Hannlester Case Pros And Cons

Anti-Kickback Statute prohibits anyone knowingly or willfully offering, paying or soliciting or receiving remuneration, directly or indirectly; in cash or kind; in exchange for; patient referrals or furnishing or arranging a good or service for a Federal healthcare program including Medicare or Medicaid. Stark would also apply to Hanlester as well but Stark was not enacted until after the Hanlester case. Stark is strict liability, does not require the knowingly/willfully element, and is not prosecuted criminally.
1) Pros that support that Hanlester should not be viewed as a financial inducement:
a. The contract was created to be lawful, not intentional to be illegal
b. Knowingly and willfully acts, a required element of AKS, was not the basis of the initial of the contract
c. Smith Kline did not solicit remuneration from the partners
Cons that support that Hanlester should be viewed as

Between March 1987 and March 1988, Hanlester issued a private placement memoranda offering limited partnership shares in joint venture laboratories PPCL, Placer, and Omni. Smith Kline entered a laboratory management agreement with PPCL which required PPCL to provide a Medical Director and pay a fee to Smith Kline of $15,000 or 80% of all net cash receipts, whichever is greater. During this time, Ms Hitchcock told prospective partners that the memorandum was sales material only. However, she also told prospective partners that eligibility to purchase shares the number of shares they can purchase was based on volume of business they referred to the laboratories. Also, if the partners did not refer business, they would be pressured to leave the partnership. If the partners did comply, their return on investment was guaranteed. These actions were interpreted by the courts as offers of payment to induce referrals of program related business based on volume of referrals which is