A referral fee may also be referred to as a kickback. Referral fees are payments which medical service providers offer to doctors in exchange for the doctor referring patients to that service.

Are Referral Fees Legal?

There are numerous federal laws which prohibit referral fees. These laws are referred to as anti-kickback statutes.

Examples of these statutes include the Stark Act and the Medicare and Medicaid Patient Protection Act of 1987 and the Stark Act. Federal laws make it illegal for a referring doctor to receive fees from a medical testing center to refer a patient or to interpret medical test results.

A physician is not permitted to refer their Medicare or Medicaid patients to a medical lab that the physician or their immediate family owns. The law also includes certain safe harbor provisions but the penalties include hefty fines and exclusion from Medicare or Medicaid.

Based on the 42 U.S.C. § 1320a-7b(b) Anti-Kickback Statute, it is a crime to either pay or accept such remuneration. In certain cases, violating the Anti-Kickback Statute is not actually a violation.

For example, safe harbor regulations set forth by the Office of Inspector General Advisory Opinions outline various payments and business practices that are legal even though they may appear to break the law. In addition to the federal laws discussed above, every state usually has its own rules which prohibit kickbacks.

What is the Stark Law?

The Stark Law is an Anti-Kickback Statute that was enacted in 1972. It prohibits medical doctors from referring clients to other hospitals or clinics in which they have a financial interest.

The effect of this law is to prevent and reduce the occurrence of physician self-referral. In other words, this law was created with the intent to prevent doctors from profiting off of their own referrals.

Self-referrals are thought to reduce the quality of health care and may lead to potential mistreatment and medical malpractice claims. The Stark Law makes it a felony for any individual to knowingly and willinging do any of the following related to promoting a referral for health care services which are paid by federal health programs, for example, Medicare:

  • Offer;
  • Pay;
  • Solicit;
  • Receive a kickback;
  • Receive a bribe; or
  • Rebate.

The Stark Law is a strict liability statute, which means that it is not required to show that the doctor acted intentionally or with knowledge in order for them to be held liable. Stark Law violations may, in some cases, form the basis for False Claims Act litigation.

Any individual who violates this statute may receive a prison sentence of up to 10 years or a fine of up to $100,000. A health care service may involve providing supplies or drugs.

A bribe may include:

  • Money;
  • Meals;
  • Tickets;
  • Hotel rooms; or
  • Other items.

There may also be less obvious types of compensation for a particular service, for example, being given a certain job.

What is the Code of Medical Ethics Opinion 11.3.4?

A patient must trust their doctor will be genuine with them and make treatment suggestions as well as referrals based upon:

  • Medical necessity;
  • The talent of other health care experts or entities to which the patient is referred; and
  • The grade of the services or products provided.

Payment made by a doctor or a health care institution solely for a referral of a patient is fee-splitting and is considered illegal. A doctor is not permitted to accept:

  • Any payment from any source for the referral of patient other than allocations of a health care organization’s earnings as permitted by law;
  • Any payment from any source for prescribing specific:
    • medications;
    • products; or
    • services;
  • Payment for services relating to a patient’s care from any health care facility or organization to which the doctor has referred the patient;
  • Payment referring a patient to a research study; or
  • A doctor in a capitated primary care practice may not refer a patient based upon whether the referring physician has arranged a discount for the specialty services.

What are the Penalties for Violating Anti-Kickback Statutes?

The penalties for violating a federal anti-kickback statute may be severe. For example, a violation of the Medicare and Medicaid Patient Protection Act of 1987 is considered to be a felony criminal offense. A defendant may face criminal consequences including a prison term of up to 5 years and criminal fines of up to $25,000.

Liability for a criminal referral often results from an interaction between the Medicare and Medicaid Patient Protection Act and the Stark Act. Therefore, a doctor can face criminal fines on various 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 doctors who make investments in clinics by making loans or by investing capital. The OIG is specifically involved with physicians who are asked to invest based on the number of referrals they make to a clinic.

It is important to note that the OIG has made safe harbors which allow doctors to have particular types of joint ventures.

What are the Penalties for Violating the Stark Law?

The penalties for a violation of the Stark Law involves fines that are similar to those for white collar crimes. A Stark Law violation typically involves a fine being imposed on the liable physician.

The penalties may be very costly and can include:

  • Payment of civil penalties of up to $100,000 for each violation instance;
  • Refund of the money which was collected by the physician or facility that received the referral;
  • Exclusion from Medicare or other state health care programs, for example, Medicaid;
  • Payment of fines of up to $15,000 for each service provided that the individual knew or should have known was provided through a Stark Law violation; and
  • Other penalties depending on the specific circumstances involved in the violation.

A Stark Law penalty may apply to both the doctor who is making the illegal referral as well as the organization which received the referrals. The penalties may increase if the parties knowingly act together to circumvent, or avoid, the requirements of the Stark Law.

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

The laws which govern referral fees are complex and the penalties for a violation may be severe. As previously noted, the Stark Law is a strict liability statute.

This means that even if the doctor did not intend to break the law, they may still be liable for paying back millions of dollars in Medicare and Medicaid claims. When entering into new arrangements, a doctor should hire a lawyer with knowledge of anti-fraud and government law to ensure they comply with all federal laws.

Do I Need a Lawyer for Assistance With Stark Law Provisions?

It may be difficult to defend against a Stark Law violation since it is a strict liability law. It is in your best interests to hire a personal injury lawyer in your area if you need assistance with any matters involving the Stark Law.

Your attorney can provide you with legal guidance related to any Stark Law governed activities and can represent you in court, if needed. In the event that you need to report a Stark Law violation, your lawyer can assist you with that claim.