by Kim C. Stanger, Holland & Hart LLP

I often see programs in which health care providers offer rewards to persons who refer new business to the practice.  Such programs are risky.

Anti-Kickback Statute.  The federal Anti-Kickback Statute prohibits offering or paying any remuneration to induce referrals for items or services payable by federal healthcare programs, including Medicare or Medicaid.  (42 USC 1320a-7b(b)).  Violation of the Anti-Kickback Statute is a felony.  It is also an automatic violation of the federal False Claims Act.  Accordingly, providers should never reward referrals for Medicare or Medicaid business.  In addition, the OIG has suggested that carving out federal program business from reward programs may not insulate the provider from Anti-Kickback Statute liability because a person who receives rewards for referring non-federal program business is likely to refer federal program business as well.  (OIG Advisory Opinion No. 12-06).

State Laws.  Referral reward programs might also violate state laws.  For example, the Idaho Medical Practices Act prohibits “[d]ivision of fees or gifts or agreement to split or divide fees or gifts received for professional services with any person, institution or corporation in exchange for referral.”  (Idaho Code 54-1814(8)).  Idaho’s insurance code also prohibits rewarding referrals that result in “treatment of physical or mental illness or injury arising in whole or substantial part from trauma.” (Idaho Code 41-348). I am not aware of any cases in which these statutes have been applied to referral reward programs, but there is a risk.

Bottom line:  Providers should run any referral reward programs by their compliance officer or attorney before they begin.

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For questions regarding this update, please contact:
Kim C. Stanger
Holland & Hart, 800 W Main Street, Suite 1750, Boise, ID 83702
email: kcstanger@hollandhart.com, phone: 208-383-3913

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