Inducements To Obtain Patients: Don't Do It

Health care providers and insurers should be aware that a provider's payment of consideration to obtain patients is unlawful and that resulting claims are not payable. This includes not only payments to third-party patient recruiters, but also financial incentives offered to patients themselves, such as paying their insurance premiums or waiving the patient cost-share to induce the patient to treat with the provider.

California Insurance Code section 750 prohibits a provider who bills a patient's insurer from offering or delivering "any consideration," "whether in the form of money or otherwise," to "any person" as "compensation or inducement" to "procure" the patient. The Supreme Court has offered the helpful advice that an "'[i]nducement' is anything that induces." People v. Hering, 20 Cal.4th 440, 447 (1999) (citation omitted). This includes paying referral fees to third-party recruiters, but it also prohibits giving patients financial consideration as an inducement to treat with the provider. Federal law has similar prohibitions. Both the anti-kickback statute, 42 U.S.C. § 1320a-7b(b), and the Civil Monetary Penalties Law, 42 U.S.C. §1320a-7a(a)(5), prohibit any person from paying consideration to steer patients to particular providers or suppliers of any item or service paid by Medicare or a State health care program.

Anti-kickback and anti-inducement statutes are important to curtailing health insurance fraud and abuse. They prohibit the payment of consideration to obtain patients to ensure that treatment is not influenced by considerations other than the best interest of the patient, and to prevent patients and their insurers from being charged excessive amounts for treatment in order to recoup the consideration paid. People v. Guiamelon, 205 Cal. App. 4th 383, 399 (2012). Inducements like the routine waiver of the patient cost-share also serve to eliminate the patient's skin in the game, removing the financial incentive for patients to seek equally effective but less expensive treatment. And the payment of referral fees to recruiters or financial consideration to patients is unfair to other providers who do not pay these types of inducements to obtain patients. U.S. ex rel. Grenadyor v. Ukrainian Village Pharmacy, 772 F.3d 1102, 1105 (7th Cir. 2014) (a discount or copay waiver artificially inflates the price that the government pays pharmacies for prescription drugs. Patient gratuities divert customers from other pharmacies who do not offer such gratuities and induce customers to purchase drugs they would not have purchased if responsible for the copay.)

The Office of Inspector General ("OIG") has confirmed that provider-funded premium assistance programs are prohibited when they may influence the patient's choice of provider. 79 Fed. Reg. 31120, 31121 (May 30, 2014). Even premium assistance programs run by independent charities run afoul of the anti-kickback and anti-inducement prohibitions if the assistance steers patients to particular products or providers. See OIG Adv. Op. 97-1 (permitting the American Kidney Fund ("AKF") to use donations by a provider association to pay for patient insurance coverage, but only because under the circumstances of that arrangement, the premium payments were not tied to, or likely to influence a beneficiary's selection of, a particular provider.) OIG noted that the AKF arrangement "differs from an arrangement where a renal dialysis provider directly pays premiums for beneficiaries, thus potentially influencing them to continue to use that particular dialysis provider in order to ensure continuing payment of premiums." Id. at 5 n.4.

An insurer who denies a claim that is tainted by an unlawful inducement can defend against a suit for non-payment by asserting affirmative defenses of fraud or unclean hands, or by bringing a cross claim under California's Unfair Competition statute or various other state or federal anti-kickback laws. An insurer who already paid such claims may be entitled to an order of restitution for amounts previously paid for patients obtained in violation of anti-kickback laws. Public policy underlying the prohibition on the payment of unlawful kickbacks or inducements would be defeated if providers could unlawfully obtain patients and then expect to be paid. See, e.g., Lab. Code § 3219(b) (voiding contracts in violation of various anti-kickback laws and providing for an order divesting the provider of any compensation received); Ins. Code § 1871.7(a), (b) (remedy for employing patient recruiters is "an assessment of not more than three times the amount of each claim for compensation"); 42 C.F.R. § 411.353(d) ("An entity that collects payment for a designated health service that was performed pursuant to a prohibited referral must refund all collected amounts on a timely basis ...").

In short, offering financial inducements to obtain patients is illegal. Don't do it.