By Michael H. Cohen Law Group
MARCH 29, 2016 – Is it a kickback when a medical center offers insurance agent services to its patients?
A Boon for Patients
Consider this scenario. Marvin’s Medical Center markets itself as giving patients “something extra:” a free consultation with a health insurance agent with whom Marvin’s has an arrangement as “independent contractor.”
Has Marvin’s run afoul of anti-kickback laws?
The arrangement began, Marvin tells us, when Marvin first learned of Insurance Agent Annie, who did a spectacular job landing insurance for Marvin’s clientele, which then further built up Marvin’s patient base (because now they came with health insurance). So eventually Marvin just started paying Annie to be a resource Marvin’s agents could call to get insurance.
Kickback Law quick overview
In general, there are four key legal sets of rules of concern:
- federal self-referral (“Stark”) rules
- federal anti-kickback rules
- state self-referral rules
- state anti-kickback and fee-splitting rules
Self-referral laws (including federal, “Stark” rules) generally apply when a healthcare provider (or an immediate family member) is referring a patient to an entity in which the provider has a financial (ownership or compensation) interest.
So, if the healthcare provider is not referring a patient to an entity in which the provider has a financial (ownership or compensation) interest, then self-referral laws do not apply. If the referral is not from a healthcare provider, then these rules do not apply.
If no Medicare-reimbursable services are being provided, the federal law does not apply.
However, even if federal law does not apply, state law might.
For example, California Business & Professions Code (“B&P”) Section 650(a) prohibits the offer, delivery, receipt, or acceptance by any physician (and certain other licensed clinicians) of “any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person.” This is California’s version of a prohibition against kickbacks and fee-splitting.
Section 650(a) speaks to “referring patients, clients, or customers.” The language is broad, and the California Attorney General (“AG”) has, in past opinions, adopted a broad interpretation of the concept of “referral
While B&P 650 references licensed clinicians, there are other California statutes that express the same public policy against compensation as an inducement for referring patients, clients or customers for healthcare services. This includes California Health & Safety Code, Section (“H&S”) 445, which prohibits any person from profiting from referring patients to a physician or clinic for care; and B&P 2273(a), which prohibits “the employment of runners, cappers, steerers, or other persons to procure patients.”
As well, the Special Fraud Alert on Joint Ventures by the Office of the Inspector General (“OIG”), U.S. Department of Health and Human Services, cautions against arrangements where the joint venture is a “shell” intended to induce referrals. State regulators are often influenced by opinions and publications of the OIG, even if federal law does not apply but state law does.
In addition to flagging statutory prohibitions on kickbacks, the OIG states that “many marketing and advertising activities may involve at least technical violations of the statute.”
For example, in the recent decision of Joint Technology, Inc. v. Weaver, 2014 WL 2199373 (10th Cir. May 28, 2014), the U.S. Court of Appeals for the Tenth Circuit affirmed the decision of a District Court, that had invalidated a contract, based on the District Court’s finding that a percentage-based compensation arrangement between a distributor of durable medical equipment (DME) and its independent outside contractor sales agent was a violation of the federal anti-kickback statute. In this case, the distributor’s compensation was calculated as a percentage of the sales of DME he generated for the company.