Our law practice has recently represented physicians and alternative care practitioners on anti-kickback issues.
Health care providers need to be concerned not only with federal law (i.e., Stark financial self-interest and related anti-kickback rules), but also with state laws. Every state has different legal rules determining what is considered a kickback.
For example, here are some notes from research into Michigan law:
333.16221 Investigation of licensee, registrant, or applicant for licensure or registration; hearings, oaths, and testimony; report; grounds for proceeding under MCL 333.16226. Sec. 16221. The department may investigate activities related to the practice of a health profession by a licensee, a registrant, or an applicant for licensure or registration. The department may hold hearings, administer oaths, and order relevant testimony to be taken and shall report its findings to the appropriate disciplinary subcommittee. The disciplinary subcommittee shall proceed under section 16226 if it finds that 1 or more of the following grounds exist: (d) Unethical business practices, consisting of 1 or more of the following: (i) False or misleading advertising. (ii) Dividing fees for referral of patients or accepting kickbacks on medical or surgical services, appliances, or medications purchased by or in behalf of patients....... ***** (e) Unprofessional conduct, consisting of 1 or more of the following: (i) Misrepresentation to a consumer or patient or in obtaining or attempting to obtain third party reimbursement in the course of professional practice. (ii) Betrayal of a professional confidence. (iii) Promotion for personal gain of an unnecessary drug, device, treatment, procedure, or service. (iv) Either of the following: (A) A requirement by a licensee other than a physician that an individual purchase or secure a drug, device, treatment, procedure, or service from another person, place, facility, or business in which the licensee has a financial interest. (B) A referral by a physician for a designated health service that violates section 1877 of part D of title XVIII of the social security act, 42 USC 1395nn, or a regulation promulgated under that section. Section 1877 of part D of title XVIII of the social security act, 42 USC 1395nn, and the regulations promulgated under that section, as they exist on June 3, 2002, are incorporated by reference for purposes of this subparagraph. A disciplinary subcommittee shall apply section 1877 of part D of title XVIII of the social security act, 42 USC 1395nn, and the regulations promulgated under that section regardless of the source of payment for the designated health service referred and rendered. If section 1877 of part D of title XVIII of the social security act, 42 USC 1395nn, or a regulation promulgated under that section is revised after June 3, 2002, the department shall officially take notice of the revision. Within 30 days after taking notice of the revision, the department shall decide whether or not the revision pertains to referral by physicians for designated health services and continues to protect the public from inappropriate referrals by physicians. If the department decides that the revision does both of those things, the department may promulgate rules to incorporate the revision by reference. If the department does promulgate rules to incorporate the revision by reference, the department shall not make any changes to the revision. As used in this subparagraph, "designated health service" means that term as defined in section 1877 of part D of title XVIII of the social security act, 42 USC 1395nn, and the regulations promulgated under that section and "physician" means that term as defined in sections 17001 and 17501. Additionally, if there are issues with misbranding, this could apply:
333.17764 Conduct constituting misdemeanor; violation; penalty; other violations.
(1) A person shall not sell, offer for sale, possess for sale, or manufacture for sale a drug or device bearing or accompanied by a label that is misleading as to the contents, uses, or purposes of the drug or device. A person who violates this subsection is guilty of a misdemeanor. In determining whether a label is misleading, consideration shall be given to the representations made or suggested by the statement, word, design, device, sound, or any combination thereof, and the extent to which the label fails to reveal facts material in view of the representations made or material as to consequences that may result from use of the drug or device to which the label relates under conditions of use prescribed in the label or under customary or usual conditions of use.
(2) A person shall not knowingly or recklessly do either of the following:
(a) Adulterate, misbrand, remove, or substitute a drug or device knowing or intending that the drug or device shall be used.
(b) Sell, offer for sale, possess for sale, cause to be sold, or manufacture for sale an adulterated or misbranded drug.
Earlier provisions sent to you:
THE MEDICAID FALSE CLAIM ACT (EXCERPT)
Act 72 of 1977400.604 Furnishing of goods or services; kickbacks or bribes; payments or rebates for referrals; felony; penalty.
A person who solicits, offers, or receives a kickback or bribe in connection with the furnishing of goods or services for which payment is or may be made in whole or in part pursuant to a program established under Act No. 280 of the Public Acts of 1939, as amended, who makes or receives the payment, or who receives a rebate of a fee or charge for referring an individual to another person for the furnishing of the goods and services is guilty of a felony, punishable by imprisonment for not more than 4 years, or by a fine of not more than $30,000.00, or both.
THE HEALTH CARE FALSE CLAIM ACT (EXCERPT)
Act 323 of 1984
752.1004 Kickbacks, bribes, or rebates as felony; penalty.
A person who solicits, offers, pays, or receives a kickback or bribe in connection with the furnishing of goods or services for which payment is or may be made in whole or in part by a health care corporation or health care insurer, or who receives a rebate of a fee or charge for referring an individual to another person for the furnishing of health care benefits, is guilty of a felony, punishable by imprisonment for not more than 4 years, or by a fine of not more than $50,000.00, or both.
Notice the breadth of the language as to what is swept into the definition of kickback.
Fyi, there was a 1995 Michigan Court of Appeals case that dealt with earlier statutory language prohibiting physicians from "directing or requiring" patients to use a facility in which the physicians had a financial interest. The physicians had posted a sign letting patients know that there were "other qualified facilities capable of providing the service." They argued that this, together with the fact that their ownership shares did not depend on volume of referrals, relieved them from discipline under the statute.
The medical board found that the physicians had committed unethical business practices under the Public Health Code. The trial court reversed the board's ruling. But the appellate court reversed, noting that the legislative concern is to stop a physician from "being tempted to over-utilize the laboratory services and thereby increase his income." In other words, the appellate court upheld the disciplinary order of the medical board.
It looks like the language in 16221(e)(iii) above is even broader than the old language, and it is additional to the anti-kickback language in 16221(e)(ii). These are the kinds of nuances that inform judgments in situations such as, for example, physicians directly selling dietary supplements in an office practice or at a seminar, or even being in a wellness center where the person down the hall sells herbs and other dietary supplements and they are generating cross-referrals to the MDs.
Michael H. Cohen is a attorney providing business legal advice to entrepreneurs and companies, and health care law advice to businesses and clinicians in the holistic health, wellness, and green industries.