“Free With Purchase” May Sell Cosmetics, but “Free With Referral” Is a Bad Marketing Idea

April 20, 2020

The coronavirus has closed their office doors, but the U.S. Department of Justice is still prosecuting healthcare crimes and extracting painful settlements.

Last week, the DOJ settled a case involving what might be described as a twist on the “free with purchase” promotion so popular with regular merchants, “regular” in the sense of not having anything to do with healthcare. Here, the allegations were “free with referral.”

In the case at point, the allegations were that the defendant physician, Mubashar Choudry, M.D., a cardiologist who treats patients for peripheral arterial disease in Maryland and Washington, D.C., and three medical practices with which he’s associated, Washington Cardiovascular Institute, Advanced Vascular Resources, and Washington Vascular Institute, performed free “ankle-brachial index” tests on the patients of other physicians and allowed those physicians to bill for the procedures, thereby providing remuneration in exchange for referrals.

On April 17, 2020, the DOJ announced that Dr. Choudry, and the three medical practices have agreed to pay the United States $750,000 to resolve the underlying False Claims Act allegations that they knowingly billed Medicare and TRICARE for claims in violation of the Anti-Kickback Statute (“AKS”). As mentioned above,  the defendants allegedly induced patient referrals by providing ankle-brachial index testing on patients under agreements with the referring physicians but without collecting from the physicians the fair market value for the tests.

As readers are well aware (right?), the AKS prohibits the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal healthcare program.

Kickbacks can take many forms, from good old cash in a bag, to free rent, to undervalued services (e.g., the so-called company model of anesthesia services problem), to, well, tests that someone else can bill for.

One final point, one that falls into the category of “last, but not least” – the settled allegations arose from a whistleblower action brought by Steven Pringle, a former sales and operations employee of the practices, under the False Claims Act, which permits private parties to sue on behalf of the government for false claims and to receive a share of any recovery.

“Who’ll ever find out?” is a question that many physicians ask themselves when hatching too-clever plans. The answer, of course, is your own staff.

In the Choudry settlement, the “why” for the whistleblower probably includes the fact that he’s about to receive a check for his share of the government’s recovery.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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