Appeals Court Upholds Broad Definition of “Referral” in Kickback Case

You can’t avoid anti-kickback liability by splitting hairs—at least not when it comes to defining the word “referral”. One physician alleged to have accepted payments for home health referrals tried to argue he never actually made any referrals so the payments couldn’t be illegal kickbacks. That physician said referral should be defined as directing a patient to obtain services from a particular provider. He claimed that since he never told the patient where to get home health services, instead letting the patient choose, he wasn’t paid for referrals. But the government said that interpretation defined the word “referral” too narrowly and the 7^th Circuit Court of Appeals agreed. The court said referral also means to authorize services and to facilitate Medicare reimbursement. What happened The physician claimed he never responded to offers from a home health company’s owners for payments in exchange for referring Medicare patients for home health services. But the government claimed that after such offers were made, the home health company began providing services to a few of the physician’s patients every month. The court noted that it was irrelevant whether the physician verbally or otherwise expressed his agreement with the referral scheme because his actions—accepting the payments—constituted conspiracy to violate the law. The home health company was alleged to have paid the physician about $400 every time he certified a patient was eligible for and needed home health services and $300 every time he re-certified a patient for home health services. The physician made the certifications using required Form 485, which the home health agency prepared whenever the physician’s patient chose that company for home health services. The physician argued he never “referred” any patients because he never told patients to choose a specific home health provider and “the patients independently chose” their provider. In fact, he claimed to not have discussed home health providers at all but rather his medical assistant would provide brochures for several home health providers and the patients would select one. After the patient selected a provider, a Form 485 certification was completed and signed by the physician to authorize those services for reimbursement. The government asserted that the home health company paid the physician in cash each time he completed a Form 485 and that the physician had even indicated to the company via telephone on one occasion that he wasn’t ready to sign the forms until the company was able to provide the cash payments. The physician was found guilty and sentenced to eight months jail time and 200 hours community service and had to forfeit the $31,900 of kickbacks he received. Definition of referral The physician argued that the general dictionary meaning of the word referral was “to personally recommend to a patient that he seek care from a particular entity.” On the other hand, the government argued the term meant not just a recommendation about provider selection but “authorization of care by a particular provider.” The court agreed that common dictionary meaning of the term was to direct a patient to a provider for service but said that “is not the only common usage.” The term is also commonly used in the health care industry to refer to a physician’s authorization of care for health insurance purposes. In fact, the court noted, the physician in this case called patients receiving home health services for the first time “new referrals” when he submitted patient information to the home health care provider. The court said that whether or not the physician guided the selection of the health care provider was not the most important criteria for determining whether a referral occurred but rather whether the physician “facilitates or authorizes that choice.” It is the physician’s “gatekeeper” role that constitutes a referral, the court explained: “Without his permission, his patients’ independent choices were meaningless.” The physician also tried to argue, to no avail, that the specific and very express definition of referral provided in the Stark law should be considered. That law and its regulations define a referral to be “the request by a physician for a consultation with another physician” or the “request or establishment of a plan of care” or request or order or certifying or recertifying the need for health care services. The physician argued that because the Anti-Kickback Statue didn’t include similarly broad definitions, the ordinary dictionary meaning should apply. The court rejected this argument, however, and relied on the purpose behind the Anti-Kickback Statute to support its interpretation of referral to include certification and recertification of healthcare services for reimbursement purposes. No harm, still foul The court also said it was irrelevant that the government had conceded that all the patients did truly need the services provided and therefore, as the physician argued, there was no harm to the Medicare system. The court said there was still a danger of fraud because the physician could increase the cost of care by refusing to certify or recertify a patient unless he received the demanded kickback. And it would give the physician incentive to recertify services from a particular provider even if care wasn’t really necessary or the provider wasn’t providing quality care. Legitimate payments are okay The physician also argued that the government’s definition of referral would mean a physician could violate the Anti-Kickback Statute for receiving any remuneration from an entity that happens to also treat the physician’s patients. But the court clarified that “[p]ayments for legitimate services (such as giving a speech) cannot be construed as an illegal kickback.” Instead, the physician has to “do something that either directs a patient to a particular provider or allows the patient to receive care from that provider.” This is relevant for labs because if a lab provides a physician payments based on patients who come to the lab for testing, it doesn’t matter if the physician or a payer directs a patient to the lab or if the patient even randomly selects the lab. If the physician authorizes that test or otherwise facilitates reimbursement of that test, such payments could be a kickback. Takeaway: Another court has broadly interpreted the meaning of the word referral making it imperative that payments to physicians be carefully scrutinized for kickback liability.