Laboratories, durable medical equipment (DME) suppliers, wound care product vendors, and remote patient monitoring (RPM) companies can offer nursing facilities free services, discounted equipment, or direct payments that function as inducements for resident referrals and vendor selection. The arrangement can look like an ordinary business courtesy. Under the federal Anti-Kickback Statute, it can be a felony. Nursing facilities control which ancillary providers see their residents, and that control is exactly what the statute was written to reach.
The Arrangements Under Scrutiny
OIG guidance has flagged a consistent pattern of free or below-fair-market-value arrangements between ancillary suppliers and nursing facilities. Laboratories have offered free phlebotomy staffing, chart review, and infection-control reporting that goes beyond specimen collection. DME suppliers have provided free or deeply discounted equipment for residents covered under the SNF Part A benefit. Long-term care pharmacies and laboratories have supplied free computers, software, and administrative support. The same remuneration analysis reaches newer vendor categories: an RPM vendor's free monitoring devices or enrollment-based fees, and a wound care supplier's free dressing supplies or billing support tied to exclusive use of a particular product, substitute something other than cash for the same thing a cash kickback buys: value flowing to whoever controls the referral.
The Anti-Kickback Statute's Remuneration Standard
Under the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), it is a felony to knowingly and willfully offer, pay, solicit, or receive remuneration to induce referrals of items or services reimbursable under a federal health care program, or to induce the purchase, lease, or order of any good or service paid for under such a program. Remuneration reaches far beyond cash: free staffing, free equipment, discounted supplies, and waived fees all qualify. Liability attaches whenever one purpose of the arrangement is to secure referrals of federal program business, even where the free service also benefits patient care. A conviction carries a felony record, a fine of up to $100,000, and up to ten years in prison.
The Anti-Kickback Statute asks only one question about a free service to a nursing facility: whether one purpose of the arrangement is to secure referrals of federal program business.
Why Free Services Rarely Qualify For a Safe Harbor
The statute's safe harbors for personal services and management contracts, and for equipment and space rentals, each require a written agreement, compensation set in advance at fair market value, and terms that do not vary with the volume or value of referrals. A laboratory's free chart-review staffing, a DME supplier's free equipment for SNF Part A residents, and an RPM vendor's free devices tied to enrollment numbers fail that test on their face: the price is zero, or discounted, specifically because the facility refers or orders. Stark Law raises a parallel concern wherever a referring physician, rather than only the facility, receives the benefit. The arrangement itself is the exposure, regardless of whether the free service changed a clinical decision.
Exposure Runs in Both Directions
The supplier that offers free goods and the facility, or the facility decisionmaker, that accepts them both face liability under the Anti-Kickback Statute. Health Law Alliance's attorneys have overseen 2,000+ audits and handled 5,000+ matters, with 25+ years of experience. A facility that has accepted free lab staffing, discounted DME, or RPM revenue-sharing can receive a civil investigative demand or a grand jury subpoena before anyone involved has worked out that the arrangement was a kickback rather than a courtesy. DME suppliers named in these arrangements have faced their own enforcement exposure, and laboratories have faced parallel scrutiny under the kickback theories also used against labs under EKRA for other referral sources. Facilities and suppliers that unwind these relationships early, through counsel rather than an internal memo, are positioned to resolve a government referral short of conviction, including through a deferred or non-prosecution agreement where the facts support it.
Why Early Legal Counsel Is Critical
It is critical that healthcare providers promptly retain experienced healthcare defense counsel upon receiving a subpoena, audit notice, investigative request, or other government inquiry. Early legal intervention can protect the provider's rights, ensure appropriate responses to government requests, avoid inadvertent admissions, preserve relevant defenses, and allow counsel to communicate with investigators on the provider's behalf. Delaying legal representation can significantly affect the outcome of a matter and expose the provider to unnecessary risk.
How Health Law Alliance Can Help
Health Law Alliance defends healthcare professionals and companies in Anti-Kickback Statute investigations, from the first civil investigative demand through resolution. The firm's healthcare fraud defense practice reviews existing ancillary-supplier arrangements, restructures them to fit an available safe harbor where one applies, and defends the facility or supplier once the government has already opened an inquiry. Contact us for a free, confidential consultation.
