Prohibition on paid referrals not limited to ‘relevant decisionmakers’

The Seventh Circuit affirmed the conviction of an individual under the Anti-Kickback Statute (AKS) (42 U.S.C. § 1320a-7b) whose referral agency had provided referrals to a home health company in exchange for $500 per referral. In affirming the lower court’s decision, the Seventh Circuit found that criminal liability under the AKS is not limited to relevant decisionmakers and that no safe harbors applied (U.S. v. George, August 14, 2018, Rovner, I.).

Referrals for money

The referrer was a certified homemaker employed by Help at Home, a home healthcare agency, beginning in 2007. In 2010, she decided to start a referral agency and signed a work for hire agreement with another home health service, Rosner Home Health Care, Inc. (Rosner), in which she agreed to convince providers, including doctors, case managers, discharge planners, and social workers, to refer patients to Rosner. In exchange, Rosner paid the referrer $500 for each patient referred. In 2015, the referrer was indicted and then found guilty of two counts of violating the AKS and one count of violating the general conspiracy statute (see Receipt of per-patient referrals, knowledge of illegality enough to overcome doubt, Health Law Daily, March 25, 2016).


Under the AKS, the government must demonstrate that the referrer knowingly and willfully solicited or received remuneration in return for referring an individual to Rosner to provide or arrange services paid at least in part under Medicare. The referrer appealed her conviction arguing that there was insufficient evidence to support the substantive counts of her conviction falling under the AKS. According to the court, rather than merely demonstrate that evidence could have supported a finding of innocence, the referrer must demonstrate on appeal that the evidence could not have allowed a reasonable trier of fact to find her guilty.

Relevant decisionmakers

The referrer argued that she could not be held liable, as the statute applied only to “relevant decisionmakers,” which she was not. In making this argument, the referrer relied on a previous Fifth Circuit decision in which the court held that payments to a marketing firm distributing advertisement brochures of a provider to physicians did not fall within the AKS because they were not payments made to the relevant decisionmaker in exchange for sending patients to the provider. However, the court cited a subsequent case rejecting an interpretation of that case limiting criminal liability to persons would could be deemed relevant decisionmakers.

Safe harbors

The referrer also argued that she had a reasonable basis to believe she fell within the safe harbor provision of the AKS applying to “any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services. However, her written agreement with Rosner specifies that she was acting as an independent referral agency, not an employee. The court also noted that the referrer was paid for referrals, not for the provision of items or services covered by Medicare. Thus, the safe harbor provision did not apply.

Structure call coverage arrangements to avoid Stark & AKS issues

When compensating physicians for the time they spend on-call, hospitals should draft call coverage agreements with care to avoid potential problems implicating federal laws prohibiting physician self-referral (Stark Law) and kickbacks (Anti-Kickback Statute (AKS)). In a webinar presented by the Health Care Compliance Association (HCCA), Robert G. Homchick, partner at Davis Wright Tremaine LLP, and Scott M. Safriet and Adam S. Polsky, partners at HealthCare Appraisers, Inc., discussed changes to the call coverage risk analysis based on court opinions and changes in government implementation of rules.

As with most physician compensation arrangements, the Stark Law (42 U.S.C. §1395nn) is the threshold issue when analyzing call coverage agreements; additionally, if the agreement passes muster under Stark, the AKS (42 U.S.C. §1320a-7b) risks should be relatively modest. Both analyses contain some of the same considerations, such as fair market value (FMV) and commercial reasonableness.

Homchick, Safriet, and Polsky noted the following concerns for call coverage:

  • on-call coverage is becoming more expensive, but hospitals are facing decreased reimbursement; and
  • because traditional methods of securing call coverage no longer apply to all situations, hospitals are becoming more creative to obtain coverage.

To effectively secure coverage, hospitals should consider many options, and determine which is best applied in their situation. Potential coverage options include concurrent coverage, telemedicine, bundling on-call coverage with services beyond the emergency room, on-call coverage payment for employed physicians, and use of the “activation fee” concept.

However, the webinar cautioned that not all arrangements are the same, and in situations where it is truly difficult to secure coverage, a different approach may be necessary. Additionally, hospitals should look into the underlying reasons of why securing that coverage has been difficult—for example, are there shortened response times, a physician shortage in the marketplace, or is coverage restricted or quasi-restricted.

DOJ recovers almost $2B in health care false claims

The Department of Justice (DOJ) obtained more than $3.5 billion in False Claims Act settlements and judgments in fiscal year (FY) 2015, more than half of which—$1.9 billion in federal losses—came from companies and individuals in the health care industry. These cases included companies and individuals that allegedly provided unnecessary or inadequate care, paid kickbacks to health care providers to induce the use of certain goods and services, or overcharged for goods and services paid for by Medicare, Medicaid, and other federal health care programs.


The False Claims Act (FCA) (31 U.S.C. §3729 et seq.) is the federal government’s primary civil remedy to redress false claims for government funds and property under government contracts and programs including Medicare and Medicaid. Most false claims actions are filed under the FCA’s whistleblower, or qui tam, provisions that allow individuals to file lawsuits alleging false claims on behalf of the government. Section 1313 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute (AKS) (42 U.S.C. §1320a-7b). If the government prevails in the action, the whistleblower, also known as the relator, receives up to 30 percent of the recovery. In fiscal year 2015, whistleblowers filed 638 qui tam suits leading to $2.8 billion in DOJ recoveries, with awards to relators totaling $597 million.

Health care fraud

In addition to recovering losses from health care fraud that has already occurred, the DOJ says that its continuing pursuit of fraud deters individuals who might otherwise cheat the system and prevents billions of additional lost dollars. The DOJ’s focus on health care fraud is a priority of the Obama Administration, which created the Health Care Fraud Prevention and Enforcement Action Team (HEAT), an interagency task force to increase coordination and optimize criminal and civil enforcement. Additional information on the government’s efforts in this area is available at, a webpage jointly established by the DOJ and HHS.

Largest recoveries

The largest health care recoveries in FY 2015—October 1, 2014, through September 30, 2015—were from DaVita Healthcare Partners, Inc., the nation’s largest dialysis provider. DaVita entered into an agreement with the DOJ to pay $350 million to settle claims that it violated the AKS by soliciting and entering into joint venture agreements with physicians who had large renal patient bases, and agreed to a civil forfeiture of $39 million, totaling $389 million (see DaVita filters $350M to feds in dialysis scheme, Health Law Daily, October 23, 2014; DaVita to pay $389M in largest kickback-only case in healthcare history, Health Law Daily, October 27, 2014). A few months later, DaVita agreed to pay $450 million to resolve claims that it for knowingly created unnecessary waste in administering the drugs Zemplar® and Venofer® to dialysis patients (see Another day, another DaVita settlement; $450M this time, Health Law Daily, June 25, 2015).

Among the other health-care-related FCA recoveries were $330 million in settlements and judgments involving hospitals (see Whistleblowers rake in heart-stopping $38M in cardiac device FCA settlements, Health Law Daily, November 2, 2015), several Stark Law (42 U.S.C. §1395nn) settlements involving financial relationships between hospitals and doctors that could improperly influence patient referrals, $96 million in settlements and judgments involving the pharmaceutical industry., and many civil fraud and false claims actions against skilled nursing homes and rehabilitation facilities. The DOJ also made note of actions it successfully pursued against individual providers or facility owners and operators.

Other recoveries

Following health care fraud and abuse, the next largest recoveries were in connection with government contracts. This is the fourth year in a row that the DOJ has recovered more than $3.5 billion in FCA claims. Since January 2009, the DOJ has recovered $26.4 billion under the FCA, nearly $16.5 billion of which is attributed to health care fraud. Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said, “The False Claims Act has again proven to be the government’s most effective civil tool to ferret out fraud and return billions to taxpayer-funded programs. The recoveries announced today help preserve the integrity of vital government programs that provide health care to the elderly and low income families, ensure our national security and defense, and enable countless Americans to purchase homes.” Overall, the DOJ collected $23.1 billion in civil and criminal cases in FY 2015.