What Are Kickbacks in Healthcare? Laws, Penalties, and Examples

Kickbacks in healthcare are payments or other things of value exchanged to influence where patients are referred for care, and federal law treats them as a felony. Under the Anti-Kickback Statute, anyone who knowingly pays or receives compensation tied to referrals for services billed to Medicare, Medicaid, or another federal healthcare program faces up to $100,000 in fines per violation and up to ten years in prison.¹ The reason these arrangements are outlawed is straightforward: when a doctor’s income depends on sending patients to a particular lab, hospital, or device company, that financial incentive can override medical judgment and drive up costs for taxpayers and patients.

What Counts as a Kickback

The federal Anti-Kickback Statute, codified at 42 U.S.C. § 1320a-7b, is the backbone of healthcare fraud enforcement. It makes it a felony to knowingly and willfully pay or receive anything of value in exchange for referring patients for items or services covered by a federal healthcare program. Both sides of the transaction face liability: the person offering the payment and the person accepting it can each be charged.¹

The statute covers “remuneration” of any kind, not just cash. Free office space, lavish dinners, paid vacations disguised as conferences, inflated consulting fees, and below-market equipment leases all qualify. If it has value and it is tied to referrals, the statute reaches it.

Prosecutors do not need to prove that generating referrals was the sole reason for a payment. Courts have adopted what is called the “one purpose” test: if even one purpose of the payment is to encourage referrals for federally covered services, the statute is violated, even when the arrangement also serves legitimate business goals. That low threshold catches many arrangements that look reasonable on the surface.

Common Examples of Illegal Kickbacks

Kickback schemes rarely announce themselves. They are almost always wrapped in the appearance of a normal business deal, which is what makes them dangerous. The patterns regulators see most often include the following.

Pharmaceutical Speaker Fees

A drug manufacturer pays a physician thousands of dollars per event to give talks about its medication. On paper, the doctor is a paid speaker. In practice, the events require minimal preparation, the audience is small or disengaged, and the real point is to reward the physician for prescribing the company’s drugs. The Department of Health and Human Services Office of Inspector General has flagged these arrangements repeatedly.²

Medical Device Incentives

Surgical implant companies sometimes offer surgeons perks like luxury travel, royalty agreements, or equity stakes in exchange for choosing their devices. The choice of a hip implant or spinal hardware should turn on clinical evidence and patient anatomy, not on whether the surgeon has a financial stake in the manufacturer.

Below-Market Office Space

A hospital provides a physician group with office space at well below fair market rent, with the unspoken expectation that those doctors will route their patients back to the hospital for procedures, imaging, and lab work. The Anti-Kickback Statute’s safe harbor for space rentals exists specifically because regulators recognized how easily lease arrangements can mask referral payments.

Waiving Patient Copayments

Labs and diagnostic facilities sometimes routinely waive patient copays or deductibles. It looks like a favor to the patient, but it can function as an inducement to steer all testing to that lab. The OIG has stated plainly that routinely waiving copayments can violate the Anti-Kickback Statute, though individual waivers based on a patient’s inability to pay are permitted.²

Telehealth Fraud Schemes

One of the fastest-growing areas of kickback enforcement involves telehealth companies. In a typical scheme, telemarketers collect Medicare beneficiaries’ personal information, then a purported telehealth company pays a doctor to sign orders for durable medical equipment, genetic tests, or prescriptions without ever examining or even speaking with the patient. A lab, equipment supplier, or pharmacy then buys the completed paperwork and bills Medicare for medically unnecessary services. The OIG has investigated dozens of these operations and published alerts warning providers to exercise extreme caution before entering arrangements with unfamiliar telehealth companies.³

The Main Federal Laws Against Kickbacks

The Anti-Kickback Statute

The Anti-Kickback Statute is the primary tool, and its features are described above. Because a 2010 amendment made every claim submitted to Medicare or Medicaid that results from a kickback automatically a “false or fraudulent claim,” a single kickback arrangement can also trigger False Claims Act liability for every tainted bill.¹ Each of those claims carries its own penalty plus three times the government’s actual damages.⁴ In fiscal year 2025, False Claims Act settlements and judgments exceeded $6.8 billion, with healthcare fraud accounting for over $5.7 billion of that total.⁵

The Stark Law

The Physician Self-Referral Law, commonly called the Stark Law, overlaps with the Anti-Kickback Statute but works differently. Codified at 42 U.S.C. § 1395nn, it prohibits a physician from referring Medicare patients for “designated health services” to any entity in which the physician or an immediate family member holds a financial interest, unless a specific exception applies.⁶

The designated health services list covers clinical laboratory work, physical and occupational therapy, radiology and imaging, radiation therapy, durable medical equipment, home health services, outpatient prescription drugs, and inpatient and outpatient hospital services.⁷

The biggest difference between the two laws is intent. The Anti-Kickback Statute requires proof that someone acted “knowingly and willfully” to induce referrals. The Stark Law is a strict liability statute. If a prohibited financial relationship exists and a referral is made, the law is violated regardless of whether anyone intended to do anything wrong. A physician who genuinely does not realize that an ownership interest disqualifies a referral still violates the Stark Law. Civil penalties reach $15,000 per improper claim and $100,000 for circumvention schemes.⁶

EKRA

The Anti-Kickback Statute applies only to services paid for by federal healthcare programs. That left a gap for kickback schemes involving privately insured patients. The Eliminating Kickbacks in Recovery Act (EKRA), enacted in 2018 as part of the SUPPORT for Patients and Communities Act and codified at 18 U.S.C. § 220, partially closes that gap. EKRA makes it a federal crime to pay or receive kickbacks in connection with referrals to recovery homes, clinical treatment facilities, and laboratories, regardless of who pays the bill, including private insurers and patients paying out of pocket.⁸ EKRA currently targets only labs, substance abuse treatment facilities, and recovery homes, so it does not reach all healthcare services the way the Anti-Kickback Statute does.

State Anti-Kickback Laws

Most states have their own anti-kickback statutes that can apply alongside the federal law. These sometimes reach arrangements that the federal statute does not, including services paid by private insurance or by the patient directly. Criminal penalties at the state level vary widely, with maximum prison sentences ranging from 30 days to 30 years depending on the jurisdiction. State medical boards can also take separate disciplinary action against a physician’s license, including suspension, revocation, or administrative fines.

Penalties for Kickback Violations

The consequences stack up in ways that can destroy a career or a company. Kickback enforcement operates on multiple tracks simultaneously, and a single scheme can generate criminal, civil, and administrative liability all at once.

Criminal Penalties

A criminal conviction under the Anti-Kickback Statute is a felony carrying up to $100,000 in fines per violation and up to ten years in prison. Each illegal payment in a scheme can count as a separate violation, so penalties compound quickly in long-running arrangements.¹

Civil Monetary Penalties

Separately from criminal prosecution, the OIG can impose civil monetary penalties of up to $100,000 for each kickback payment, plus an assessment of up to three times the total remuneration involved. These amounts are adjusted upward for inflation, and the 2025 inflation-adjusted maximum per violation is $127,973.⁹ Civil penalties can be imposed even when criminal charges are not filed, and the standard of proof is lower than in a criminal case.

Whistleblower Suits

The False Claims Act empowers private individuals, often employees, competitors, or business partners who witness the fraud, to file lawsuits on the government’s behalf. These are called qui tam actions. If the government joins the case and it succeeds, the whistleblower receives between 15 and 25 percent of the recovery. If the government declines to intervene and the whistleblower presses forward alone, the share increases to between 25 and 30 percent.¹⁰

Exclusion from Federal Healthcare Programs

Individuals and entities convicted of kickback offenses face exclusion from all federal healthcare programs. Medicare, Medicaid, TRICARE, and others will not pay for any item or service they furnish or prescribe. For a physician, exclusion effectively ends the ability to treat the majority of patients. For a company, it can be a death sentence. The exclusion also extends to employment: excluded individuals generally cannot work for any provider or supplier that bills federal programs, even in administrative roles.¹¹

Corporate Integrity Agreements

When a company settles kickback allegations, the OIG frequently requires it to enter a Corporate Integrity Agreement as a condition of avoiding exclusion. These agreements last five years and impose substantial compliance obligations: hiring a dedicated compliance officer, implementing employee training programs, retaining an independent reviewer to audit operations, establishing a confidential disclosure program, and submitting annual reports to the OIG. A material breach of the agreement is itself grounds for exclusion from federal programs.¹²

Financial Arrangements That Are Allowed

Not every payment between healthcare entities is illegal. Congress directed the OIG to create “safe harbors,” specific categories of arrangements that are shielded from prosecution if they meet every listed requirement. These are codified at 42 C.F.R. § 1001.952. An arrangement must satisfy all of a safe harbor’s conditions; meeting most of them is not enough.¹³

Payments from an employer to a bona fide employee for legitimate work are protected, provided the worker meets the IRS definition of an employee rather than an independent contractor paid per referral. Discounts on medical products and services are permitted when properly documented and accurately reported on cost reports to federal programs. Space and equipment rentals qualify when the lease is in writing for at least one year, specifies the exact space or equipment, and reflects fair market value set without regard to referral volume. Personal services and management contracts get similar treatment: written agreement, at least a one-year term, fair market value, and pay that does not fluctuate with referrals.¹³

The OIG finalized three additional safe harbors for value-based arrangements in 2020. These protect payments exchanged within a “value-based enterprise,” a group of providers and others working together to improve care quality for a defined patient population. The level of protection scales with the financial risk the participants assume, with the broadest protection reserved for enterprises taking on full financial risk for patient care. All value-based safe harbors require a written agreement, a defined target population, and measurable outcome or process benchmarks.¹³

How to Report a Suspected Kickback

Anyone who suspects a healthcare kickback arrangement can report it to the OIG through its fraud hotline. Reports can be submitted online at the OIG’s website or by calling 1-800-HHS-TIPS, and they can be made anonymously.¹⁴ Individuals with direct knowledge of fraud may also have the option of filing a qui tam lawsuit under the False Claims Act, which entitles them to a share of any recovery.

1
Office of the Law Revision Counsel. 42 USC 1320a-7b – Criminal Penalties for Acts Involving Federal Health Care Programs
2
Office of Inspector General. Fraud and Abuse Laws
3
Office of Inspector General. Telehealth
4
Office of the Law Revision Counsel. 31 USC 3729 – False Claims
5
U.S. Department of Justice. False Claims Act Settlements and Judgments Exceed $6.8B in Fiscal Year 2025
6
Office of the Law Revision Counsel. 42 USC 1395nn – Limitation on Certain Physician Referrals
7
Centers for Medicare & Medicaid Services. Physician Self-Referral
8
Office of the Law Revision Counsel. 18 USC 220 – Illegal Remunerations for Referrals to Recovery Homes, Clinical Treatment Facilities, and Laboratories
9
eCFR. 42 CFR Part 1003 – Civil Money Penalties, Assessments and Exclusions
10
Office of the Law Revision Counsel. 31 USC 3730 – Civil Actions for False Claims
11
Office of Inspector General. Special Advisory Bulletin on the Effect of Exclusions From Participation in Federal Health Programs
12
Office of Inspector General. About Corporate Integrity Agreements
13
eCFR. 42 CFR 1001.952 – Exceptions
14
Office of Inspector General. Submit a Hotline Complaint