The Anti-Kickback Statute and EMS Ambulance Billing

The federal Anti-Kickback Statute [AKS], 42 U.S.C. § 1320a-7b(b), prohibits certain discounts to customers (hospitals and nursing homes) who refer Medicare and Medicaid patients for EMS services. It does not apply to business relationships where 100% of the patients are cash-pay or private insurance.

Federal law


Federal Law 42 U.S.C. § 1320a-7b(b)

The Federal Anti-Kickback Statute [AKS] 42 U.S.C. § 1320a-7b(b) says:

  1. Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind --
    1. in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or
    2. in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program,
    shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.
  2. Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person --
    1. to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or
    2. to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program,
    shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.
  3. Paragraphs (1) and (2) shall not apply to --
    1. a discount or other reduction in price obtained by a provider of services or other entity under a Federal health care program if the reduction in price is properly disclosed and appropriately reflected in the costs claimed or charges made by the provider or entity under a Federal health care program;
    2. [...]

This means that EMS may not give discounts to a customer (nursing home or hospital) if that customer refers patients to EMS for services that will be paid for by Medicare or Medicaid... unless those same discounts are given to the Medicare and Medicaid programs.

Since nobody extends a discount to Medicare and Medicaid, you must be very careful what discounts, rebates, below-market prices, and other perks you give to customers who send you Medicare and Medicaid patients for transport.

In 2010 the Patient Protection and Affordable Care Act PL 111-148 clarified that an anti-kickback claim is a violation of the False Claims Act. This means that a violation of the Anti-Kickback Statute can result in loss of your Medicare and Medicaid numbers, among other penalties.


Intent Not Required

42 U.S.C. § 1320a-7b(h) of the Affordable Care Act clarified that the government does not have to prove that the defendant knew about the AKS and engaged in conduct with the intent to violate the AKS. The payment of the kickback is itself sufficient to establish guilt.

To wit:

"Section 6402(f) of Affordable Care Act [ACA] revises the evidentiary standard under the anti-kickback statute. ACA states that in order to establish a violation of Section 1128B of the Social Security Act, including the anti-kickback statute, a defendant does not have to have actual knowledge of, or specific intent to commit a violation of, the anti-kickback statute." -- Health Care Fraud and Abuse Laws Affecting Medicare and Medicaid: An Overview, September 8, 2014; 7-5700; RS22743, Jennifer A. Staman, Legislative Attorney for the Congressional Research Service

In other words, if your pricing structure is ruled to be a kickback, then it is automatically presumed to be intentional.


Dangerous EMS Practices

The following practices are common in the EMS industry but are likely to be ruled as violations of the AKS:

*If in doubt about the Medicare rates for a certain ZIP code, use AngelTrack's Medicare Rate Browser tool available under Billing Home.

How low is too low?

Medicare wants to pay the lowest price of all payors in the market. Therefore your stretcher rates should be equal to or greater than the Medicare rates for that ZIP code.

If your stretcher rates are even one dollar below Medicare's, then you are exposed to the Anti-Kickback Statute, and you must be able to justify the discount. Otherwise it is assumed to be a kickback.

Neither federal law nor CMS regulations give a definition of "reasonable discount", nor do they give any helpful examples. Therefore you are on your own, with no guarantee that your discounts will be judged "reasonable". And make no mistake: it does not matter how many other EMS operators in your area are doing the same thing; if your MAC objects to your discount, it is no defense that other EMS companies are equally guilty.

Here are some common justifications used by EMS to defend their contractual discounts:

None of these justifications are guaranteed to be acceptable, but they are nevertheless in common use. Consult your legal team before putting any of these ideas into practice.

Note that if you give a discount with any of these justifications as its basis, you must enforce it. For example, if you justify a 5% discount in exchange for "quick pay", then you cannot let that customer stretch their invoices out to 60 or 90 days. The customer must earn their discount.

If you do offer such a discount -- i.e. if your contract prices are even one dollar below the Medicare rates -- then you should take steps to qualify for the "Regulatory Discount Safe Harbor". The safe harbor will help you defend your pricing against accusations of kickbacks. AngelTrack will help you qualify for the safe harbor; see below to learn more.

Checking your contract prices against Medicare

AngelTrack will show you how your contract prices compare against the Medicare rates for the respective ZIP code. Visit the Pricing page under Billing Home and select any of the stretcher billing codes. The chart of prices will show each patient's and each facility's contract rates for that code, along with a percentage comparison against the Medicare rate.

Medicare rates usually change once a year. AngelTrack always has the current Medicare rates onboard. Use the Medicare Rate Browser tool under Billing Home to see what the rates are for your area.


Paying a bribe

Employees Receive a Bounty for Blowing the Whistle

An employee who blows the whistle on AKS violations occuring at your company will be paid a percentage of the amounts recovered in court. This means your employees (including ex-employees) have a financial incentive to report the aforementioned billing practices to the authorities.

Likewise for any employee or ex-employee of a nursing home or hospital, who blows the whistle on below-Medicare prices being offered to that facility.

So, you must not only avoid a violation of the law, you must also (for the sake of your employees) avoid any appearance of a violation of the law.


Current Enforcement Efforts

The proliferation of kickback violations prompted the Department of Health and Human Services [HHS] and the Department of Justice to create in 2009 the Health Care Fraud Prevention and Enforcement Action Team, also known as HEAT.

Anti-kickback prosecutions now make up the majority of False Claims Act cases. And most states also have their own comparable anti-kickback laws, with their own enforcement divisions.

When a prosecution occurs, the authorities go after both the ambulance company and the customers (nursing homes and hospitals). For a recent example, read this article: Below Medicare Rates and Free Miles Costs Houston Nursing Facility Group $3M


AKS Warnings in AngelTrack

AngelTrack has monitoring features to help you keep clear of the Anti-Kickback Statute. By reviewing each facility's history of insurance claims, AngelTrack determines which facilities are referring Medicare/Medicaid patients to you and hence subject to the AKS. This warning is therefore dependent upon your billing history with the facility: the warning will not function until that history has been established in AngelTrack. So, do not consider the absence of the warning as a guarantee that the AKS does not apply.

In other words, do not depend on AngelTrack's AKS warnings to keep you safe; everyone in the billing office should always be aware of which facilities are subject to the AKS.

Discounts on facility invoices

If underpaying an invoice and selecting the option to write off the balance as a courtesy discount, AngelTrack checks the facility's billing history to determine whether it has referred any Medicare/Medicaid patients in the past year. If it has, then the AKS warning icon appears.

When the warning icon appears, ask your billing director to review the invoice before proceeding with the planned discount.

Forgiveness of patient copays and invoices

If writing off part or all of a patient's balance, you will create an AKS hazard if the patient represents future business covered by federal programs. In that situation, if the patient cannot or will not pay, then you must not write off the patient's debt. Instead you must do one of the following:

  1. Sell the receivables to a collections agency operating at arm's length, whose decisions to reduce or forgive the debt are independent of your desire for future business; or
  2. Work with the patient to complete a hardship application which documents their poverty or indigence. If you do not yet have a hardship policy, you may use this sample financial hardship policy and application (in MS-Word format) as the basis for creating one.

Facility contract pricing

The AKS applies to any facility contract with Medicare and Medicaid patients in play. The facility's contract stretcher prices are not permitted to be lower than Medicare's, although a "cash pay discount" can usually be given. A good rule of thumb is: the total of all discounts, free mileage, and writeoffs must not exceed 20% of the Medicare published rate for that ZIP code. However this is just a rule of thumb: 20% is not a strict limit, rather it is an example of a "reasonable" discount for cash-pay/quick-pay versus the cost of billing insurance. Discounts that exceed 20% of Medicare rates carry an escalating risk of indictment under the AKS.

If you include free mileage in your contracts, then the value of those miles must be included in this calculation.

To help you steer clear of such risks, AngelTrack looks up the effective Medicare rates for each contracted facility and then compares them to the facility's contract price. The difference in prices is expressed as a percentage in the Pricing page. Anything below 80% should be carefully reviewed for AKS compliance.


The Regulatory Discount Safe Harbor

42 C.F.R. § 1001.952(h) provides a safe harbor for the giving and receiving of discounts off the published Medicare rates.

A safe harbor provides a legal defense (though not a guaranteed defense) in the event that you are accused of violating the adjoining law. You must take steps to qualify for the safe harbor before you need it.

Qualifying for the safe harbor

To qualify for the safe harbor, the buyer (i.e. the nursing home or hospital, subject to cost reporting) must meet the requirements listed in 42 C.F.R. § 1001.952(h)(1)(ii):

  1. The discount must be earned based on purchases of that same good or service bought within a single fiscal year of the buyer;
  2. The buyer must claim the benefit of the discount in the fiscal year in which the discount is earned or the following year;
  3. The buyer must fully and accurately report the discount in the applicable cost report; and
  4. the buyer must provide, upon request by the Secretary or a State agency, information provided by the seller as specified in paragraph (h)(2)(ii) of this section, or information provided by the offeror as specified in paragraph (h)(3)(ii) of this section.

Likewise the seller (i.e. the EMS company) must meet the requirements of 42 C.F.R. § 1001.952(h)(2)(ii):

  1. Where a discount is required to be reported to Medicare or a State health care program under paragraph (h)(1) of this section, the seller must fully and accurately report such discount on the invoice, coupon or statement submitted to the buyer; inform the buyer in a manner that is reasonably calculated to give notice to the buyer of its obligations to report such discount and to provide information upon request under paragraph (h)(1) of this section; and refrain from doing anything that would impede the buyer from meeting its obligations under this paragraph; or
  2. Where the value of the discount is not known at the time of sale, the seller must fully and accurately report the existence of a discount program on the invoice, coupon or statement submitted to the buyer; inform the buyer in a manner reasonably calculated to give notice to the buyer of its obligations to report such discount and to provide information upon request under paragraph (h)(1) of this section; when the value of the discount becomes known, provide the buyer with documentation of the calculation of the discount identifying the specific goods or services purchased to which the discount will be applied; and refrain from doing anything which would impede the buyer from meeting its obligations under this paragraph.

And finally, 42 C.F.R. § 1001.952(h)(2)(ii)(a) requires the seller (EMS) to remind the buyer (nursing home or hospital) of the buyer's possible obligation to report the discount, which any Cost Reporting Entity must do:

[EMS must] give notice to the buyer of its obligations to report such discount and to provide information upon request [...]

AngelTrack's invoicing system does the hard work for you

To help you qualify for the safe harbor, AngelTrack's invoices have two specific features:

  1. The template text shown on every facility invoice's cover page says:
    Cost Reporting Entities are obligated to report discounts and/or rebates upon request by HHS.
    If you require additional information to fulfill your annual cost report, please contact us.

    You can modify this text if your legal team decides that the built-in notice is insufficient.

  2. Whenever the total charged price is below the Medicare rate, the discount percentage (including the value of any free miles) is automatically calculated and printed in the invoice, like this:
    Invoice summary box showing AKS calculation

Serious enforcement is already underway

The importance of the regulatory discount safe harbor is no longer theoretical: serious enforcement of the AKS is ongoing, and EMS companies and their nursing home and hospital customers have already been tagged with fines and sanctions. For example, National Care EMS was accused of AKS violations with nursing homes and hospitals and settled for $245,000.

The safe harbor affords you some protection from this legal threat.

Further reading

For more background and precedent information about the AKS and the safe harbor, see:


Call Centers, Referrals, and Bounties

If you are a call center, or if you delegate a large number of calls to other services, you probably receive a bounty for each delegated call. Federal regulation 42 CFR 1001.952 provides an exception to the Anti-Kickback Statute, legalizing your bounty even though there may be Medicare and Medicaid patients in play:

  1. Referral services. As used in section 1128B of the Act, “remuneration” does not include any payment or exchange of anything of value between an individual or entity (“participant”) and another entity serving as a referral service (“referral service”), as long as all of the following four standards are met:
    1. The referral service does not exclude as a participant in the referral service any individual or entity who meets the qualifications for participation.
    2. Any payment the participant makes to the referral service is assessed equally against and collected equally from all participants, and is only based on the cost of operating the referral service, and not on the volume or value of any referrals to or business otherwise generated by either party for the referral service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.
    3. The referral service imposes no requirements on the manner in which the participant provides services to a referred person, except that the referral service may require that the participant charge the person referred at the same rate as it charges other persons not referred by the referral service, or that these services be furnished free of charge or at reduced charge.
    4. The referral service makes the following five disclosures to each person seeking a referral, with each such disclosure maintained by the referral service in a written record certifying such disclosure and signed by either such person seeking a referral or by the individual making the disclosure on behalf of the referral service:
      1. The manner in which it selects the group of participants in the referral service to which it could make a referral;
      2. Whether the participant has paid a fee to the referral service;
      3. The manner in which it selects a particular participant from this group for that person;
      4. The nature of the relationship between the referral service and the group of participants to whom it could make the referral; and
      5. The nature of any restrictions that would exclude such an individual or entity from continuing as a participant.

Notice that item (4) requires five specific disclosures, which must be included in your contract -- or added as a rider -- with the facilities who call you for services that you will be delegating to other companies.

The difference between the USC and the CFR

You may notice that the Anti-Kickback Statute is a federal law, a part of the United States Code [USC], whereas the aforementioned exception for referral services is a federal regulation, a part of the Code of Federal Regulations [CFR]. So what's the difference?

The USC contains laws passed by congress, and therefore tends to be general and non-specialized. The CFR, on the other hand, contains regulations -- which are detailed interpretations of laws -- that were created by federal agencies. Thus, title 42 of the USC is where Medicare and Medicaid laws are found, and title 42 of the CFR is where Medicare and Medicaid regulations are found. Of course all American citizens are required to abide both.

The Centers for Medicare & Medicaid Services [CMS] is the federal agency that interprets the Medicare laws from the USC into regulations for the CFR. The agency is part of the US Department of Health and Human Services [HHS], and was formerly known as the Health Care Financing Administration [HCFA].


This is Not Legal Advice

This primer is not legal advice and AngelTrack LLC does not provide legal counsel. Following the advice in this document does not absolve you of any legal liability, and this primer is not a full or sufficient treatment of the subject. This document is not a substitute for professional legal advice.

You should consult your legal counsel before setting any contract prices, before offering any discount or gift to any customer, and before charging or accepting any bounty for delegated calls. You can also contact your state's Office of the Attorney General / Office of the Inspector General for a written opinion on AKS compliance.

Help from AngelTrack LLC

AngelTrack LLC has staff with the following credentials:

...on call if you exhaust the other avenues and are not sure where to turn for compliance counseling. Anyone with a valid AngelTrack license is entitled to a free consult; call the main number and ask to speak with a compliance counselor.



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