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Physician Beware: Ruling Expands Reach of Anti-Kickback


Court determines that an illegal referral can exist even if a physician plays no role in determining what provider a patient obtains services from.

I lecture clients regularly on compliance with the Anti-Kickback Statute (AKS), a criminal federal statute that generally prohibits the giving or solicitation of “kickbacks” for referring federal patients to a particular healthcare provider. 

Unlike most statutes and their related case law, which typically allow healthcare attorneys to provide clients with fairly clear guidance, case development around the AKS has created much uncertainty, even for experienced counsel.

In yet another decision that adds complexity to advising clients on the AKS, a recent decision in the 7th Circuit (United States v Patel) has expanded the reach of the AKS even further.  In this case, the court examined the definition of a “referral” under the AKS and determined that an illegal referral can exist even where a physician plays no role in determining the healthcare provider from which a patient may obtain services.

In this case, a Chicago physician, Dr. Patel, routinely saw patients who required home healthcare services.  In order for a federal patient to receive home healthcare services, a physician must complete Form 485, which certifies not only that home care is medically necessary but it also outlines the diagnosis and treatment plan, among other details.  Although Dr. Patel’s patients apparently went to many different agencies, one agency (Grand) had an arrangement to pay Dr. Patel $400 for each signed Form 485 when the patient chose such agency, and an additional $300 if the patient was recertified for care beyond 60 days.

The interesting part of the Patel case is that although Dr. Patel decided when and if patients required home healthcare (and in fact nobody questioned that the patients were properly certified for such care), Dr. Patel played no role in steering  patients toward any particular home health agency.  In fact, patients were presented by a practice nurse with a wide variety of home health agency brochures from which to choose (and most chose an agency other than Grand). 

Still, the government found that the arrangement between Patel and Grand violated the AKS.

Most healthcare lawyers would likely not have approved the arrangement between Grand and Patel in the first instance.  After all, why was Grand paying Patel for a form he needed to complete for his patients?  Did it hope he would steer patients to Grand even if Patel apparently took no action to do so?  Did Patel not wonder why other agencies made no such payments? 

The AKS is an intent-based statute and case law in the area has always made it clear that if even one purpose of the remuneration is to induce the referral of a federal patient to obtain items or services from a particular provider, then the statute is implicated.  Under this scenario, I would have warned my clients that such payments were potential kickbacks.

In the Patel case, the court’s interpretation was different than expected.  Rejecting Dr. Patel’s argument that a “referral” cannot occur without a recommendation of a healthcare provider (and in this case, no “recommendation” was made), the court agreed with the government’s argument that a doctor’s authorization of care can be a “referral” within the meaning of the statute.

Accordingly, the court held that Patel determining that his patients could go to Grand put Dr. Patel in the role of “gatekeeper” to federally-reimbursed care.  Consequently, the court found that even if no specific recommendation was made, Dr. Patel did take some action to allow his patients to go to Grand, and was paid in return.

What does this decision mean for physicians and counsel setting up arrangements in the future? Payments from healthcare providers in any way, shape, or form must be considered suspect and fully examined. 

Although the same analysis and concerns regarding the AKS continue to apply, providers are advised to assume the broadest interpretation of the AKS that could apply to any arrangement, to closely review the direct and indirect flow of funds between all healthcare providers, and to keep an eye out for potential “gatekeeper” roles that a provider may play.

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