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David McGill Blogger

What's a referral?

Posted by David McGill | March 10, 2015

We usually focus our posts on Medicare-related news. But we want to shift gears today to explore a compliance-related topic: what is a "referral" in the context of the Federal Anti-Kickback Law?

The Case 

The Federal Anti-Kickback law prohibits the knowing and willful solicitation or receipt of any remuneration in return for referring an individual to a person for the delivery of a service or item reimbursable under a Federal health care program. The 7th Circuit examined this in connection with the prosecution of a physician in Illinois.

The physician, Dr. Patel, argued that because he had not referred patients to a specific home health care facility, he couldn't have violated the Anti-Kickback law, even though he received payments from that facility. The government acknowledged that Dr. Patel appropriately prescribed home health care services to every patient at issue. In other words, the services were medically necessary. The government further conceded that Dr. Patel never directed patients to receive treatment from the home health care entity that paid him. Instead, the evidence showed that he gave patients anywhere from 10-20 pamphlets from different home health care agencies and the patients decided which one to use. Based on these facts, Patel claimed that hadn't referred anyone anywhere.

The 7th Circuit's Analysis

While Patel argued that "refer" means to personally recommend that a patient receive care from a specific person or entity, the 7th Circuit concluded that the term more generally describes "a doctor's authorization to receive medical care, even when the doctor is not the one choosing the provider of that care." [emphasis added] 

What does this mean for you? 

The 7th Circuit's decision reinforces the broad interpretation of the Anti-Kickback Law favored by federal law enforcement. The OIG has historically prosecuted the individuals paying kickbacks and, as this case shows, now the individuals receiving them as well. As a result, you need to take the following three steps to protect your business.

First, review your records at least annually to see if you're paying anything to physicians or other health care providers, or alternatively, receiving payments for referrals yourself. (The statute isn't referring only to cash payments; ​any transfer of value potentially violates the law (e.g., gifts, credits, etc.)).

Second, if you are making or receiving any such payments, confirm whether they fit into one of the Anti-Kickback Law's "safe harbors." These exceptions may permit the payment, but only if you meet every one of the safe harb​or's requirements. 

Third, if you are either unsure whether your payment qualifies for a safe harbor or it clearly does not, call a health care attorney and get an opinion about whether the payment is appropriate. The Anti-Kickback Law is a broad statute. In theory, it could apply to almost anything. So some transfers of value - even though they aren't within a safe harbor - may not give rise to liability while others will. Working with health care counsel to understand the boundaries will protect your company from a risk that many in the world of orthotics and prosthetics fail to even consider, much less understand. 

If you don't believe us, check with Dr. Patel: he only referred people for home health care when it was medically appropriate; he didn't encourage patients to go to any specific home health care agency. But because he still received payments from one particular company when patients selected it on their own and he then authorized it, the 7th Circuit upheld his criminal conviction: 8 months in jail, 200 hours of community service, and repayment of just under $32,000 for kickbacks paid to him by that entity.

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