Fraud in the Purchase and Sale of Medical Practices
Our health care fraud attorneys have experience in all the facets of health care fraud law, including the different types of fraud that can occur when the purchase or sale of a medical practice is taking place.
There is a lot to consider when you are thinking about purchasing or selling a medical practice and knowledge of the intricacies of the complicated health care fraud laws may take a back seat.
A knowledgeable health care fraud attorney will be able to advise and guide you through all the twists and turns of the health care fraud maze and can make sure you get the best results possible in your individual situation.
Below we discuss the relevant health care fraud laws when it comes to the purchase and sale of a medical practice.
Health Care Fraud Laws Relating to the Purchase of Sale of a Medical Practice
There are several federal laws that make up what is more commonly known as health care fraud law.
When purchasing or selling a medical practice it is important the following are the relevant health care fraud laws.
The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b))
This statute looks to punish the purposeful payment made in order to reward people or companies for patient referrals or the generation of business involving any item or service payable by the federal healthcare programs, including Medicare and Medicaid. There are several exceptions to this law. These exceptions are discussed more generally below but can be found in full under 42 CFR §1001.952.
Payments to Investors
In relation to the purchase or sale of a medical practice, a return on investment does not violate the anti-kickback statute. The government wants to ensure that all parties that helped build the practice by making an investment into it are repaid in full. However,the amount of payment to an investor in return for their investment interest must be directly proportional to the amount of the capital investment of that investor to avoid breaching this statute.
Rent PaymentsMaking payments in order to lease a space does not violate the anti-kickback statute so long as six factors are met:
- The lease agreement is in writing and signed by the parties;
- The lease covers all premises to be leased between the parties for the full term of the lease;
- If the lease is intended to provide the lessee with access to premises for a period rather than a full-term basis, those periods must be specified;
- The term of the lease of for at least one year;
- The rental charge is set in advance, is consistent with fair market value that does not take into account the volume of the business; and
- The whole space is not larger than what is necessary to accomplish a commercially reasonable business.
Sale of Practice
Illegal remuneration does not include payments made from one practitioner to another where the former practitioner is selling the practice to the latter practitioner, as long as two standards are present:
- The time between the date of the first agreement pertaining to the sale and the completion of the sale is less than a year.
- Plus, the practitioner who is selling the practice will not be in a professional position to make referrals to or create business for the purchasing practitioner for which payment could be made in whole or in part under any Federal health care program after 1 year from the date of the first agreement pertaining to the sale.
Basically, this means that if a doctor is buying a practice from another, the seller cannot refer patients who might be able to claim under Medicare, or a similar program after a year from the first agreements regarding the sale.
Illegal remuneration does not include any payment made to a practitioner by a hospital, or other larger medical entity, when the practitioner is selling their practice to that hospital or entity.
- The time between the date of the first agreement pertaining to the sale and the completion date of the sale is no longer than 3 years,
- The selling practitioner will not be in a professional position after completion of the sale to make or influence referrals to, or create business for in any way, the purchasing hospital or entity for which payment may be made under any Federal health care program,
- The practice being purchased is located in a Health Professional Shortage Area (HPSA), and
- The purchasing hospital or entity must diligently and in good faith participate in commercially reasonable recruitment activities.
- If you are found guilty of violating the Anti-Kickback statute you face fines of up to $25,000, a prison sentence of up to 5 years, or a combination of both.
The Physician Self-Referral law (Stark Law) (42 U.S.C. § 1395nn)
The Stark Law is aimed at punishing those doctors who refer patients to receive specialized medical care from any facility or business that the doctor, or any member of the doctor’s immediate family, has some financial interest in.
For example, if a general practitioner recommends that their patient needs some type of imaging service, like a CAT scan and refers them to an imaging center which happens to be owned by that physician’s doctor, that referral would be a violation of the Stark law.
There are exceptions to the Stark Law that are relevant to purchasing and selling a medical practice, included generally below. (The full list can be found under 42 CFR § 411.357.)
Isolated TransactionsThe one-time sale of a medical practice will not violate the Stark Law so long as all of the following conditions are met:
- The payment amount is consistent with the fair market value of the transaction, and the amount does not take into account the volume or value of any referrals by the selling physician or any other business between the parties,
- The payment is provided under an agreement that is commercially reasonable even if the selling physician made no referrals to the entity, and
- There are no additional transactions between the two parties for at least 6 months after the isolated transaction.
Other Applicable Laws to the Purchase or Sale of a Medical Practice
It is important to keep in mind that health care fraud may not be the only legal problem you may run into when selling or purchasing a medical practice.
You should consider tax exempt statutes, antitrust laws (including non-competition clauses) and laws under the Health Insurance Portability and Accountability Act (HIPAA).
If you have questions about the laws and regulations surrounding the sale of a medical practice, get in touch with an experienced attorney who can guide you through the process.
Let Our Attorneys Help You
Getting in touch with a lawyer as soon as you start to consider purchasing or selling a medical clinic will make the process easier and put you at less risk to be investigated for, or ultimately charged with, fraud.
If you are already under investigation for or have been charged with, health care fraud in relation to the buying or selling a medical practice you should contact an attorney as soon as possible.