When is Marketing An Illegal Kickback?

kickbackHealthcare professionals and businesses are routinely barraged with people who claim to be able to generate business for them.  The business of healthcare is like none other in its abhorrence of anything that even smells like payment for patient referrals, so professionals and businesses alike have to be extremely cautious and well advised in crafting marketing and related business-enhancing relationships.

The federal Anti Kickback Statute (“AKS”) is a criminal law that arises in the context of individuals and entities that pay or receive anything of value in exchange for referring a patient whose care is compensated in any way by a state or federal healthcare program.  Violations of the statute are punishable by a maximum fine of $25,000 and/or imprisonment up to five years.  Federal courts have applied the statute to any arrangement where even one purpose of the arrangement was to obtain money for the referral of services or an attempt to induce additional referrals. Its exceptions (“Safe Harbors”) include permissible arrangements for independent contractors and employees, both of which are elusive because of the common requirement that the arrangement not vary based on the value or volume of business between the parties.  The “value or volume” aspect of the regulations flies in the face of percentage based compensation arrangements (which seem to be the rule in marketing relationships).

State laws like Florida’s Patient Brokering Act (PBA) and industry specific kickback prohibitions (e.g. 483.245, F.S., applying to clinical laboratories or 465.185, F.S., which applies to arrangements involving pharmacies) lean heavily on marketing relationships.  The PBA, for instance not only expresses the same intention (and criminal consequences) as the federal AKS, parties to marketing relationships cannot feel secure in escaping the reach of the AKS, in light of the fact that the PBA essentially permits relationships that meet the federal Safe Harbor, even where no federal or state healthcare program dollars are involved.  In short:  parties can’t necessarily sleep well simply by carving Medicare, Medicaid and other federal and state healthcare programs from their marketing compensation arrangements.

One of the key factual issues to wrangle with in the context of marketing has to do with whether in fact marketing constitutes a “referral” under applicable law.  How can a marketing professional (especially one who is not a licensed healthcare provider (“HCP”)) ever be held to have been paid for a patient referral, when the most they can do is open doors between HCPs?  This is no comfort when federal or state healthcare program dollars are involved, since the AKS prohibition extends beyond referrals to parties who are paid for “generating business.”  Lead generation relationships provide a good illustration of a difference that may matter.

The question of whether sales people are actually “referring” is a factual question which the Office of the Inspector General, in OIG Advisory Opinion 08-19 has addressed, in an unrelated context.  In that Opinion, which is not law, but which expresses prosecutorial intent, the following facts were presented:

  1. Internet advertiser (Advertiser),who was not a healthcare provider or supplier, specializes in creating internet platforms for “pay per call” and “pay per lead” type marketing arrangement;
  2. Advertiser wanted to expand its service into the chiropractic industry;
  3. Since some of the potential patients who would visit Advertiser’s web site might be seeking services covered by federal healthcare programs, the Advertiser wanted to know if the proposed arrangement might violate the Anti Kickback Statute;
  4. Each chiropractor client of Advertiser would be assigned a telephone number and e mail address owner by Advertiser;
  5. Advertiser would not collect any healthcare information (e.g. payer information, medical history, diagnosis) from the potential patient;
  6. The web site would have certain disclosures;
  7. Each chiropractor subscriber would pay Advertiser on a per call-per e mail basis at a “fair market value” rate;
  8. The Advertiser’s fee to the chiropractor would have nothing to do with (a) whether the potential patient actually became a patient of the chiropractor/subscriber, or (b) whether such potential patients are recipients of any federal healthcare program; and
  9. Potential patients will not receive anything of value for using the web site.

The OIG distinguished “advertising” from “referral” and stated that the proposed arrangement involves a “minimal risk of Federal health care program abuse, and therefore we would not seek to impose administrative sanctions….”

Parties looking at permissible marketing type relationships will likely find lower risk alternatives in the context of lead generation relationships, especially in light of the OIG Advisory Opinion.

Physicians have become especially attuned to kickback related issues.  What is surprising to learn, however, is how prevalent the issues are in healthcare industries like compounding pharmacies, clinical labs, and substance abuse recovery centers.  These and any other healthcare businesses in Florida have to be extremely cautious and well informed when stepping into marketing or marketing type relationships.  They need to know the laws, the options and the risks associated with each such option.

6 thoughts on “When is Marketing An Illegal Kickback?

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