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Creative Marketing Can Lead to Anti-Kickback Violations

by Ronald W. Chapman

Marketing and promotion are part of every successful business. Marketing and promotion require creativity. Unfortunately, novel thinking and creative promotion are not always rewarded in the medical industry. Simple promotional activities that would be commonplace in many industries, are prohibited by law in the medical industry. Examples of prohibited activities include: coupons, rebates, and credit toward future purchases. As physicians, hospitals, and other medical providers explore new ways to stay competitive and attractive to their patients or customers, they must always consider the federal laws that prohibit kickbacks and other inducement. When a medical provider does not consult with a healthcare attorney to make sure that their marketing activities comply with federal law, the provider can open themselves up to criminal and civil penalties. These penalties can devastate a medical practice for years to come. One such penalty is mandatory exclusion from any federal health program, either temporarily or permanently. Few medical entities can survive without federal funds.

When medical entities explore different promotional ideas or experiment with different joint ventures, they enter into a dangerous realm. It can feel like being lost in the jungle, while trying to avoid quicksand. While the medical industry may seem treacherous at times, a competent healthcare law attorney can act has a guide through this winding path of pitfalls. Chapman Law Group provides our clients with guidance in a safe and confidential environment.

Chapman Law Group can help medical providers analyze their current or future business practices, to determine whether they comply with the law. Chapman Law Group can help medical providers understand the difference between “inducement” and “mere encouragement”. Inducement is prohibited by law and mere encouragement is not. Obviously, there can be a very fine line that separates the two concepts. Inducement can be described as quid pro quo. Simply put, one entity does something in order to get something in return from another entity. An obvious example of inducement is when payment is made to one entity in return for referrals to another entity. In this example, payment can be in the form of: cash, rent, trips, or other services. Sometimes, there may be an indirect link to the payment with an underlying purpose to induce referrals. For example, if a pharmaceutical company pays a prescribing physician for speaking engagements that aren’t actually performed or pays in excess of market value for these speeches, this may suggest that the payment is not only for the speaking engagements, but for prescribing the pharmaceutical company’s drugs. Just because there is no direct link, does not mean that the practice does not violate the Anti Kickback Statute (AKS). In a landmark anti kickback case, the court stated, that even if the physician performs some service for the money received, the potential for unnecessary drain on the Medicare system remains. United States v. Greber, 760 F.2d 68, 71 (3d Cir. 1985) If there is any evidence to suggest that once the payment went away, so would the referrals, there is an extreme danger of a kickback or inducement.

Another area of potential danger for healthcare providers, is joint ventures or profit sharing arrangements. Horizontal marketing can be defined as one entity or entities selling additional products or services to already existing customers. An example would be a fitness gym selling workout attire. In the medical field, this could be illustrated by laboratory services for patients treated by a physician. There have been examples of physicians taking blood or other samples and sending the samples to the laboratory for analysis. Then, either the laboratory or the physician bills the federal health program for laboratory services performed for the physician’s patient. Once payment is received, the physician and the laboratory share the profits. This is a clear violation of the Anti Kickback Statute. Although it can be tempting to consider teaming up to perform a wider range of services for existing patients, this should be done with great caution. It is imperative to consult with a healthcare law attorney to ensure that federal laws are not violated. Chapman Law Group can help medical providers work through possible opportunities and help identify potential problems in their business structure.

The examples above involve one medical provider offering kickbacks to another medical provider. Another type of kickback can take place between a patient and a medical provider. If a medical provider routinely waives the Medicare coinsurance and/or the Medicare deductible, it is considered a kickback under the Anti Kickback statute (AKS). Waiving or lowering the patient’s responsibility is seen as an inducement for the patient to choose a specific medical provider. In addition, if a “discount” is given to a patient, it must also be passed on to the federal health program (Medicare). It is possible for medical providers to make adjustments for financial hardship. However, this should be done on a case by case basis and should include verification of the financial hardship. Chapman Law Group can help medical providers establish criteria for financial hardship waivers, in their practices.

To complicate matters even further, the Anti Kickback Statute (AKS) contains many “safe harbors” for certain situations and arrangements. It is important for medical providers to remain innovative and creative. It is also essential for medical providers to stay informed and aware of federal laws that prohibit certain business practices. Chapman Law Group can help medical providers and physicians navigate the ever changing landscape of collaboration in the healthcare industry. In addition to the “safe harbors” found in the statute, there are recent decisions by the Office of Inspector General (OIG) that temporarily suspend enforcement of certain federal laws for certain organizations. This suspension is intended to encourage the formation of Accountable Care Organizations (ACOs). Accountable Care Organizations are an important element of the healthcare reform sought by the Affordable Care Act (ACA).

It is important to remember that if an inducement or a kickback is found in certain business practices, both the entity providing the kickback and the entity receiving the kickback are guilty of violating the Anti Kickback Statute. Regardless of which role a medical provider plays, the penalties of fines, damages, and exclusion from Medicare and other federal health programs can be severe and devastating. Chapman Law Group has years of experience guiding medical providers as their practices change and grow. The medical industry continues to be highly scrutinized. Allow Chapman Law Group to provide a confidential source of information to assist you in making informed decisions about your medical practice.

Chapman Law Group is a professional health care law litigation firm, with offices in Michigan and Florida (Sarasota & Miami). For over 25 years Chapman Law Group has defended the rights of health care professionals, providers and corporations involved in the delivery of health care at all levels. Chapman Law Group handles claims involving False Claims; Anti-kickback; Stark; Civil Monetary Penalty; DEA Controlled Substance Act violations; Compliance related issues including Medicare, Medicaid and private pay; OIG investigations; Audits of all types; Professional Licensing, State and Federal Criminal Charges; Civil and Administrative actions; Peer Review and Credentialing issues; HIPAA compliance; and much more. We believe the dedicated men and women who provide health care deserve an exceptional defense when their integrity and actions are called into question.