Medicare Compliance & Reimbursement

Here's what you need to know about per-patient marketing compensation.

A federal appeals court has overturned major kickback convictions in one of the biggest home health fraud cases in recent memory -- and the move has implications for all health care providers who receive referrals from physicians.
 
In a Feb. 13 ruling, the 5th U.S. Circuit Court of Appeals reversed 11 kickback counts against Carrie Hamilton and Alice Miles of the former Houston-based Affiliated Professional Home Health. Hamilton and Miles were convicted of 28 and 29 fraud counts, respectively, in October 1999 in U.S. v. Miles. They were sentenced to 17 years and 14 years in prison, respectively, and ordered to repay more than $4 million to Medicare.

Affiliated engaged Premier Public Relations to distribute marketing literature and business cards to area physicians, according to the decision. The convictions came about based on Affiliated's agreement to pay Premier $300 for each patient referral generated from their marketing.

The problem: Prosecutors charged that such a volume-based marketing arrangement violated the anti-kickback statute's prohibition on paying for referrals, and the jury agreed.

But the appeals court said that in fact, the arrangement doesn't violate the anti-kickback statute provisions prosecutors invoked. Premier distributed marketing materials for 10 different HHAs to physicians, and the only inducement offered to docs was an occasional plate of cookies, the court noted.

Further, physicians contacted Premier after they selected an HHA. Thus, it was the physician who made the referral decision, not Premier, the court reasoned. And neither Affiliated nor Premier paid the physicians for the referrals, so kickbacks between the physician and HHA didn't take place, the court ruled.

That means providers who work with public relations firms can breathe a huge sigh of relief.

The decision "is a somewhat surprising, but certainly welcome, development," observes attorney John Wester with Sidley Austin Brown & Wood in Washington. "The fact that the PR firm had no say over which doctor selected which home care agency and ... that those doctors received nothing of value for their referrals ... goes to the very heart of what is not a kickback," says attorney Virginia Caudill with Indianapolis-based Gilliland & Caudill.

The point of anti-kickback legislation "has never been to prohibit advertising or other legitimate business operations," Caudill adds.

Warning: Don't take this decision as blanket approval of per-patient marketing compensation arrangements, warns attorney Bob Ramsey with Buchanan Ingersoll in Pittsburgh. "Tying payments to the number of Medicare patients is done at your own peril," agrees attorney Mark Langdon with Arent Fox Kintner Plotkin & Khan in Washington. "The government views any percentage arrangement as risky."

"You're playing with fire if you engage in these kinds of practices," warns Ramsey. Violating kickback laws is no minor offense -- it can carry five years in prison and termination from the Medicare program, Ramsey reminds providers.

Beware: Even if you think you've insulated yourself against kickback concerns, if you're paying your outside marketers anything extra to produce referrals, you're asking for trouble, Ramsey stresses. "The real danger is that without your knowledge, [marketers] will go out and engage in unethical practices you may not know about" to reach their referral goals, he cautions.