By: Jackie Bain

Providers of healthcare items or services are well-served to take note: a Federal Court of Appeals has recently held that “the Anti-Kickback Statute prohibits a doctor from receiving kickbacks that are made in return for a referral. It does not require that the referral be made in return for a kickback.”  Thus, receiving any unauthorized payment from a health care provider to whom you send patients is a very bad idea.

The Federal Anti-Kickback Statute, 42 USCS § 1320a-7b(b) states, in pertinent part, that a person may not knowingly or willfully solicit or receive any remuneration directly or indirectly, overtly or covertly, in cash or in kind, in return for referring an individual for the furnishing of a healthcare item or service that is payable in whole or in part by a Federal healthcare program. In laymen’s terms, a person cannot pay or receive anything of value in return for furnishing a Medicare patient to receive a healthcare item or service. (Note, however, that the law does set forth examples of permissible payments, or “safe harbors,” but we won’t address those in this article.)

In United States v. Patel, 778 F.3d 607 (7th Cir. 2015), the United States Court of Appeals for the Seventh Circuit (presiding over Wisconsin, Illinois and Indiana) was asked to determine if the following facts ran afoul of the Anti-Kickback Statute. Dr. Patel was an internal medicine physician who occasionally his patients for home health care services. The vast majority of Dr. Patel’s patient population is insured by Medicare. Once Dr. Patel made the referral, his patient would independently choose which home health provider to use. Dr. Patel never recommended a particular home health care provider, and was never involved in helping a patient choose a particular home health care service. Once the patient chose his/her provider, Dr. Patel would then certify on an appropriate Medicare form that the patient qualified for home health care services. The home health care provider would then bill and collect from Medicare for the services it provided to the patient. For each patient that chose to procure home health services from a provider named Grand Home Health Care (“Grand”), Grand would pay Dr. Patel $400 in cash. If Dr. Patel later recertified the patient for additional home health care services, Grand would pay him $300 in cash. Regardless of the payments made by Grand to Dr. Patel, the parties all agreed that all of the patients treated by Grand were in need of home health care services.

The question at issue before the Court was whether Dr. Patel violated the Anti-Kickback Statute by receiving payment in return for referring his patients to Grand. The Anti-Kickback Statute does not define the term “referral”. Dr. Patel contended that a physician cannot refer a patient when the patient, with no input from the physician, independently chooses a provider. The Government argued for a more expansive view of the word “referral”— mainly, that the term includes not only a recommendation of a provider, but also a doctor’s authorization of care by a particular provider. The Government’s interpretation of the term “referral” meant that each time Dr. Patel certified or recertified for a patient to receive home health care services from Grand on the appropriate Medicare form, he was “referring” that patient to Grand.

The Court noted that, when interpreting the meaning of undefined terms in a statute, the rule is that words should be given their ordinary and plain meaning. After examining the various definitions for the term “referral” and he main purposes of the Anti-Kickback Statute, the Court held that the term “referral” includes not only a recommendation of a healthcare provider, but also the authorization or certification of care by that provider. In a medical context, people often use the word “referral” to describe a doctor’s authorization to receive medical care. The physician acts as a gatekeeper for certain specialized medical services. For example, once a patient chose a home health provider, Dr. Patel’s office would fax that patient’s information to Grand under a cover sheet titled “New Referral” even though Dr. Patel played no part in the patient’s selection of Grand.