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3 lessons from “referral” case for AKS violations

The term “referral” is not clearly defined within the Anti-Kickback Statue (AKS). This ambiguity can make it difficult when building relationships with other healthcare providers. A recent case provides a reminder for the need to tread carefully when making these arrangements.

In the case, Stop Illinois Health Care Fraud LLC v. Asif Sayeed, Physician Care Services, S.C. Management Principles, Inc., and Vital Home and Health, Inc, Management Principles, Inc. (MPI) agreed to pay $5,000 per month to Vital Home and Healthcare, Inc. in exchange for administrative advice. Although not outlined specifically within the agreement, the collaboration resulted in MPI accessing Vital Home and Healthcare’s client records. It would then allegedly use this information to reach out and make new patient contacts.

A whistleblower filed a lawsuit against the company, alleging the relationship was a referral in violation of the Anti-Kickback Statute (AKS). The case made its way up to the United States Court of Appeals for the Seventh Circuit. The Seventh Circuit explained that the definition of “referral” for the purposes of the AKS is broad. As a result, it includes both direct and indirect referrals. It encouraged the lower courts to review the facts of the case under the “file access theory” to determine if the relationship constituted an AKS violation.

In the end, the court stated that the ultimate effect of the arrangement, not its form, is what mattered. Since the ultimate effect of this arrangement was to gather new federal healthcare program eligible patient contacts, access to the files constituted a referral. The court further stated that the fees paid by the management company to the community care organization were meant as remuneration for the services. As a result, the relationship was a violation of the AKS.

Healthcare providers and others who bill Medicare or other federal healthcare programs are wise to learn three things from this case:

#1: Courts are applying the term “referral” broadly when it comes to AKS cases

This case provides an example of just how broadly courts are defining a referral for the purposes of this law. As far as the courts were concerned, the provision of information was enough to meet this definition.

#2: Eyes are everywhere

The old saying that you live in a fishbowl applies to organizations that bill the government, like those who file claims with Medicare. This is true because anyone within the business could file a claim stating they are violating federal law. Why would they do this? Because they stand to gain from the case. If the case is successful, they get a percentage of the award.

#3: Move forward with these relationships carefully

This does not mean healthcare providers should avoid collaboration. Instead, it should highlight the need to make sure such relationships fit one of the many safe harbors of the AKS.