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Recovery Business Marketing Not Immune from Anti Kickback Exposure

Many business people involved in some aspect of the recovery business world (e.g. IOPs, PHPs, Detox) are not aware of the punishing laws that apply to their marketing arrangements.  Simply paying someone a commission based sales compensation without fully appreciate the applicable laws is dangerous and costly.

The chief federal law involved in the issue, the Anti Kickback Statute (“AKS”) is found at 42 CFR 1320a-7b(b) and essentially forbids paying anyone for referring patients whose care is compensated in any way by any state or federal healthcare program (e.g. Medicare, Medicaid, CHAMPUS or TriCare).  The law enforcement arm of that law, the Department of Health and Human Services Office of the Inspector General (OIG), has weighed in several times on the issue of how the AKS would apply to situations involving independent contractors whose compensation is commission based.  More specifically, the OIG has been clear that such arrangements clearly implicate the AKS and has identified some core suspect indicators, including:

●Compensation set on a percentage of sales basis

●Direct billing of any federal healthcare program by the seller for an item sold by the contractor

●A direct contract between the contractor and a physician in a position to order or refer

●A direct contract between the contractor and federal healthcare program beneficiaries

The AKS is a statute with both criminal and civil monetary consequences.  As such, it is a primary enforcement tool for the government.  That said, the AKS is an intent based law, meaning the feds have to prove intent on the part of the offender, namely that the offender intended to pay for referred patients.  Though intent can be gleaned from conduct, proving intent (even “one purpose” of the arrangement) is not easy.

Recovery service providers are well advised to become familiar with not only the AKS, but also the law’s exception, so called “Safe Harbors,” which specify specifically permitted arrangements (42 CFR 1001.952).  The “personal services arrangement” Safe Harbor has particular application in the area of marketing, as does the AKS exception for “bona fide employment arrangements,” which apply to W-2 employees, but not independent contractor relationships.

Many recovery service providers do not interact with federal or state healthcare programs of any kind.  For them, the AKS may not seem to be an issue, since the law only applies when services are reimbursable by a state or federal healthcare program.  And yet the inquiry cannot stop there since many states have remarkably similar laws that apply even when there is no governmental payer involved.  For instance, Florida’s Patient Brokering Act (“PBA”) (Section 817.505, F.S.) mirrors the AKS in several key respects.  Like the federal AKS, the PBA carries with it criminal consequences and is used by many insurers to deny payment for claims.  Like the AKS, the PBA contains an exception for arrangements that comply at the federal level.  As such, Safe Harbor compliant arrangements can be expected to survive scrutiny in PBA enforcement activity.  This is just one instance where it may appear that federal regulatory compliance is not germane, but in fact is.

Recovery service providers must take care to be familiar with both federal and state laws and to understand how they apply to the risky realm of marketing arrangements.