Definition
The Anti-Kickback Statute (AKS) is a federal criminal law designed to protect patients and federal healthcare programs from fraud. In simple terms, it makes it illegal to knowingly and willfully offer, pay, solicit, or receive anything of value to encourage or reward patient referrals for services paid for by programs like Medicare or Medicaid.
The two most important things for you to understand are.
1. “Anything of value” is broad. This is not limited to cash. It can include free or discounted rent, free administrative staff, or excessive compensation for a medical directorship.
2. The “one purpose” test. If even one purpose of a payment or benefit is to induce referrals, it can violate the law, even if other legitimate reasons exist.
Why This Matters to Healthcare Providers
During a practice sale, a buyer’s legal team will intensely examine all your financial relationships for AKS compliance. An arrangement that seems like a good business deal, like discounted rent from a hospital, could be viewed as an illegal kickback for your referrals, putting your entire transaction at risk.
Example in Healthcare M&A
Scenario: A multi-specialty group is performing due diligence to acquire your successful primary care practice. Your practice leases office space from a local diagnostic imaging center for 30% below what other tenants in the building pay. You refer a significant number of patients to this imaging center.
Application: The buyer’s lawyers will flag this lease arrangement as a high-risk area for an AKS violation. The discounted rent is “remuneration” (something of value) from the imaging center. Because of the “one purpose” test, a prosecutor could argue that at least one purpose of the cheap rent was to thank you for past referrals and induce future ones.
Outcome: The buyer will require you to fix this potential violation before the sale. This could involve renegotiating the lease to a fair market value rate and potentially self-disclosing the arrangement to the government. At worst, the perceived compliance risk could cause the buyer to lower their offer or walk away from the deal entirely.
Related Terms
- Stark Law – An often-confused civil law with a stricter “no-intent-required” standard that applies only to physician self-referrals for specific services.
- Due Diligence – The buyer’s investigation process where financial arrangements like leases, employment contracts, and service agreements are reviewed for AKS compliance.
- Representations and Warranties – Your binding statements in a sale contract that the practice has complied with all laws, including the AKS. A breach can lead to significant financial liability for you post-sale.
Preparing properly for buyer due diligence can prevent unexpected issues. Request a Due Diligence Preparation Session →
About the SovDoc M&A Glossary
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Frequently Asked Questions
What is the Anti-Kickback Statute (AKS)?
The Anti-Kickback Statute (AKS) is a federal criminal law that makes it illegal to knowingly and willfully offer, pay, solicit, or receive anything of value to encourage or reward patient referrals for services paid for by federal healthcare programs like Medicare or Medicaid.
What does ‘anything of value’ mean under the AKS?
Under the AKS, ‘anything of value’ is broadly defined and includes not just cash, but also things like free or discounted rent, free administrative staff, or excessive compensation for a medical directorship.
What is the ‘one purpose’ test in the context of the AKS?
The ‘one purpose’ test means that if even one purpose of a payment or benefit is to induce patient referrals, the arrangement can violate the AKS, even if there are other legitimate reasons for the payment.
Why is the AKS important during healthcare practice sales?
During a practice sale, the buyer’s legal team will scrutinize all financial relationships for AKS compliance to avoid illegal kickbacks that could put the transaction at risk. For example, discounted leases linked to patient referrals may need correction before the sale proceeds.
How can a discounted office lease be a problem under the AKS during a practice sale?
A discounted lease to a medical practice by an imaging center could be viewed as a kickback if it’s tied to patient referrals. The buyer’s legal team may require the lease to be renegotiated to a fair market value rate to avoid violating the AKS, or the deal could be jeopardized.