Illegal Kickbacks and Referrals in Healthcare Fraud

Illegal Kickbacks and Referrals in Healthcare Fraud

Illegal Kickbacks and Referrals in Healthcare Fraud 150 150 Bo Frith

A whistleblower may bring a variety of different allegations of healthcare fraud. One such allegation concerns improper referral fees. Whistleblowers can bring a lawsuit for this type of fraud through the Anti-Kickback Statute and the Stark Law.

The Anti-Kickback Statute and Stark Law prohibit medical providers from paying or receiving financial compensation, or anything of value, in exchange for referring patients. For the statutes to apply, government programs such as Medicare or Medicaid must pay for some of the healthcare received. The idea behind both statutes is to keep medical decisions free from the motive of financial gain. Kickbacks and other unlawful financial arrangements can lead to a variety of negative healthcare outcomes, including:

  • overburdening the healthcare system with unnecessary procedures;
  • increasing the cost of government healthcare programs;
  • encouraging poor decision-making by healthcare providers; and
  • promoting unfair competition.

The Anti-Kickback Statute and Stark Law differ in their scope and level of proof required. The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b, covers a broader range of activity than the Stark Law, and extends to all medical providers in a position to arrange or recommend medical services. “Referrals” under the Anti-Kickback Statute include “any item or service for which payment may be made in whole or in part under a Federal health care program.”[1] The statute applies even if a medical provider did not have the specific intent to commit a violation.[2] Notably, penalties can be imposed on both parties involved in the arrangement—in other words, the party receiving the kickback and the party making the kickback—upon a showing that the violation was “knowing and willful.”

Under the Stark Law, 42 U.S.C. § 1395nn, “referrals” are limited to certain types of medical services, such as lab testing, hospital services, prescription drugs, and durable medical equipment, defined as “designated health services.”[3] In addition, the Stark Law applies only to relationships with physicians.[4]

The federal government aggressively pursues suspected violations of the Anti-Kickback Statute and Stark Law against healthcare providers. The zealous prosecution of these statutes can result in significant financial reward. For example, under the Anti-Kickback Statute, the government can pursue civil penalties of up to $50,000 per violation plus three times the amount of any government overpayment. Under the False Claims Act, a whistleblower is entitled to a percentage of the government’s recovery.

In 2020, Lynchburg-based Centra Health and Blue Ridge Ear, Nose and Throat agreed to pay nearly $10 million to settle claims of improper kickbacks and referral fees.[5] Blue Ridge ENT allegedly had a financial relationship with Centra that guaranteed income to one of its physicians.[6] Centra also allegedly agreed to pay back Blue Ridge ENT for actual additional incremental costs attributed to that physician.[7] A whistleblower and former physician at Blue Ridge ENT brought the lawsuit under a provision of the False Claims Act alleging violations of the Anti-Kickback Statute and Stark Law.[8]  The whistleblower shared in the government’s monetary recovery.[9]

As demonstrated by the Centra Health example, illegal kickbacks and referral systems occur in Western Virginia. Should you become aware of such healthcare fraud, we encourage you to contact the attorneys at Frith & Ellerman Law Firm.



[1] See 42 U.S.C. § 1320a-7(b) (b) (Illegal remunerations).

[2] 42 U.S.C. § 1320a-7(b) (h) (Actual knowledge or specific intent not required).

[3] 42 USC § 1395nn (h)(6) (Designated Health Services).

[4] 42 USC § 1395nn (a)(1) (In General).

[5] Centra Health Inc. and Blue Ridge Ear, Nose, Throat, and Plastic Surgery, Inc. Agree to Pay Nearly $10 Million to Settle False Claims Act Allegations. Dep’t of Justice, U.S. Attorney’s Office W.D.VA. (April 22, 2020). Available at

[6] Smith, Samantha. Centra, Blue Ridge ENT agree to pay nearly $10 million to settle alleged improper financial relationships. WSLS 10 News (April 22, 2020). Available at

[7] Mahoney, Rachel. Centra Admits Physician Contracts Violated Self-Dealing Law in $9M Settlement. Lynchburg News and Advance (April 22, 2020). Available at

[8] Hospitals, Docs Strike $9M Deal in Feds’ Kickback Suit. Law360 (April 22, 2020). Available at

[9] Centra Health, Blue Ridge ENT Agree to Pay Nearly $10M Settlement in Lawsuit Involving Allegations of Improper Financial Relationships. WFXR Fox News (April 22, 2020). Available at

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