Ruling Clarifies Legal Referrals in Healthcare Community for Non-Physicians
As we have previously covered, one of the most important federal laws at the government’s disposal for combating healthcare abuse is the Anti-Kickback Statute (“AKS”), which at its core makes it illegal for anyone in the healthcare industry to give referrals or “renumerations” to professionals in order to induce or reward the referral of federal healthcare business (such as Medicare or Medicaid). A recent unanimous ruling at the 7th Circuit of Appeals has narrowed what constitutes illegal conduct under the Act, setting new boundaries between what is and isn’t a lawful marketing practice that could bring criminal charges against individuals or businesses. Mark Sorensen, owner and operator of a Chicago-based Medicare-registered distributor of durable medical equipment, SyMed, had his conviction overturned and 42-month sentence vacated, after the panel found that there was insufficient evidence that he violated the statute through his “aggressive advertising efforts” to get orthopedic braces to Medicare beneficiaries. Along with a billing agency and marketing agency, the business model at issue had the marketing agency publish advertisement for orthopedic braces, when prospective patients responded to those advertisements, a sales agent would collect information from the interested party and then fax a, “prefilled but unsigned prescription forms to patients’ physicians.” Once SyMed was paid by Medicare for any braces, they would keep 21% as a service fee, and give back 79% of payment to the advertising firms based on the number of leads generated to the tune of millions of dollars. Any type of kickback scheme based on percentages were generally frowned upon and many believed they could easily lead to criminal violations in the medical space, so were generally avoided by businesses seeking to remain compliant.
In overturning the conviction, the panel wrote that “critical” to their decision was that in 80% of cases, the physicians declined to sign these prescription forms, evidence that the parties in the business model, “were neither physicians in a position to refer their patients nor other decisionmakers in positions to ‘leverage fluid, informal power and influence’ over healthcare decisions.” Meaning that because the decision whether or not to fill the prescription for Medicare patients was up to physicians, they did not try and leverage to induce prescriptions being filled and the business model did not give kickbacks or referral fees to anyone in positions of authority to see those prescriptions filled, there was insufficient evidence to convict Mr. Sorensen under the statute. While the decision was quick to clarify that the statute can apply to “non-physicians” as well, that those cases were less common and do not apply to similar arrangements such as the one at the heart of this case. While this decision opens up new business opportunities for the medical industry, anyone seeking to emulate this arrangement should consult with an experienced attorney before entering into such an agreement, especially since this precedent is confined to this appellate region at the moment and there very well could be a split amongst the Circuit Courts of Appeals. However, anyone who has been convicted of similar violations of the Anti-Kickback Statute or is currently facing charges or believes to be under investigation should likewise seek an experienced defense attorney who can help them navigate this change in the law and determine if it provides an avenue for relief.
