Chapter 10.E (or 4.E) -- Referral Fees

Click here to read the referral fee and fraud and abuse provisions governing Medicare and Medicaid
Click here to read the federal false claims act, governing "qui tam" actions.

Advisory rulings under the anti-kickback statute can be found at  Similar rulings are no longer issued under the Stark law.  For general analysis and discussion, see David M. Deaton, What is "Safe" About the Government's Recent INterpretion of the Anti-Kickback Statute Safe Harbors?, 36 J. Health L. 549 (200x).

Part II of the Stark II regulations were issued  March 26, 2004.  69 Fed. Reg. 16053.  Highlights include more leeway for academic medical centers, a series of exceptions that are similar to the anti-kickback safe harbors, and a host of technical clarifications.

There is increasing focus on whether fraud and abuse laws are violated by pharmaceutical and medical device manufacturers’ aggressive marketing activities directed toward physicians.  For guidance on this issue from the DHHS Office of Inspector General (OIG), see 68 Fed. Reg. 23731 (May 5, 2003).  The industry has responded with a code of conduct limiting practices accordingly.  See generally David M. Studdert, et al., Financial Conflicts of Interest in Physicians' Relationships with the Pharmaceutical Industry: Self-Regulation in the Shadow of Federal Prosecution, 351 New Eng. J. Med. 1891 (2004); Reed Abelson, Whistle-Blower Suit Says Device Maker Generously Rewards Doctors, New York Times, Jan. 24, 2006.

In an interesting development, the HHS Inspector General has solicited comments on whether "economic credentialing" by hospitals violates the anti-kickback statute.  67 Fed. Reg. 72894 (Dec. 9, 2002).  The reasoning is that hospital medical staff privileges have economic value and therefore could be viewed as "remuneration" if they are extended or withdrawn based on how much money physicians generate for the hospital or divert from the hospital.  See Alice G. Gosfield, ed., Health Law Handbook, Chap. 7 (2003); Beverly Cohen, An Examination of the Right of Hospitals to Engage in Economic Credentialing, 77 Temp. L. Rev. 705 (2004).  If this reasoning were to hold, however, why would it be limited to credentialing for economic reasons?  Isn't there always a reciprocal referral incentive inherent in conferring admitting privileges?  After all, that is why physician recruitment incentives by hospitals are suspect.  See Eva H. Goldstein, An Analysis of Medical Staff Credentialing As Remuneration under the Anti-Kickback Statute, Health Lawyers News, Aug. 2004, at 7.

There is controversy over whether Stark II's prohibition of physician self-referral should apply to physician-owned speciality hospitals, which are proliferating.  See Note, 2006 Colum. Bus. L. Rev. 215.

Regarding the potential fraud involved in failing to accurately account for coinsurance amounts, which is discussed in footnote 3 of the Hall article, it is importnat to distinguish between coninsurance, which is a percentage of the billed charge, and copayments, which are a fixed charge that does not vary regardless of the overall charge.  In some instances, the fixed copayments for inexpensive prescription drugs exceed the full charges for the drugs.  One court has held that this is not fraudulent.  Alves v. Harvard Pilgrim Health Care, __- F. 3d ___ (1st Cir. 2003).

For a thorough analysis of "gainsharing" (hospitals rewarding physicians for productivity improvements) and criticism of the government's position, see Richard S. Saver, Squandering the gain: gainsharing and the continuing dilemma of physician financial incentives, 98 Nw. U. L. Rev. 145-238 (2003).  In early 2005, the OIG issued an additional series of rulings (advisory opinions Nos. 05-01 to 05) that, while continuing to find gainsharing arrangements a technical violation of the anti-kickback statute, declined to impose any penalties because there were sufficient safeguards in place guard against patient harm and the incentives were limited to specifically described cost-savings measures, such as not opening more surgcical supplies than are needed for the operation, and using less expensive versions of particularly expensive surgical supplies. 

In a rare ruling, a New York court held that it constitutes illegal "fee-splitting" for a medical school to charge a 10% "dean's tax" on clinical revenues by part-time adjunct faculty members whose clinical practice is not part of the university's medical system and is not supported by the school.  Odrich v. Trustees of Columbia University, ___________ (N.Y. App. Div. 2003).  For analysis of  state law generally, see Note, 43 Brandeis L. J. 465 (2005).

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