False Claims Act Case Beaten by Bona Fide Employee Arrangement

By: Jeff Cohen     

One healthcare employer’s compensation arrangement with its employees just got much needed support from the 11th Circuit Court of Appeals.  The employer there, which provided AIDS patients certain healthcare related services, paid its employees a bonus of $100 per patient.  The case was brought on the argument that the compensation arrangement constituted an illegal kickback under the federal Anti- Kickback Statute.  The court, however, disagreed because the employees who received the bonuses were “bona fide employees.”

The court’s focus on the plain language of the safe harbor for bona fide employees was refreshingly clear, notably that “any amount paid by an employer to an employee (who has a bona fide employment relationship with such an employer) for employment in the furnishing or any item or service.”  Essentially, any amount paid by an employer to a bona fide employee is not considered to be “remuneration” under the Anti-Kickback Statute.

The federal law’s impact on its “first cousin” in Florida (the Florida Patient Brokering Act – Section 817.505) will be interesting to see.  While the PBA exception clearly captures the bona fide employee provision of federal law, the PBA is in a state of flux as law enforcement digs into it, particularly in the addiction treatment space.

The issue of compensation is especially controversial when applied to marketing healthcare items or services.  In fact, the environment of healthcare marketing has never been more treacherous than it is today.  So what’s changed?  How about:

1. Commission based marketing and sales involving federal or state payers, even those that arguably comply with the personal services arrangement and management contract safe harbor, are targeted by federal regulators;
2. State regulators and law enforcement are especially eager to use the PBA to attack marketing relationships in the addiction treatment space which are not clearly safe harbor compliant. Even then, such arrangements are especially vulnerable to question and expensive investigation.

While the 11th Circuit court case is very helpful in defining the permissible lines in marketing relationships, the devil is in the details.  What constitutes a “bona fide” employment relationship takes care and specificity, as does ensuring there aren’t also facts and circumstances that directly implicate federal and state laws designed to punish illegal behavior that may not seem obvious to providers.

As such, healthcare providers and marketers must:

1. Obtain healthcare legal advice at the “design” stage;
2. Know, follow and monitor strict compliance with applicable healthcare law;
3. Have a compliant contract (and follow it); and
4. Regularly document compliance with their own compliance driven policies, procedures, rules and regs.