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What is a Referral Under the Federal Anti-Kickback Laws?

What is a Referral Under the Federal Anti-Kickback Statute?

(June 11, 2015): Under the federal Anti-Kickback Statute (Anti-Kickback Statute), what constitutes a referral? Notably, neither the term referral nor the term referring (as it is referred to in the law) are defined in the statute. While you may be tempted to argue that a referral only occurs when one party refers a beneficiary to another party for services or supplies that may be covered by a federal health care provider, a recent Seventh Circuit case shows how broad this term is likely to be interpreted by the courts.

I.  The Federal Anti-Kickback Statute:

At the outset, it is important to keep in mind that the Anti-Kickback Statute is a criminal statute. The statute makes it a crime to exchange (or offer to exchange), anything of value, in an effort to induce (or reward) the referral of federal health care program business. See 42 U.S.C. § 1320a-7b. Violations of the Anti-Kickback Statute can result in fines of up to $25,000 and imprisonment for up to five years. Under the federal Anti-Kickback Statute, a health care provider may be liable if he or she is found to be:

”knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe, or rebate)… in return for referring an individual to a person for the furnishing” of health care services paid for, in whole or in part, by a federal health care program.” 42 U.S.C. § 1320a-7b(b)(1)(A).(emphasis added).

A recent decision issued by the Seventh Circuit Court of Appeals has provided a comprehensive analysis as to what it believes may constitutes a referral under the Anti-Kickback Statute. In the case, United States vs. Kamal Patel, a Chicago area doctor was found to be in violation of the Anti-Kickback Statute because he allegedly referred one of his patients to a home health care provider in return for a monetary payment. The Patel case has important implications for physicians and other health care providers who wish to avoid liability under the Anti-Kickback Statute and, possibly in turn, under the False Claims Act.

II.  Background of the Case – What is a Referral?

Dr. Patel practiced internal medicine and provided services for elderly patients. He prescribed home health care services to about ten patients per month. 95% of Dr. Patel’s patients were Medicare beneficiaries. The home health care provider, Grand Home Health Care (Grand), was among several providers available to Dr. Patel’s patients. After experiencing a decline in its patients, the owners of Grand met with Dr. Patel and offered to pay Dr. Patel for referrals on a per-patient basis. Grand started to provide services for 2 to 4 of Dr. Patel’s patients per month. After the patients selected Grand as the home health care provider, Grand was required to obtain Dr. Patel’s certification and recertification on the Medicare Form 485 for payment under Medicare. Grand would pay Dr. Patel $400 for each certification and $300 for each re-certification.

Importantly, Dr. Patel was not involved in the selection of Grand by his patients. The patients chose Grand among a number of choices given to them by Dr. Patel’s assistant. Moreover, Dr. Patel did not discuss the selection with the patients or their family members. Grand, however, could not be paid and reimbursed under Medicare without Dr. Patel signing the Form 785 certification form which stated that the home health care was medically necessary. Dr. Patel would also sign the re-certification form if home health care and treatment lasted longer than 60 days. Grand paid Dr. Patel $300 for each certification form, and $400 for each re-certification form signed. The certification form also stated that Dr. Patel “authorized” the services.

Dr. Patel was subsequently investigated and prosecuted under the federal Anti-Kickback Statute for referring patients to Grand in return for monetary payments. Dr. Patel argued that he had not referred his patients because the patients selected Grand without input or recommendation from him. The Court disagreed. The Court found that a broader definition of referring is mandated in order to promote the central purpose of the Anti-Kickback Statute to prevent Medicare and Medicaid fraud and to “protect doctors whose medical judgments might be clouded by improper financial considerations.”

The Court therefore concluded that the term referring under the Anti-Kickback Statute not only addresses an action by a physician in recommending home care services but also in authorizing such services. The Court found that the danger of fraud in the certification process is quite clear because a physician could refuse to certify the provider thereby increasing the cost of care and impeding the selection process of the patient. Also, the Court found that the doctor would have an improper incentive to certify or re-certify a provider when the care is not necessary or the services of the provider are not competent. Ultimately, the Court found that Dr. Patel acted as a financial gatekeeper to the patient selecting the provider of choice, making the patient’s independent choices at the outset meaningless if Dr. Patel did not provide certifications.

III.  “Certifications” and “Recertifications” Can Result in Liability:

In the Patel case, the physician there did not directly refer his patients to the home health care provider at issue. Yet, the Court found treated certifications and recertifications completed by Dr. Patel to be the same conduct as a referral because without the doctor’s authorization the provider could not be paid under Medicare. Accordingly, doctors must take extra care to monitor staff and the providers with whom they work with in treating payments. Both monetary payments and other forms of remuneration received from a home health agency must be carefully evaluated to ensure that the relationship does not run afoul of the federal Anti-Kickback Statute. Depending on the state, it may also be necessary for you to analyze any applicable state statutes that may criminalize such conduct. As this case reflects, referrals, certifications and recertifications can result in a violation of the statute.

The Patel case suggests that what is a “referral” may be broadly construed by a court to include any type of approval or authorization by the physician, including, but not necessarily limited to, the signing of a Medicare certification or recertification form.

IV.  Final Remarks:

It is important to keep in mind that the federal Anti-Kickback Statute is a criminal statute. Moreover, a violation of the Anti-Kickback Statute may give rise to parties involved in the “referral” – both a referring (certifying or recertifying) physician, and the home health agency to whom the referral is being made. It is imperative that any and all home health Medical Director (and similar) relationships must be carefully vetted to ensure that the business relationship does not run afoul of the Anti-Kickback Statute.

Although not raised in the Patel case, it is important to also keep in mind that the Patient Protection and Affordable Care Act (Affordable Care Act), Public Law 111-148, can lead to civil False Claims Act liability under similar facts. As you will recall, the Affordable Care Act was passed by Congress and subsequently signed into law by President Obama on March 23, 2010. While the overall purpose of the legislation was to make health care more accessible and affordable for millions of uninsured Americans, the statute also introduced a number of important revisions to the federal Anti-Kickback Statute, one of which expanded a health care provider’s potential liability for a Medicare or Medicaid-related kickback violation. While both the government and private relators had successfully argued (under an implied certification theory) that a violation of the Anti-Kickback Statute may give rise to a violation of the False Claims Act, the Affordable Care Act effectively codified this theory. As 42 U.S.C. § 1320(a)-7b(g) now provides:


(1) KICKBACKS.—Section 1128B of the Social Security Act

(42 U.S.C. 1320a–7b) is amended by adding at the end the following new subsection:

‘‘(g) In addition to the penalties provided for in this section or section 1128A, a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of title 31, United States Code.’’

As a result of this legislation, federal prosecutors (and possibly whistleblowers) could have also pursued this case under the civil False Claims Act. Both physicians and home health care providers must be mindful that the damages and penalties under the False Claims Act can be quite severe. A violation of the False Claims Act can result in penalties of between $5,500 to $11,000, plus treble damages, per false claim.

What’s the answer for your organization? First and foremost, it is imperative that you develop, implement and adhere to the provisions and guidelines of an effective Compliance Plan. While no Compliance Plan can completely shield a health care provider from liability, your earnest efforts to fully comply with the law can go a long ways towards dispelling the argument that you knowingly (as defined under the False Claims Act) submitted a false claim to the government for payment.

Robert Liles represents health care providers in RAC and ZPIC appeals.Robert W. Liles, JD, MS, MBA serves as Managing Partner at Liles Parker, Attorneys and Counselors at Law. Robert represents home health agencies of all sizes around the country in connection with a full range of ZPIC prepayment reviews, postpayment audits and suspension actions. He also handles home health False Claims Act cases. For a complimentary consultation, please call Robert at: 1 (800) 475-1906.

OIG Proposes New Anti-Kickback Law Safe Harbors

(November 10, 2014): The U.S. Department of Health and Human Services Office of Inspector General (“OIG”) recently published a Proposed Rule that would amend the safe harbor regulations under the Federal Anti-Kickback statute[1] (“AKS”) as well as add new safe harbors. The Proposed Rule would also establish new exceptions to the Civil Monetary Penalty (“CMP”) statute related to the beneficiary inducement CMP.[2] OIG will accept comments on the Proposed Rule by mail or electronically until December 2, 2014 at 5 p.m. (Eastern).

I.  The Anti-Kickback Statute and Safe Harbor Regulations:

The AKS provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce or reward the referral of business reimbursable under Federal health care programs. The types of remuneration covered specifically include, but are not limited to, kickbacks, bribes, and rebates, whether made directly or indirectly, overtly or covertly, in cash or in kind. Additionally, prohibited conduct includes not only the payment of remuneration intended to induce or reward referrals of patients, but also the payment of remuneration intended to induce or reward the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by any Federal health care program.

Due to the broad reach of the statute, interested parties expressed concern that some relatively innocuous commercial arrangements would be covered by the statute. This could, in turn, potentially subject entities to unwarranted criminal prosecution. As a result, Congress drafted certain “Safe Harbor” provisions. These regulations describe various payment and business practices that, although they potentially implicate the Federal AKS, are not treated as offenses under the statute.

II.  Changes to the Anti-Kickback Statute:

The Proposed Rule would modify certain existing safe harbors under the AKS as well as add new safe harbors that provide new protections or codify certain existing statutory protections. These changes include:

      • A technical correction to existing safe harbor for referral services;
      • Protection for certain cost-sharing waivers, including pharmacy waivers of cost-sharing for financially needy Medicare Part D beneficiaries and waivers for state- or municipality-owned emergency ambulance services;
      • Protection for certain remuneration between Medicare Advantage organizations and federally qualified health centers;
      • Protection for discounts by manufacturers on drugs furnished to beneficiaries under the Medicare Coverage Gap Discount Program; and
      • Protection for free or discounted local transportation services that meet specified criteria.

III.  Changes to the Beneficiary Inducement CMP:

The Beneficiary Inducement CMP statute generally prohibits any person or entity from offering remuneration to a Medicare or Medicaid beneficiary if that remuneration is likely to influence the beneficiary’s selection of a provider. The Proposed Rule would also amend and narrow the definition of “remuneration” to include certain exceptions for the following:

  • Copayment reductions for certain hospital outpatient department services
  • Certain remuneration that poses a low risk of harm and promotes access to care;
  • Coupons, rebates, or other retailer reward programs that meet specified requirements;
  • Certain remuneration to financially needy individuals; an
  • Copayment waivers for the first fill of generic drugs.

OIG also proposes to codify the gainsharing CMP[3]. The gainsharing CMP prohibits a hospital from knowingly paying, either directly or indirectly, a physician to induce the physician to reduce or limit the services provided to Medicare or Medicaid beneficiaries under the physician’s direct care. The Proposed Rule would narrow the prohibition in light of today’s health care landscape, which focuses on “accountability for providing high quality care at lower costs.”

IV.  Conclusion:

Health care providers should be interested in the Proposed Rule and make comments as necessary. The Proposed Rule makes pertinent changes to the AKS Safe Harbors and CMP laws that should give providers greater leeway to enter into beneficiary arrangements without fear that they will be subject to criminal penalties under the statutes. In a sense, the Proposed Rule follows OIG’s ongoing efforts to adopt regulations that promote lower costs and greater health care services while protecting patients and federal health care programs from fraud and abuse.

As a provider, if you have any questions about the current regulations found within the Anti-Kickback Statute or the proposed changes, please do not hesitate to give us a call today. We would be more than happy to assist you so that you remain compliant with all federal and statute regulations regarding potentially fraudulent activity.

Saltaformaggio, RobertRobert Saltaformaggio, Esq., serves as an Associate at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent health care providers and suppliers around the country in connection with Medicare audits by RACs, ZPICs and other CMS-engaged specialty contractors.  The firm also represents health care providers in HIPAA Omnibus Rule risk assessments, privacy breach matters, State Medical Board inquiries and regulatory compliance reviews.  For a free consultation, call Robert at:  1 (800) 475-1906

[1] 42 U.S.C. § 1320a-7b(b).

[2] 42 U.S.C. § 1320a-7a.

[3] 1128A(b)(1) of the Social Security Act.