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Is Intent Needed to Violate the Anti-Kickback Statute?

The United States Court of Appeals for the Eleventh Circuit recently defined the level of criminal intent needed to prove a "knowing and willful" violation of the Anti-Kickback Statute. This Statute prohibits a person from "knowingly and willfully" offering, paying or receiving, directly or indirectly, any "remuneration" in return for referring patients or providing goods or services if the federal government pays for any part of the goods or services provided. Federal prosecutors use the Anti-Kickback Statute extensively in health care prosecutions. Among circuit Courts of Appeal, the Eleventh Circuit is the fifth to address what intent is needed to establish a violation of the Anti-Kick-back Statute. The Supreme Court has not yet addressed this issue.

In United States v. Starks, the government charged the owner and operator of a hospital drug treatment facility and two people who made referrals to the program with conspiracy to violate the Anti-Kickback Statute as well as Anti-Kickback violations. In Starks, the owner and operator of the drug treatment program made payments to two employees of a federally funded Florida state research project for referring their clients to the drug treatment program. The defendants sought a jury instruction that required a jury to find that to be convicted, they had to know their referral arrangement actually violated the Anti-Kickback Statute. The District Court refused, and the jury convicted the program owner and two employees on all counts. On appeal, the defendants argued that to "knowingly and willfully" violate the Anti-Kickback Statute the government needed to prove that the defendants "had to have known that the referral arrangement violated the Anti-Kickback Statute. To prove a violation of the Anti-Kickback Statute, the Eleventh Circuit held that the government does not have to show that defendants were actually aware of the Statute. Such specific intent is not required. Rather, the government need only prove that the defendants acted "with specific intent to do something the law forbids ... with a bad purpose, either to disobey or disregard the law." Essentially, it is enough to show that, in carrying out a referral arrangement, the defendants knew they were doing "something" illegal even if they were not entirely sure just what was illegal.

In reaching its holding, the Eleventh Circuit specifically relied on the recent Supreme Court case of Bryan v. United States. In Bryan, the Supreme Court found that a "willful" violation of a criminal statute requiring the licensure of firearm sales did not require the government to prove that the defendant had specific knowledge of the licensing statute, only that the defendant "acted with knowledge that his conduct was unlawful." The Eleventh Circuit also followed Bryan in rejecting those cases, such as Ratzlaf v. United States, which require the defendant to have specific knowledge of a "technical" criminal statute before a willful violation can be proved.

According to Eleventh Circuit, the Anti-Kickback Statute "is not a highly technical tax or financial regulation that poses a danger of ensnaring persons engaged in apparently innocent conduct." As if it were self-evident, the court declared that "the giving or taking of kickbacks for medical referrals is hardly the sort of activity a person might expect to be legal." Finally, the court found that such kickbacks are inherently morally wrong as opposed to illegal only because they are statutorily prohibited.

The court did not engage in any analysis or cite any evidence in declaring that the Anti-Kickback Statute is "not highly technical." The court was obviously not aware of the confusion that has reigned over the last few years regarding the scope and application of the Anti-Kickback Statute to the medical field. Indeed, determining how the Anti-Kickback Statute applies to hospitals, physician practices, labs and durable medical equipment companies has given rise to a vast legal and consulting industry to deal with the myriad issues.

The Court's finding that medical referral payments are "hardly the activity a person might expect to be legal" is also surprising. The Ninth Circuit in Hanlester, by contrast, specifically found that many of the arrangements that allegedly violated the Anti-Kickback Statute "were fairly common" and "not per se unlawful." In fields such as law referral, payments are an accepted legal practice, and the Anti-Kickback Statute only applies to remuneration paid in conjunction with patients or services for which the government pays the bills. We can only hope that, had the court been evaluating an informal (and common) quid pro quo arrangement between two physicians who have agreed to refer patients to one another, it would not be so ready to find a federal criminal violation in such a referral arrangement.

Finally, Starks not only made new laws as to how the Anti-Kickback Statute is interpreted, the court surprised experts in how it applied the federal sentencing guidelines to Anti-Kickback violations. The court rejected the "fraud guideline" and found that the more burdensome "bribery guideline" applied instead.