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Tricare, Medicare & DOL Referrals: Should Marketers Receive Commissions for Federal Business?

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A common question that we receive from both physicians and healthcare marketers is whether a marketer can receive commissions for finding federally funded patients – including providing Medicare, Medicaid, Department of Labor, and Tricare referrals. Unfortunately, this question is more complicated than it sounds. Many factors come into play, including the employment status of the marketer, the types of services provided, and the structure of the compensation.

The Issue with Paying for Referrals of Federally Funded Patients

Most healthcare marketers get paid a guaranteed base salary, plus commissions. This hybrid structure is designed to incentivize the marketer to develop as much business as possible. However, under federal healthcare laws, that is where the problem arises. Since federal healthcare programs like Medicare, Tricare, and Department of Labor coverage are funded by taxes, regulators closely scrutinize any payments that are not exclusively in exchange for medical services rendered.

Some Guidance: OIG Advisory Opinion 98-10

Guidance on the issue comes from an advisory opinion issued by the Chief Counsel to the Office of Inspector General (OIG), a branch of the U.S. Department of Justice. Although OIG advisory opinions are not legally binding, they are highly authoritative, and law enforcement officials rarely deviate from the OIG’s guidance.

With respect to marketer referral fees for federally-funded patients, OIG Advisory Opinion No. 98-10 calls into question compensation arrangements that are based on a percentage of sales. It also calls for close scrutiny of any direct contact between sales agents and physicians who are in a position to order items or services that will be paid for by a federal healthcare program.

In the opinion, the OIG addresses the question of whether the payment of a sales commission to an independent marketing contractor (i.e., one who is not the physician’s employee) for referring federally funded patients violates federal law. The OIG concludes that such payments may constitute illegal remuneration and, as such, violate of Section 1128B(b) of the Social Security Act (also-known as the federal anti-kickback statute).

Although the opinion does not specifically address whether the status of a marketer as an employee – rather than an independent contractor – solves this issue, the OIG has previously stated that, “any compensation arrangement between a seller and an independent sales agent for the purpose of selling health care items or services that are directly or indirectly reimbursable by a federal health care program potentially implicates the anti-kickback statute, irrespective of the methodology used to compensate the agent.”

Rescue Through Safe Harbors? Probably Not.

Sometimes, anti-kickback concerns can be mitigated – or even avoided entirely – by structuring an arrangement to fit within an applicable safe harbor. Among the most utilized of these safe harbors is the personal services and management contracts safe harbor established by 42 C.F.R. Sect. 1001.952(d).

However, the personal services and management contracts safe harbor is unlikely to apply to Medicare or Tricare commissions paid to independent contractors. First and foremost, one of the safe harbor’s conditions is that the marketer’s aggregate compensation must be calculated in advance. That condition, however, is hard to meet in an arrangement that does not predetermine the final paycheck amount, but rather conditions (and calculates) payment upon the marketer’s actual sales. As a result, payments to independent healthcare marketers for federally funded referrals generally should not be made on a commission basis.

Questions? Contact Us for a Free Consultation

The attorneys of Oberheiden, P.C. advise healthcare clients across the country on marketing arrangements and other issues. Our team includes former Medicare Fraud Strike Force officials who have a thorough understanding of the complex laws and rules that apply to physicians, healthcare providers, and other companies in the healthcare industry. If you are concerned about your payment arrangement, or if you want to ensure that your contracts comply with the law, call (800) 701-7249 or contact one of the following attorneys directly for a free and confidential consultation.

  • Dr. Nick Oberheiden

Attorney & Founder
nick@federal-lawyer.com

  • Lynette S. Byrd

Former federal healthcare prosecutor, Department of Justice
lsb@federal-lawyer.com

This information has been prepared for informational purposes only and does not constitute legal advice. This information may constitute attorney advertising in some jurisdictions. Reading of this information does not create an attorney-client relationship. Prior results do not guarantee similar future outcomes. Oberheiden, P.C. is a Texas LLP with headquarters in Dallas. Mr. Oberheiden limits his practice to federal law.
Orange County 714-294-2000
Los Angeles 310-873-8140
Detroit 313-888-8807
Nationwide 888-452-2503