It’s common for businesses big and small to outsource marketing. For providers and healthcare business owners, it is no different. In a competitive healthcare market, organizations and medical practices are becoming creative in their advertising to differentiate themselves from competitors.
Unfortunately, creative arrangements that may incentivize a marketing company to bring in more business isn’t always rewarded in healthcare. In fact, these arrangements can even be illegal.
The Anti-Kickback Statute (AKS) prohibits persons from knowingly and willfully soliciting, making payment or receiving remuneration “in return for referring or inducing reimbursable business under state or federal healthcare programs.” See 42 U.S.C. § 1320a-7b(b).
Under the statute, remuneration may be direct or indirect, overt or covert and in cash or in kind. The term “refer,” as used in the AKS, is not limited to physicians and other healthcare providers who formally authorize a service. The AKS covers arrangements where at least one purpose of the arrangement is to receive funds to induce further referrals. See United States v. Greber, 760 F.2d 68, 71-72(3d Cir. 1985). Violation of the statute constitutes a felony, and a conviction will cause physicians and providers to be excluded from federal healthcare programs.
In response to AKS, the Department of Health and Human Services has promulgated safe harbor laws to identify actions that are not subject to the statute, as these actions would be unlikely to result in fraud or abuse. See 42 C.F.R. § 1001.952.
For marketers, the pertinent regulatory safe harbor provisions are outlined in the personal services and management contracts provisions. The government sets out seven safe harbor provisions for marketers to follow. Even though safe harbor compliance is not mandatory, it creates a presumption of compliance and an affirmative defense if indicted.
When examining potential marketing agreements, spend some time reviewing provisions concerning these three areas:
· The agreement is set out in writing and signed by all parties.
· The term of the agreement is for more than one year.
· The compensation paid for the term of the agreement
o is set in advance,
o is consistent with fair market value in arm’s-length transactions and
o is not determined in a manner that takes into account the volume or value of any referrals / business otherwise generated between the parties for which payment may be made under Medicare, Medicaid or other federal healthcare programs.
The Office of Inspector General further states, “In reviewing arrangements that do not fit in the personal services and management contracts safe harbor, this office has identified several characteristics of arrangements among sellers, sales agents and purchasers that appear to be associated with an increased potential for program abuse, particularly overutilization and excessive program costs.” See OIG Adv. Op. No. 99-3 (Mar. 19, 1999)
These suspect characteristics include but are not limited to:
1. compensation based on percentage of sales;
2. direct billing of a federal healthcare program by the seller for the item or service sold by the sales agent;
3. direct contact between the sales agent and physician(s) who orders items or services paid for by a federal healthcare program;
4. direct contact between the sales agent and federal healthcare program beneficiaries;
5. use of sales agents who are healthcare professionals or persons in a similar position to exert undue influence on purchasers or patients; and
6. marketing of items or services that are separately reimbursable by a federal healthcare program, whether on the basis of charges or costs.
In conclusion, marketing arrangements for healthcare businesses need not be difficult to navigate. Executives and medical practice should try to remain squarely under the protection of safe harbor provisions. If they are having difficulty deciphering whether an arrangement is protected under the law, then they should reach out to an experienced attorney for guidance.
Doris O. Dike, JD, is a healthcare attorney at Friedman & Feiger, LLP, a law firm based in Dallas. She represents physicians, pharmacies, home health companies, healthcare entrepreneurs and other healthcare providers nationwide. She can be reached at [email protected].