Q: An internist friend told me about an arrangement he has with an agency that provides at-home medical testing for patients who are bed-bound; under the arrangement, he is paid a fee if he refers a patient to the agency. The agency, he said, told him that this is not a violation of the federal Anti-Kickback Statute (AKS) because he is not recommending the service to anyone who does not need it and does not refer the patient to any specific provider. My friend asked me whether I was interested in setting up the same arrangement with this agency. Should I consider it?

A: No, and your friend needs to stop immediately.

It is remarkable that this is still being tried, since it was directly dealt with in 2014 in US v Patel. In that case, the doctor filled out the necessary paperwork for home healthcare, and the patients then chose the agency they wanted for their actual care. However, the doctor had an arrangement with one agency to pay him $400 for each signed form if a patient chose them, and an additional $300 if the patient was recertified for care beyond 60 days.

The doctor did not pressure patients to choose that agency and did not certify the care unless he felt that it was warranted, but the arrangement was found to violate the AKS. The AKS prohibits knowingly and willfully being involved in soliciting, receiving, offering, or paying any type of remuneration in return for referring a patient covered by a federal program. That language is actually wider than it seems because “knowing and willful” does not actually require specific intent to violate the law, and “remuneration” includes anything of value, whether tangible or intangible.

The issue of renumeration is critical in sussing out an impermissible arrangement. In your friend’s case, remuneration is cash, but subtler schemes may involve things like a “loan” without interest or specified repayment date, or personnel or devices being supplied to the doctor’s office for free or at a deep discount.

AKS is also strictly governed by the “one purpose” test, which means that both sides of the transaction are accountable even if only one purpose of the arrangement is to induce referrals.

Although the doctor’s statements on the forms were true—that the services were medically required, and that he never told a patient which agency to choose—this was irrelevant because of the agency’s obvious intention to induce referrals and the steps they knowingly took to make that likely.

The only “out” under the AKS is a safe harbor. For example, a physician employed by a hospital is paid a salary to provide services that they recommend—not a payment for ordering—and so a personal services agreement can pass muster if compensation is set in advance based on fair market value rather than referral volume.

However, safe harbor does not cover your friend’s arrangement. There is also no semantic distinction to hide behind. In US v Patel, the doctor tried to argue that “referral” requires a direct recommendation, but the court found that his act of authorizing care itself qualified as a “referral” because he was the gatekeeper to federal programs.

That an individual patient may not come under the AKS because they have private coverage is also likely not protective because many states have an AKS that covers non-governmental payors. And don’t forget that the AKS is a criminal statute, so in addition to fines and program exclusion, a jail term is possible.

The answer for both you and your friend is therefore simple: You must avoid any payment-for-business schemes with healthcare service providers, and he needs to get out of this as soon as possible.