Referral fees, also known as kickbacks, are payments that medical service providers offer to physicians in exchange for the physician referring patients to that service.

Are Referral Fees Legal?

Numerous federal laws prohibit referral fees. These are known as “Anti-kickback statutes .” A few examples of these are the Medicare and Medicaid Patient Protection Act of 1987 and the Stark Act. These laws allow for only a few limited exceptions:

  • Federal law makes it illegal for referring doctors to receive fees from medical testing centers to refer patients or interpret medical test results.
  • Physicians cannot refer their Medicare or Medicaid patients to medical labs that the physician or their immediate family owns. There are also some safe harbor provisions in the law, but the penalties include hefty fines and exclusion from Medicare or Medicaid.

In addition to these federal laws, each state often has its own rules to prohibit kickbacks.
Based on the Anti-Kickback Statute, found at 42 U.S.C. § 1320a-7b(b), it is a crime to either pay or accept such remuneration. The law indicates as follows:

  • (b) Illegal remunerations
    • (1) Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in-kind—
      • (A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or
      • (B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program.

In some cases, violating the Anti-Kickback Statute is not a violation. For instance, “safe harbor” regulations set forth in the Office of Inspector General Advisor Opinions describe various payments and business practices that are legal even though they might appear to break the law.

What Is the Stark Law?

The Anti-Kickback Statute was enacted in 1972. It makes it a felony for anyone to knowingly and willingly offer, pay, solicit, or receive a kickback, bribe, or rebate to promote referrals for health care services paid by federal health programs, such as Medicare. Violators of this statute can receive up to a $100,000 fine or a prison sentence of up to 10 years.

Health care services could involve providing drugs or supplies. Bribes could include money, meals, tickets, hotel rooms, etc. There could be less obvious compensation for a particular service, such as being given a particular job.

What Are the Penalties for Violating Anti-Kickback Statutes?

The penalties for violating federal anti-kickback statutes can be quite intense. For instance, violations of the Medicare and Medicaid Patient Protection Act of 1987 are deemed felony criminal crimes. The defendant may face criminal consequences, including fines of up to $25,000 and imprisonment for up to 5 years.

Liability for criminal referrals is often the result of an interaction between the Medicare and Medicaid Patient Protection Act and the Stark Act. Therefore, a doctor may face criminal fines on several different grounds since both acts cover various aspects of criminal kickbacks.

What Is the Office of the Inspector General?

The Office of the Inspector General (OIG) investigates physicians who make investments in clinics by investing capital or making loans. The OIG specifically is involved with physicians who are asked to invest based on the number of referrals they make to the clinic.

Nevertheless, the OIG has made safe harbors that permit physicians to have particular types of joint ventures.

Safe Harbors

Attorneys are watching to see if any new safe harbors will be added under the anti-kickback law that could give physicians and hospitals the green light to conduct business in ways they once worried would land them in jail.

Safe harbors already exist for some collaborative care enterprises, like specific demonstration projects from the Center for Medicare & Medicaid Innovation and the Medicare Shared Savings Program. The program consists of physicians, hospitals, and other healthcare providers who coordinate care for patients and share monetary risks for their healthcare spending to obtain savings. Because the program is operated through HHS, those providers can share the savings for providing more satisfactory care.

Requests for information on the anti-kickback law have asked participants in those programs about the problems they encounter complying with their waivers. Participants in the pilot programs received a waiver for the anti-kickback statute.

Individually, medical device and drug manufacturers desired a safe harbor to permit them to participate in coordinated care. They wanted to accept economic risk for patient outcomes as a preventative measure against forgery and abuse. The manufacturers want to join in coordinated care because it gives them an in with physicians involved in these programs. Manufacturers have been requesting this safe harbor since the development of the Affordable Care Act.

Hospitals are also interested in seeing a safe harbor permitting them to supply doctors’ offices with cybersecurity-related items and services. Right now, providing those physicians’ offices with cybersecurity measures could lead to breaches of the anti-kickback statute.

Code of Medical Ethics Opinion 11.3.4

Patients must trust that their physicians will be genuine with them and make treatment suggestions, including referrals, based on medical necessity, the talent of other health care experts or establishments to whom the patient is referred, and the grade of products or services provided.

Payment by or to a doctor or health care institution exclusively for the referral of a patient is fee-splitting and is illegal.

Doctors may not accept:

  • Any payment of any kind from any source for referring a patient other than allocations of a health care organization’s earnings as allowed by law.
  • Any payment of any kind from any source for prescribing a specific medication, product, or service.
  • Payment for services relating to a patient’s care from any health care facility/organization to which the doctor has referred the patient.
  • Payment referring a patient to a research study.
  • Doctors in a capitated primary care practice may not refer patients based on whether the referring doctor has arranged a discount for specialty services.

What Do Doctors Have to Do to Make Sure They Comply With the Law?

The rules surrounding referral fee laws are complex, and the penalties can be severe. The Stark Law is a strict liability statute. Even if physicians did not mean to break the law, they could still be liable for paying back millions in Medicare and Medicaid claims. Violators of the statute can face jail time or large fines.

When entering into new arrangements, doctors should hire a lawyer who understands anti-fraud and government law to ensure they comply with all federal laws.

Do I Need a Lawyer for my Referral Fee Problem?

Violations of referral fee laws are taken very seriously, and the laws themselves are very complex. If you have a referral fee law problem, you should consider speaking with a personal injury attorney. An experienced attorney can look at your case to determine the best way to handle your referral fee problem. Use LegalMatch to find the right attorney for your referral fee laws today.