Billing of prescription drugs in the long-term care setting is not always straightforward and the rules governing billing depend on the payor and payment arrangement. Typically, a skilled nursing facility (SNF) bills Medicare under Part A for prescription drugs and pays a fee-for-service rate to the institutional pharmacy. Under federal law, Medicare Part D drug plans should not pay for prescription drugs that are covered under the Part A SNF benefit.

The Department of Health & Human Services Office of Inspector General (OIG)’s focus in this area is on pharmacies that are submitting “duplicate” bills directly to Part D in order to obtain payments in addition to the amount received from the SNF. OIG’s concern is that the SNF would pay the pharmacy a lower rate knowing that the pharmacy will submit a Part D claim and therefore be made whole. Unfortunately, such an arrangement is not permitted. Although duplicate billing can occur due to simple error or oversight, the knowing submission of duplicate claims can create liability under the False Claims Act and/or Federal Anti-Kickback Statute.

Federal False Claims Act

The federal False Claims Act covers fraud involving any federally funded contract or program, including Medicare and Medicaid programs. The act establishes liability for any person who knowingly presents or causes to be presented a false or fraudulent claim to the U.S. government for payment.

The act does not require proof of a specific intent to defraud the U.S. government. Instead, health care providers can be prosecuted for a wide variety of conduct that leads to the submission of fraudulent claims to the government, including double-billing for items or services.

By knowingly billing Medicare for prescription drugs for which the SNF has directly received Part A reimbursement, a pharmacy faces liability in the amount of three times the government’s damages plus civil penalties of $5,500 to $11,000 per false claim.

Federal Anti-Kickback Statute

The federal Anti-Kickback Statute prohibits the offering, giving, receiving or solicitation of illegal remuneration (kickbacks or bribes). Anyone who knowingly and willfully solicits, pays, offers or receives any remuneration, in cash or in kind, directly or indirectly, overtly or covertly, to induce or in return for arranging for or ordering items or services that will be paid for by Medicare or Medicaid may be guilty of a felony and fined or imprisoned for not more than five years, or both.

The Anti-Kickback Statute is implicated where one purpose of the remuneration transferred to a party is to induce the referral of government-program business. In the event an SNF is aware of a pharmacy’s duplicate billing scheme or participates in the scheme by accepting discounted rates for prescription drugs, the SNF (together with the pharmacy) may be violating the Anti-Kickback Statute by providing the pharmacy with access to the Medicare Part A business in exchange for a lower or discounted fee-for-service rate.

Given the severity of sanctions under the False Claims Act and Federal Anti-Kickback Statute, including imprisonment, parties to these arrangements need to structure them appropriately and in a manner consistent with applicable law.