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Real World Kickback Case – Broad Reading of Referral

March 9, 2015

AMARILLO, TX – On February 10, 2015, the 7th Circuit Court of Appeals published a decision in which it upheld the conviction of a physician under the Medicare anti-kickback statute based on a broad reading of “referral.” 1

The trial court (U.S. District Court for the Northern District of Illinois) convicted Dr. Kamal Patel of six counts of violating the anti-kickback statute and one count of conspiracy to violate the anti-kickback statute. The court found that Grand Home Health Care paid Dr. Patel $400 in cash per home health care certification and $300 per recertification for each Grand patient whose care Dr. Patel certified or recertified. Dr. Patel was sentenced to eight months in prison.

In upholding the conviction, the 7th Circuit noted that the parties agreed that: ]

Dr. Patel made the initial determination that the patient required home health care services…..After this initial determination was made…..Patel did not personally discuss the selection of providers with patients or their family members, either as an initial matter or as part of recertification. Rather, his patients discussed home health care options with Patel’s medical assistant….[who] gave patients an array of 10-20 brochures from various providers. Each patient independently chose a provider from those in the array.

Further, the government acknowledged that each of Dr. Patel’s patients who were served by Grand actually needed home health services.

Dr. Patel argued that, as a matter of law, the certifications and recertifications did not constitute “referrals” within the meaning of the anti-kickback statute. Dr. Patel’s position was that in the context of the statute, “refer” means to “personally recommend to a patient that he seek care from a particular entity,” and there was no evidence that Dr. Patel did so. On the other hand, the government advocated for an expansive reading of “referral” that “include[d] a doctor’s authorization of care by a particular provider.”

The appellate court recognized that the anti-kickback statute does not define “referral” but nevertheless rejected Dr. Patel’s argument. Although the court found that Dr. Patel’s proposed definition was consistent with a common usage of the term, “referral” is used in other contexts to “describe a doctor’s authorization to receive medical care, even when the doctor is not choosing the provider of that care.” The 7th Circuit cited no cases adopting such a broad definition under the anti-kickback statute.

Faced with two plausible readings of “referral,” and without any reference to precedent, the appellate court determined that Congress intended the anti-kickback statute to extend to certification and recertification of patients for government-reimbursed care, even in the absence of steering, based on the fact that the statute’s main purpose is to prevent fraud. The 7th Circuit endorsed the trial court’s view that Dr. Patel was a “financial gatekeeper as well as a medical one.” Even though there was no alleged financial harm to the Medicare program, the government persuaded the court that “the prospect of a kickback gave Dr. Patel an increased incentive to charge Medicare for these services – exactly the type of incentive that Congress sought to eliminate by passing” the anti-kickback statute.

The appellate court’s holding that Dr. Patel made referrals even though he did not select or even recommend a particular provider goes beyond the definition of “referral” employed by other courts. In a number of other cases, the kickback recipient played a role in the selection of the provider that paid the kickback. It is likely that the government, and the two courts, were critical that Grand was paying Dr. Patel for signing the certification and recertification forms. In other words, the “smell test” may have convicted Dr. Patel.

While the Patel case involves a physician, DME suppliers need to understand that under the anti-kickback statute, a referral source is not limited to a physician. The anti-kickback statute can be violated if any person or entity refers (or arranges for the referral of) a patient covered by a government health care program. The takeaway for the DME supplier is to remember the “duck” test….that is….”if it looks like a duck, walks like a duck, and sounds like a duck…..then it is a duck.” If a DME supplier is paying any money to a person/entity who, arguably, is referring (or arranging for the referral of) a government program patient, then there is a risk of violating the anti-kickback statute.

Jeff Baird will be speaking at the following educational session at Medtrade Spring:
DAY AND TIME: Monday, March 30, 2015, from 1:00 PM to 2:30 PM
TOPIC: Retail Sales: Innovation and Aggressiveness While Avoiding Legal Pitfalls
TRACK: Sales & Marketing
LOCATION: South Pacific C
CATEGORY: 6-4-18 Series

1 The author wishes to attribute this article to an article written by Hope S. Foster, Esq., Laurence J. Friedman, Esq., and Karen S. Lovitch, Esq., with Mintz Levin Cohn Ferris Glovsky and Popeo, PC, entitled “7th Circ.’s Reading of ‘Referral’ under AKS Is Expansive,” Law 360, February 19, 2015.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. He represents pharmacies, HME companies, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or