Consultant found guilty of illegal kickbacks by “referring” doctors’ patients to another medical provider in exchange for remuneration

Under 42 U.S.C. § 1320a-7b(b)(1)(A) it is a felony for a physician to solicit or receive a kickback “in return for referring” a Medicaid or Medicare patient to another medical provider. But as a recent decision by the Eighth Circuit in United States v. Iqbal demonstrates, physicians are not the only ones capable of making illegal referrals under the statute—consultants can, too.

Defendant Iqbal was a consultant that managed a group of physicians. He approached a medical provider (“PCP,” a home care agency) with a profit-splitting scheme: he would send physicians’ patients to PCP in exchange for fifty-percent of PCP’s profits for serving the patient. PCP contacted authorities about the scheme and thereafter accepted Iqbal’s proposal while working undercover with authorities.

The sting operation resulted, at first, in a March 2011 meeting between Iqbal and PCP. At that meeting Iqbal touted his strong relationship with the group of physicians and his ability to refer their patients to PCP, and reiterated his fifty-fifty profit sharing scheme to which PCP agreed. Iqbal’s physicians later referred two patients to PCP, which PCP served and received Medicaid and Medicare reimbursement. PCP sent Iqbal separate payments in June and August for his fifty-percent share of the profits that PCP made from serving the two patients.

Iqbal was charged with three counts of illegal kickbacks: One, for soliciting illegal kickbacks during his March 2011 meeting with PCP; Two, for receiving an illegal kickback in June; and Three, for receiving an illegal kickback in August. All three counts were “in return for referring” patients to PCP under § 1320a-7b(b)(1)(A).

Iqbal challenged the sufficiency of the evidence, and conceded that the statutory phrase “in return for referring” meant that one must cause or induce the referral. The two-judge majority willingly assumed as much, declined to interpret the statute any narrower, and found the evidence sufficient to affirm his convictions. Although the majority’s reasoning was not surprising, Judge Kelly in a partial dissent and concurrence took up the task of interpreting the statutory phrase, “in return for referring.” The Eighth Circuit had not previously defined the term. Judge Kelly relied on cases from other circuits in similar contexts to adopt the interpretation “that a person refers an individual for a service only when, as a practical matter, the person exercises decision-making control over the selection of the service provider.” As a result, Judge Kelly utilized a narrower definition than Iqbal and the majority. Under that definition, Judge Kelly found insufficient evidence to affirm Iqbal’s convictions for receiving a kickback for referring the two patients, because the government failed to show that Iqbal exercised decision-making control over the physicians’ referrals. Judge Kelly, however, affirmed Iqbal’s conviction for soliciting a kickback during his March meeting with PCP because Iqbal held himself out to PCP as having the ability to make the referrals, regardless of his actual ability to do so.

So physicians, consultants, and everyone in between dealing with Medicaid and Medicare patients should keep in mind that while decision-making control over a referral is likely necessary evidence to prove a “referral” in return for an illegal kickback, solicitations do not require such decision-making control. All that is required is representing that one has the ability to do so.

RJ Zayed

RJ Zayed

RJ HELPS CLIENTS PROTECT THEIR ASSETS AND REPUTATION IN THE AREAS OF PATENTS, TRADE SECRETS, AND GOVERNMENT ENFORCEMENT AND CORPORATE INVESTIGATIONS THROUGH COUNSELING, LITIGATION, AND TRIALS (IF NECESSARY). RJ has tried over 50 cases to jury verdict in federal court as lead trial counsel in both civil and criminal cases, including patent infringement, trade secrets, contract, and civil and criminal fraud cases. RJ has submitted, and argued as lead counsel, over 30 civil and criminal appeals before the U.S. Courts of Appeals for the Seventh, Eighth, Ninth and Federal Circuits. RJ’s Intellectual Property practice focuses on counseling and litigation concerning patents and trade secrets. RJ’s Government Enforcement and Corporate Investigations practice focuses on counseling, compliance, internal investigations, and white collar defense of government enforcement actions and investigations.

Alex Hontos

Alex Hontos

Alex is accomplished in Federal procurement law and government contracting, including the Federal Acquisition Regulations and the Contract Disputes Act; Federal civil-fraud provisions, including the False Claims Act and Anti-Kickback Act; and the specialized rules that govern claims against the United States, including bid protests.

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