Mid-Atlantic Health Law TOPICS

The federal anti-kickback statute provides penalties for anyone who knowingly and willfully offers, pays, solicits or receives remuneration to induce or reward referrals of business that may be reimbursed under the Medicare or Medicaid programs.

Depending on the nature of the referral relationship, this prohibition may cover payments made to independent sales or marketing agents who are paid a commission based on the number of referrals made.

Relevant Cases

In United States v. Miles, a federal court held in 2004 that a marketing company did not violate the anti-kickback statute when it accepted per-patient commissions from a home health agency as payment for distributing information that promoted the agency to physicians. The court held that the marketer’s conduct was legal, because the marketer never actually referred anyone to the home health agency and the payments were for ordinary advertising activities even though the payments were calculated per patient. 

Two more recent decisions, however, found that marketing relationships violated the anti-kickback statute when the marketers helped to steer patients to providers, and were paid referral commissions based on the number of patients referred. 

In United States v. George, a federal court in 2016 found that a per-patient fee for each Medicare patient referred to a home health organization violated the anti-kickback statute, despite the marketer having no final authority to make the referrals and despite the patients having to be certified for care by a physician. The court distinguished Miles on the ground that the marketer in George directly referred patients and was effectively responsible for deciding which home health service the patients used.

Similarly, in United States v. Williams, a different judge in the same federal court, also in 2016, held that per-patient referral payments to a health care marketing company violated the anti-kickback statute. This case not only also included personal contact between the marketer and patients, but other “bad” facts. Specifically, the marketer tried to cover up the referral scheme by submitting invoices based on “marketing hours” even though there was no attempt to calculate the actual number of hours worked. Instead, the marketer simply converted each patient referred to 10 marketing hours.

Recommendations

To safely avoid violating the anti-kickback statute, marketing relationships should, if possible, be structured to fall clearly within one of several safe harbors. One safe harbor involves payments made by an employer to an employee who has a “bona fide employment relationship” with the employer. Another safe harbor covers compensation paid for “personal services,” provided that the compensation is set in advance, is consistent with fair market value for the services, and is not based on the volume or value of business generated. 

If a marketing relationship that includes payments that vary with success cannot be structured within a safe harbor, then

• The marketer should be prohibited from personal contact with patients;
• The marketer, of course, should be prohibited from making any payments to patients or health care provider referral sources; and
• The marketer should be compensated for advertising services, not referrals.

Even if those restrictions are met, however, the relationship may now come with an increased level of risk to the extent that the 2016 George and Williams cases are the harbinger of a “trend.”

Barry F. Rosen
410-576-4224 • brosen@gfrlaw.com