The indictments of two Kansas osteopathic doctors in an alleged kickback scheme could define how far is too far for a hospital to go to fill its beds.
No hospitals or administrators have been charged in the case, but the government has accused the doctors of soliciting bribes from five hospitals it said paid for patient referrals.
The anti-kickback provisions of the Medicare and Medicaid fraud-and-abuse statutes make it a crime to "knowingly and willfully" solicit or pay remunerations for patient referrals. Criminal penalties for violations can include fines and imprisonment. Less severe violations can be considered civil offenses, punishable by fines and suspension or expulsion from Medicare and Medicaid.
The case could be significant if the government levels criminal charges against any of the five hospitals that had consulting agreements with the indicted doctors. If so, such a case could produce the first federal court ruling on what constitutes an illegal kickback paid by a hospital.
Past court rulings on kickbacks haven't involved hospitals, and they've been split over how narrow or broad the definition of a kickback should be. A broad definition works in the government's favor; a narrow one, in a provider's favor.
Federal agents in the Kansas case won't say whether more criminal charges stemming from the doctors' indictments will follow.
When it comes to violation of the anti-kickback statutes, the two biggest cases are at opposite ends of the spectrum, said Sanford Teplitzky, an attorney with the Baltimore office of Ober, Kaler, Grimes & Shriver.
In 1985, the 3rd U.S. Circuit Court of Appeals in Philadelphia became the first federal appeals court to define an illegal kickback. In a case called Greber, the court adopted a broad definition of a kickback. It said the law would be broken if even one purpose of a payment was to induce patient referrals regardless of whether the payment was for other services.
"This is the government's dream case," Teplitzky said. "It's as broad as you can get."
But providers were the ones rejoicing a decade later when in 1995, in the well-known Hanlester case, the 9th U.S. Circuit Court of Appeals in San Francisco adopted a narrow definition of an illegal kickback. That court said in order for providers to be found guilty, they have to know what they're doing is a kickback, know that it's illegal and do it anyway.
Patric Hooper, a Los Angeles attorney who defended the physician-owned laboratories in the Hanlester case, said the vagueness of the kickback statute leaves much to chance.
"As a result, it oftentimes becomes subject to the discretion of the prosecutors: Who are they going to go after this week?" Hooper said.
Last year, for example, the 8th U.S. Circuit Court of Appeals in St. Louis went for the middle ground between Hanlester and Greber.
In U.S. vs. Jain, the court upheld the conviction of a doctor who received payments from a psychiatric hospital for referring patients. The court said the level of proof was that the doctor knew his conduct was wrong.