Health Care Enforcement Defense Advisory: Seventh Circuit Upholds Conviction Of A Physician For A Violation Of The Anti-Kickback Statute

A recent decision by the Seventh Circuit Court of Appeals upholding a physician's criminal sentence is yet another reminder that health care providers and physicians must carefully structure their financial relationships to avoid running afoul of the Anti-Kickback Statute (42 U.S.C. § 1320a–7b et seq.). The Anti-Kickback Statute makes it a criminal offense for a provider to give "remuneration" to a physician in order to compensate the physician for past referrals or to induce future referrals of patients to the provider for items or services that are reimbursed, in whole or in part, by Medicare or Medicaid. The Seventh Circuit recently joined several other Circuit Courts in adopting the so-called "one purpose" test, which holds that a payment or offer of remuneration violates the Anti-Kickback Statute so long as part of the purpose of a payment to a physician or other referral source by a provider or supplier is an inducement for past or future referrals. United States v. Borrasi, No. 09-4088, 2011 WL 1663373 (7th Cir. May 4, 2011). Thus, the Anti-Kickback Statute may be implicated, even if a provider compensates a physician for bona fide services in circumstances, where part of the purpose of that payment can be shown to be an inducement for referrals of Medicare- or Medicaid-reimbursed items or services.

Additionally of note, the Anti-Kickback Statute applies not just to remuneration to induce referrals, but also to inducements for the purchasing and ordering of items and services and for arranging referrals. This charging language brings within the ambit of the statute a broad range of conduct well beyond mere referrals. As a result, the Anti-Kickback Statute can potentially be implicated when financial arrangements are created virtually anywhere within the health care system. Examples include arrangements involving manufacturers or suppliers and their customers, advertising and marketing arrangements with consultants who do not directly provide services, and a variety of discounting purchasing arrangements.

The Borrasi decision underscores the need for providers to exercise caution in the structuring their relationships with physicians. The delivery of health care services is a complex undertaking. To meet patient needs, hospitals and other health care facilities and organizations must provide care by and through arrangements with physicians. Many of these common interactions between physicians and other providers are "referrals" under...