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Seventh Circuit Gives Broad Read To What Constitutes A "Referral" Under Anti-Kickback Statute

Posted  February 26, 2015
By Gordon Schnell

Under the Anti-Kickback Statute, physicians may not solicit or receive kickbacks for referring Medicare patients to a particular healthcare provider. The question before the Seventh Circuit in United States v. Patel was the scope of what constitutes a referral under the statute. According to the Court, the scope is quite broad, even extending to situations where the physician plays no role in selecting the healthcare provider the patient ultimately uses.

The case involved Dr. Kamal Patel, a Chicago-area physician who routinely prescribes home health care services for his elderly patients. One such provider of these services, Grand Home Health Care, paid Patel for each of his patients who used Grand for home health care. The payment was tied to Patel’s signing the patient’s Form 485 which is the standardized Medicare form that certifies home care is medically necessary and outlines a patient’s diagnosis, medications, treatment plans and goals. Medicare will not reimburse for home health care services without a Form 485 signed by the prescribing physician. Grand paid Patel $400 for each signed Form 485 representing a new admission to Grand and $300 for each signed recertification (required if the home care lasts longer than the initial 60-day certification period).

What made this case different from the typical kickback case is that Patel apparently played no role in steering his patients to Grand. He and his staff informed his patients of the various home health care provider options, and they independently chose the one they felt best suited their needs. In fact, the majority of his patients needing home health care services selected a provider other than Grand. Nevertheless, the government learned of the arrangement between Grand and Patel and charged them with violating the Anti-Kickback Statute.

At the close of the government’s case, Patel moved for a judgment of acquittal, arguing he had not “referred” any patients to Grand because there was no evidence he steered or directed his patients there. The district court denied Patel’s motion, holding that even if his patients independently chose Grand, he “referred” them there by certifying (or recertifying) that the patient needed home care and that Grand would be the provider. The district court ultimately convicted Patel and sentenced him to serve eight months in jail and forfeit $31,900 of kickback payments. On appeal, Patel argued the mere certification via Form 485 does not constitute a “referral” under the Anti-Kickback Statute.

Patel’s principal argument on appeal was that in the context of the statute, the word “refer” means to personally recommend a particular healthcare provider; that a physician does not refer a patient when the patient independently chooses a provider with no input from the physician. The government on the other hand argued for a broader reading which would include not only a doctor’s recommendation of a provider, but also a doctor’s authorization of care by a particular provider. The Seventh Circuit agreed with the government, looking to the plain language meaning of the term and the underlying purpose of the statute in prohibiting kickbacks.

As to the plain meaning of “referral,” the Court acknowledged the term is commonly used in both ways — to signify a recommendation of a particular provider and a doctor’s authorization to receive a particular type of medical care even when not choosing the provider. The Court pointed to Patel’s own office procedure which identified a patient as a “new referral” when sending new patient information to Grand even when Patel played no part in the patient’s selection of Grand. With “two plausible readings” of the statute, the Court next looked to the statute’s main purposes, which “convinced” the Court that Congress intended for “referrals” to include the certification and recertification of patients.

According to the Court, the central purpose of the Anti-Kickback Statute is to prevent Medicare and Medicaid fraud, and “the danger of fraud at the certification and recertification stages is quite clear.” The Court detailed several ways why this is so:

  • “[A] physician could refuse to certify a patient to a patient-chosen provider unless the provider paid the physician a kickback.”
  • A physician who receives a kickback “will have an incentive to certify the patient even if he thinks that the care is unnecessary or believes that the patient-chosen provider is substandard.”
  • “[A] doctor being paid for each recertification will be incentivized to authorize unnecessary further care and to ensure that the patient continues to use the same provider, even if that provider gives poor care.”

The Court concluded that Patel’s “narrow definition” of referral “would defeat the central purposes” of the statute — namely, to prevent healthcare provider decisions based on self-interest rather than on cost, quality of care and patient need; and to protect patient choice. The bottom line for the Court was that “Patel chose whether his patients could go to Grand at all” and thus “acted as a gatekeeper to federally-reimbursed care.” As such, he did “something” to facilitate his patients’ use of Grand for which Grand paid him in return. For the Seventh Circuit, that is all that is necessary for the Anti-Kickback statute to kick in. Lesson to be learned for physicians going forward, do not accept payments from healthcare providers in any way tied to the patients you send there. For this particular Court (and likely others that will follow suit) it is as simple as that.

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Tagged in: Anti-Kickback and Stark, Court Decision, Healthcare Fraud, Provider Fraud,