the medicare anti-kickback statute

section 1128b(b) of the social security act (42 u.s.c. 1320a-7b(b)), previously codified at sections 1877 and 1909 of the act, provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit or receive remuneration in order to induce business reimbursed under the medicare or state health care programs. the offense is classified as a felony, and is punishable by fines of up to $25,000 and imprisonment for up to 5 years.

this provision is extremely broad. the types of remuneration covered specifically include kickbacks, bribes, and rebates made directly or indirectly, overtly or covertly, or in cash or in kind. in addition, prohibited conduct includes not only remuneration intended to induce referrals of patients, but remuneration also intended to induce the purchasing, leasing, ordering, or arranging for any good, facility, service, or item paid for by medicare or state health care programs.

public law 100-93

public law 100-93, the medicare and medicaid patient and program protection act of 1987, added two new provisions addressing the anti-kickback statute. section 2 specifically provided new authority to the office of inspector general (oig) to exclude an individual or entity from participation in the medicare and state health care programs if it is determined that the party has engaged in a prohibited remuneration scheme. (section 1128(b)(7) of the act, 42 u.s.c. 1320a-7(b)(7)) this new sanction authority is intended to provide an alternative civil remedy, short of criminal prosecution, that will be a more effective way of regulating abusive business practices than is the case under criminal law.

in addition, section 14 of public law 100-93 requires the promulgation of regulations specifying those payment practices that will not be subject to criminal prosecution under section 1128b of the act and that will not provide a basis for exclusion from the medicare program or from the state health care programs under section 1128(b)(7) of the act.

gpo safe harbor (42 c/f.r. 1001.952(j))

the following payment practices shall not be treated as a criminal offense under section 1128b of the act and shall not serve as the basis for an exclusion:

(j) group purchasing organizations. as used in section 1128b of the act, ``remuneration'' does not include any payment by a vendor of goods or services to a group purchasing organization (gpo), as part of an agreement to furnish such goods or services to an individual or entity as long as both of the following two standards are met--

(1) the gpo must have a written agreement with each individual or entity, for which items or services are furnished, that provides for either of the following—

(i) the agreement states that participating vendors from which the individual or entity will purchase goods or services will pay a fee to the gpo of 3 percent or less of the purchase price of the goods or services provided by that vendor.

(ii) in the event the fee paid to the gpo is not fixed at 3 percent or less of the purchase price of the goods or services, the agreement specifies the amount (or if not known, the maximum amount) the gpo will be paid by each vendor (where such amount may be a fixed sum or a fixed percentage of the value of purchases made from the vendor by the members of the group under the contract between the vendor and the gpo).

(2) where the entity which receives the goods or service from the vendor is a health care provider of services, the gpo must disclose in writing to the entity at least annually, and to the secretary upon request, the amount received from each vendor with respect to purchases made by or on behalf of the entity.

for purposes of paragraph (j) of this section, the term group purchasing organization (gpo) means an entity authorized to act as a purchasing agent for a group of individuals or entities who are furnishing services for which payment may be made in whole or in part under medicare or a state health care program, and who are neither wholly-owned by the gpo nor subsidiaries of a parent corporation that wholly owns the gpo (either directly or through another wholly-owned entity).