11th Circuit establishes scienter requirement for violation of Medicare/Medicaid anti-kickback statute.

• Author: Mandelkern, I. Paul
• Position: U.S. 11th Circuit Court of Appeals - 42 U.S.C. 1320a-7b(b - 1 - 2

In Starks the 11th Circuit Court followed the traditional legal principle that ignorance of the law is no excuse.

In the recent case of United States v. Starks, 157 F. 3d 833 (11th Cir. 1998), for the first time the United States Court of Appeals for the 11th Circuit articulated its view on the degree of scienter, or guilty knowledge, required before a defendant can be convicted of a violation of the Medicare/Medicaid anti-kickback statute, 42 U.S.C. [sections] 1320a-7b(b)(1) and (2) (the "anti-kickback statute"). The 11th Circuit held that in order to sustain a conviction for violating the anti-kickback statute the government need only prove that the defendant had knowledge that his or her conduct was unlawful and need not prove that the defendant knew that the conduct specifically violated the anti-kickback statute. In doing so, the 11th Circuit followed the traditional legal principle that ignorance of the law is no excuse.

The anti-kickback statute, which is [sections] 1128B(b) of the federal Social Security Act, makes it illegal for a person "knowingly" and "willfully" either to solicit or receive or to offer or pay "any remuneration directly or indirectly, overtly or covertly, in cash or in kind" in connection with referrals of patients or other goods and services covered by Medicare, Medicaid, CHAMPUS, or any other "federal health care program" as defined in 42 U.S.C. [sections] 1320a-7b(f). A violation of the anti-kickback statute is a felony punishable by a maximum fine of $25,000 or imprisonment up to five years, or both. In addition, a conviction under the statute can lead to automatic exclusion from the Medicare and Medicaid programs. Moreover, the United States Department of Health and Human Services (HHS) may, regardless of a criminal conviction, exclude persons from the Medicare and Medicaid programs if after an administrative process they are found to have violated the anti-kickback statute, or it may impose civil monetary penalties for activities prohibited by the statute. The elements of a violation of the anti-kickback statute that must be proved in a criminal or civil case are the same, including the statute's "knowingly" and "willfully" scienter requirement.

As originally enacted in 1972, the anti-kickback statute created a misdemeanor offense and was limited in scope to prohibiting only kickbacks, bribes, and rebates in connection with the referral of Medicare or Medicaid patients or furnishing items or services reimbursed by those programs. However, the statute was amended and made more complex over the ensuing years. In 1977 the Medicare and Medicaid Anti-Fraud and Abuse Amendments Act expanded the scope of the statute to prohibit any "remuneration," whether direct or indirect, overt or covert, in cash or in kind, and the statute was upgraded to a felony. For the first time, statutory exceptions were enacted exempting bona fide discounts and employment arrangements from the scope of the statute. Thus, after the 1977 amendment the anti-kickback statute prohibited a broader range of transactions beyond actual bribes, kickbacks, or rebates. The Omnibus Budget Reconciliation Act of 1980 (OBRA) modified the anti-kickback statute to require that the prohibited conduct be committed "knowingly" and "willfully." The legislative history of OBRA shows that this change was made because Congress was concerned that a criminal penalty could be imposed on an individual whose conduct, while improper, was inadvertent. In 1987, the Medicare and Medicaid Patient and Program Protection Act amended the anti-kickback statute further and directed HHS to promulgate "safe harbor" regulations to specifically exclude certain types of commercial transactions or arrangements from the scope of the statute. The legislative history of the 1987 amendment indicates Congress' concern with the breadth of the anti-kickback statute and the uncertainty among health providers as to the types of transactions proscribed by the statute. The 1987 amendment also gave HHS the authority to exclude violators of the anti-kickback statute from the Medicare and Medicaid programs. Finally, the Health Insurance Portability and Accountability Act of 1996 amended the statute to allow HHS to issue advisory opinions regarding whether a particular transaction or arrangement is prohibited by the statute.

In response to the Congressional mandate, HHS has issued "safe harbor" regulations under the anti-kickback statute and a series of advisory opinions. A transaction or...