Connecting the Dots: The Seventh Circuit Stretches the Definition of “Referral” to Find Anti-Kickback Liability Where a Physician Did Not Steer Patients to a Particular Provider

The Seventh Circuit recently stretched the definition of "referral" under the federal Anti-Kickback Statute (AKS) to affirm a lower court’s ruling that a physician can trigger AKS violations even if such physician does not steer a patient to the provider who paid the alleged kickback. Although it’s unclear if other Circuits will adopt this theory of liability, the decision is instructive and puts physicians and health care providers on notice to take a closer look at their business relationships.

Undisputed Facts of the Case

The case, U.S. v. Patel¹, involved Dr. Patel, a Chicago-area internal medicine specialist and Grand Home Health Care, a home health care provider (Grand). The parties stipulated that Dr. Patel treated approximately 20 elderly patients per day and prescribed home health care to about 10 patients per month. When Dr. Patel did prescribe home health care, his office always followed the same routine; Dr. Patel’s assistant would educate the patient on the benefits of home health care and present the patient with 10-20 home health care providers to choose from, one of which was Grand. Regardless of which home health care provider the patient chose, Dr. Patel’s assistant then faxed the patient’s information to the provider. Pursuant to Medicare requirements, the provider then assessed the patient and developed a treatment plan that Dr. Patel eventually reviewed and certified. The parties further stipulated that all patients who were prescribed home health care services by Dr. Patel needed such services and that neither Dr. Patel nor his assistant ever steered patients to choose Grand.

Qualifying for Medicare Home Health Care Services in a Nutshell

Before discussing how the Court connected the dots to find Dr. Patel guilty of AKS violations, it’s helpful to briefly walk through how Medicare beneficiaries qualify for home health care services. First, a patient must be either homebound and suffer from a medical condition (or conditions) that requires skilled nursing care or therapeutic services. Next, a physician or nursing facility must determine that the homebound patient requires such services. After such a determination is made, the patient selects a home health care provider. The patient’s physician then sends the home health care provider the patient’s information. Finally, the home health care provider assesses the patient’s condition and develops a treatment plan. To be reimbursed by Medicare, home health care providers must complete and submit Form 485, a standard Medicare form that certifies home health care is medically necessary and outlines a beneficiary’s treatment plan and goals. Before a home health care provider can submit Form 485 for reimbursement, however, the patient’s primary care physician must sign the document and certify (or recertify) that home health care is medically necessary.

The Seventh Circuit’s AKS Theory of Liability in Patel

The Patel decision is unique because the facts of the case don’t present the typical quid pro quo often seen with AKS violations. Although Grand did pay Dr. Patel $400 for each Form 485 he signed and certified, it is undisputed that Dr. Patel did not steer any patient to Grand in exchange for such payment. In fact, the parties agreed that Dr. Patel’s patients maintained complete freedom of choice when it came to choosing their home health care provider, and that Dr. Patel would have signed Grand’s Form 485s without receiving payment from Grand. After the government conceded that every one of Dr. Patel’s patients who chose to receive home health care services from Grand actually needed such services, the Court even acknowledged that Dr. Patel’s actions didn’t necessarily result in any harm to Medicare. Even though the Court could not pinpoint specific harm to Medicare caused by Dr. Patel’s actions, it nonetheless concluded that Dr. Patel violated the AKS by accepting payment from Grand in exchange for certifying and recertifying Grand’s Form 485s because his "behavior could increase the cost of care."

Conclusion

At least in the Seventh Circuit, the term "referral," as used in the AKS, includes not only steering a patient to a particular provider, but now also includes granting permission for a patient to receive care from a provider of such patient’s choice. Individuals and the providers to whom they refer patients for federally-reimbursed care should review their business relationships for potentially problematic compensation arrangements. Payments from providers to health care professionals that are not in exchange for bona fide services and set at fair market value may be viewed as payments in exchange for such health care professional’s certification of medical necessity and trigger AKS liability. After Patel, such liability may exist even if a patient independently selected his provider of choice, and the alleged AKS violations didn’t necessarily result in harm to a federally-reimbursed health care program.