Anti-Kickback Statute
The federal Anti-Kickback Statute (AKS), codified at 42 U.S.C. § 1320a-7b(b), is one of the most powerful and far-reaching healthcare fraud laws in the United States. It prohibits any person or entity from knowingly and willfully offering, paying, soliciting, or receiving anything of value — directly or indirectly, overtly or covertly — in exchange for referring, recommending, or arranging for the provision of items or services covered by federal healthcare programs such as Medicare, Medicaid, TRICARE, and other federally funded programs.
What the Anti-Kickback Statute Prohibits
The AKS was enacted to protect patients and federal healthcare programs from fraud and abuse by ensuring that medical decisions are based on the best interests of patients rather than on financial incentives. Violations can result in severe civil and criminal penalties, including imprisonment of up to 10 years per violation, fines of up to $100,000 per violation, exclusion from participation in federal healthcare programs, and False Claims Act liability with treble damages.
The statute applies broadly to a wide range of healthcare industry participants, including physicians, hospitals, laboratories, pharmacies, home health agencies, durable medical equipment suppliers, pharmaceutical manufacturers, and medical device companies. Common arrangements that may implicate the AKS include physician recruitment and compensation agreements, medical directorship contracts, lab specimen collection fees, pharmacy services agreements, co-marketing arrangements, and consulting and speaker fee programs.
The “One Purpose” Test and Intent Standard
Because the AKS is an intent-based statute, the government must prove that the defendant acted “knowingly and willfully.” However, courts and the Office of Inspector General (OIG) have interpreted this standard broadly. Even one prohibited purpose among several legitimate ones — what courts refer to as the “one purpose” test — can be sufficient to establish a violation.
Critical insight: Even a small financial inducement tied to federal healthcare referrals can create significant legal exposure. A business arrangement does not need to be structured as an explicit quid pro quo to violate the AKS — courts look at the totality of the relationship, and internal communications expressing concern about legality are treated as powerful evidence of knowing and willful intent.
Safe Harbors and Statutory Exceptions
Over the decades, Congress and regulatory agencies have created a series of statutory exceptions and regulatory safe harbors that protect certain business arrangements from AKS liability, provided specific conditions are met. Safe harbors exist for arrangements such as personal services and management contracts, employment relationships, bona fide investment interests, group purchasing organizations, and certain electronic health records arrangements, among others.
Meeting the requirements of an applicable safe harbor does not merely reduce risk — it provides complete protection from AKS liability. Structuring arrangements to fit within a safe harbor from the outset is far more effective than attempting to defend non-conforming arrangements after the fact.
How the Government Investigates AKS Violations
Federal prosecutors and investigators from the Department of Justice (DOJ), the Department of Health and Human Services Office of Inspector General (HHS-OIG), and the FBI actively investigate and prosecute AKS violations. These agencies use a range of investigative tools, including grand jury subpoenas, Civil Investigative Demands (CIDs), undercover operations, and qui tam whistleblower lawsuits brought under the False Claims Act. Whistleblowers — often current or former employees — play a significant role in uncovering AKS violations and may receive a share of any government recovery.
Case Study: United States v. Marchetti (5th Cir. 2024)
The Fifth Circuit’s decision in United States v. Marchetti, No. 22-40617 (5th Cir. 2024), is a significant and doctrinally rich opinion that illuminates both the reach and the limits of the Anti-Kickback Statute — with particular focus on a question central to AKS enforcement: whether a payment was made to the “relevant decisionmaker” in the referral chain.
Vincent Marchetti, Jr., served as president and manager of Accurate Lab Services (ALS), a specimen collection and distribution company. ALS contracted with Vantari Genetics, a pharmacogenomics laboratory, under which ALS collected patient samples and directed referrals to Vantari in exchange for per-referral compensation — more than $2 million related to federal healthcare program referrals. ALS was simultaneously funneling referrals through a related entity to a competing laboratory, with Marchetti actively concealing the diversion from patients and ordering physicians.
The court’s most legally significant holding concerned the “relevant decisionmaker” requirement. Drawing on its earlier decision in United States v. Miles, 360 F.3d 472 (5th Cir. 2004), the court reaffirmed that a per-referral compensation structure is not, by itself, sufficient to sustain a conviction — the government must also prove that the payer intended to improperly influence those who actually make healthcare decisions on behalf of patients.
The divided result in Marchetti: As to the primary ALS-Vantari arrangement, the court found the government’s evidence insufficient — there was no proof that Marchetti actually exercised improper influence over healthcare decisionmakers. However, in the Codon scheme, where the laboratory selection was made at the distribution level and hidden from physicians and patients, the court found that Marchetti himself may have been the relevant decisionmaker — and he was being paid per referral. That was sufficient to sustain the conspiracy conviction.
Key Lessons from Marchetti
For healthcare providers, laboratories, and marketing companies, Marchetti carries several important lessons. First, per-referral compensation structures are inherently high risk, but their presence alone does not guarantee a conviction — the government must connect the payment to actual improper influence over a healthcare decisionmaker. Second, where a marketing intermediary or specimen collector effectively steps into the role of the referrer — making provider selection decisions that are not meaningfully reviewed or overridden by physicians or patients — it faces the same AKS exposure as a traditional referring provider. Third, internal communications raising concerns about the legality of a payment arrangement will be treated by courts and juries as powerful evidence of knowing and willful participation in an unlawful scheme.
Facing an Anti-Kickback Statute Investigation?
Whether your organization is under investigation for potential AKS violations, evaluating the compliance of an existing arrangement, or structuring a new business relationship, experienced legal counsel is essential. As a former federal prosecutor, Justo Mendez understands how the government investigates and prosecutes these cases — and how to build a strategic defense.