United States: A Physician May Violate Anti-Kickback Laws Even Without Steering Patients To A Specific Provider

The United States Court of Appeals for the Seventh Circuit recently issued an interesting decision concerning the definition of "referral" in the context of federal anti-kickback laws. See U.S. v. Patel, No. 14–2607, 2015 WL 527549 (7th Cir. 2015).  In the Patel matter, the United States charged a Chicago-area physician with violating and conspiring to violate the Anti–Kickback Statute, 42 U.S.C. § 1320a–7b (the "Statute"), alleging that the physician received undisclosed payments from a home health services provider for referring patients.

The referral process at issue is summarized below:

“First, [physicians] made the initial determination that the patient required home health care services. This initial decision is not at issue in this case – it is undisputed that all of Patel's patients who were treated by [home health provider] needed home health care. After this initial determination was made, a provider needed to be chosen. [Physician] did not personally discuss the selection of providers with patients or their family members, either as an initial matter or as part of recertification. Rather, his patients discussed home health care options with [physician's] medical assistant . . . [Physician] did not tell [medical assistant] which provider to recommend. [Medical assistant] gave patients an array of 10-20 brochures from various providers. The brochures were given to [physician's] office by the providers, but it is unclear whether [medical assistant] and [physician] included every brochure that they were offered. One of the brochures provided by [medical assistant] was [home health provider], but the government does not contend that it was included in the array because [home health provider] had offered [physician] kick-backs. Each patient independently chose a provider from those in the array. After a provider was selected, [medical assistant] called or faxed the provider with the name of the patient, his diagnosis, and his Medicare number. The fax cover pages from [physician's] office bore the subject line 'new referral' and the body of the faxes contained prescriptions for home health care signed by [physician] or by [medical assistant], with [physician's] authorization.”

The physician received $400 from the home health provider for each new patient, and $300 for each recertification. The government did not allege that any patient received treatment when it was not needed. Further, the government did not allege that the physician actively steered any patients to the home health provider. In fact, many of the physician's patients chose other providers when given the option. The government nevertheless argued that the exchange of money itself constituted a "referral" under the Statute and the District Court agreed. The physician appealed his conviction and eight-month sentence to the Seventh Circuit Court of Appeals.

In affirming the conviction, the Seventh Circuit focused on the definition of "referral" in the context of the Statute and other laws governing Medicare and Medicaid fraud, such as the Stark Act, 42 U.S.C. § 1395nn. The physician argued that the traditional definition of "referral" in the medical context is a doctor's recommendation that a patient see a particular provider, and that this is the behavior that Congress targeted when it enacted the Statute. The physician argued, among other things, that because (a) he did not steer patients to the home health provider, and (b) the government could not demonstrate any harm, the physician did not violate the Statute.

The Court rejected the physician's proposed definition of "referral," opting for a more expansive interpretation, stating: "[o]ften, people use the word 'referral' to describe a doctor’s authorization to receive medical care, even when the doctor is not the one choosing the provider of that care." The Court determined that the Statute was designed to prevent Medicare and Medicaid fraud, and that a narrow definition of the term would defeat the central purpose of the Statute. Further, the Court determined that it was irrelevant that the government could not demonstrate any harm arising from the alleged pay arrangement.

Under the Court's interpretation, criminal liability may exist even if a physician takes no action to encourage his patients to select one provider over another and the Centers for Medicare & Medicaid Services ("CMS") suffers no harm. Doctors should review their compensation arrangements to determine if these types of payments exist and, if so, seek competent counsel to navigate potential risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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