reward. Connecting with well-respected kickback fraud attorneys also ensures that your case has the best chance of being taken seriously by government investigators, and is set up to recover the maximum amount of compensation possible.

How Do You Prove Kickbacks?

Not every situation will meet the threshold for kickbacks or bribery. Some, when done without demonstrable illicit intent, may only be considered conflicts of interest that should still be disclosed. In other cases, however, you may be able to blow the whistle on a kickbacks case and qualify for whistleblower protections and a reward.

The following are examples of ways to prove that kickbacks are being offered or received. Note, however, that you should never take any documents or information without first discussing your suspicions with a kickback fraud attorney.

  • Procurement documents like purchase orders, requests for bids, bids, or change orders
  • Delivery records that show goods were never received
  • Contract records
  • Receipts or payment records
  • Invoices
  • Eyewitness accounts or testimonies
  • Emails, text messages, or calls between parties
  • Hard drive or cell phone of one of the suspects
  • Interviews with other employees
  • Background checks to reveal phony or shell companies or history of illicit services
  • Significant, unaccounted for amounts of cash or money orders
  • Financial analysis of a suspect’s credit card, housing, business, or daily expenses

Rewards for Blowing the Whistle on Kickback Schemes

Under the False Claims Act, whistleblowers who report on false claims made to the government in order to collect government funds (like Medicare/Medicaid reimbursement payments) are eligible to receive up to 30% of a successful settlement. In cases of ongoing fraud or large-scale deceit, a kickbacks whistleblower may be able to receive hundreds of thousands of dollars as a result of their information.

Protections for Kickback Whistleblowers

Kickback whistleblowers are protected by federal law against retaliation by their employers. If your employer harasses, threatens, demotes, fails to promote, fires, or takes any adverse actions against you because of your protected disclosure, you may be able to sue for a combination of the following:

  • Up to double back pay, with interest
  • Reinstatement
  • Front pay, in cases where reinstatement is not possible
  • Legal fees

Notable Kickback Fraud Cases

The Department of Justice reclaims millions of stolen taxpayer dollars each year from kickbacks cases and other instances of healthcare and government contracts fraud. In 2023 alone the following notable kickback fraud cases were settled:

  • Adobe, Inc. agreed to pay $3 million to settle allegations that they made improper payments to companies that had contractual relationships with the federal government. The payments, made under the “Solution Partner Program,” took place between 2011 and 2020, and involved offering companies a percentage of the purchase price of Adobe software. The offering of these kickbacks caused false claims for reimbursement to be submitted to the United States government. “A fair market relies heavily on an even playing field,” U.S. Attorney Matthew M. Graves for the District of Columbia remarked about the case. “When a company, vendor, or business owner tips the scales to their advantage, it undermines the system. When government dollars are involved, it means taxpayers ultimately bear the burden. Whistleblowers – like those in this case – are to be commended for trying to return the playing field to level.”
  • A federal judge in Minnesota ordered payment in the amount of $487 million in order to settle allegations that three medical products companies—Sightpath, Precision Lens, and TLC Vision—paid kickbacks to eye surgeons in order to promote use of their medical equipment to treat cataracts and glaucoma. The whistleblower in the case, who previously worked for Sightpath, was able to testify that the company sent physicians on expensive ski, golfing, and hunting vacations, sometimes via private jet. The doctors also received trips to the Masters golf tournament and the College Football National Championship. They were also compensated with frequent flier miles in exchange for using Precision Lens products in cataract surgeries that were reimbursed by Medicare funds.

What Are Kickbacks?: FAQs

Is a kickback the same as a bribe?

Kickbacks are a specific kind of bribe, with the result that government funds are allocated in the giver’s favor, contracts are signed that will benefit them, or reimbursements are awarded to them due to the influence of the payment or gift.

How do kickbacks work?

Kickbacks work by creating a monetary relationship between the payer and the payee. Kickbacks skew competition away from an honest assessment of needs and services, and into a personal motivation for profit.

Ask Our Qui Tam Attorneys about Kickbacks and How to Report Them

Kickbacks usually involve long-standing corruption and serious cases of fraud and abuse of funds. Kickbacks cases can be hard to spot from the outside, but employees, former employees, family members, competitors in the field, patients, community members and more can all report it with insider information.

If you have knowledge about kickbacks, speak to a kickback fraud whistleblower lawyer as soon as possible. The kickback fraud attorneys at Tycko & Zavareei LLP can advise you about what kinds of evidence you’ll need, how to shield your professional reputation, and how best to qualify for a whistleblower reward. Our firm can also protect you in the event that you are discriminated against by your employer, in an effort to punish you for reporting their corruption. For a complimentary and confidential consultation, contact us today.

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