How to Work with Sales and Marketing Representatives in Your Medical Practice

by Steven M. Harris, Esq. •

Sales and marketing representatives can add tremendous value to your practice. They can generate consistent business by leveraging contacts who have services that can be referred to your practice. However, the services a sales and marketing representative provides are subject to significant scrutiny under the federal Anti-Kickback Statute (AKS) and state equivalents. For this reason, the decision to engage sales and marketing representatives is one you should make carefully, with the advice of counsel experienced with these types of arrangements.

Concerns

AKS prohibits offering, paying, soliciting or receiving anything of value to induce or reward referrals or generate federal healthcare program business. Many states have their own version of AKS that similarly prohibit any payment in exchange for referrals of healthcare services. Sales and marketing representatives are engaged to secure referrals of healthcare services to the physician practice with which they are contracted. This type of arrangement implicates AKS, and to engage sales and marketing representatives in a compliant manner, the arrangement you make with them should be structured to comply with one of the AKS safe harbors. The applicable safe harbor for these types of arrangements is the one for personal services and management contracts. To receive protection under this safe harbor, the arrangement must satisfy the following elements:

  • A written agreement must be signed by the parties;
  • The term of the agreement must be at least one year;
  • The agreement must specify aggregate payment, and such payment must be set in advance;
  • The compensation must be fair market value and determined through arm’s length negotiations; it must not be determined in a manner that takes into account volume or value of referrals;
  • The agreement must set forth the exact services required; and
  • The arrangement must serve a commercially reasonable business purpose, not taking into consideration the referrals generated as a result of the arrangement.

If an arrangement does not meet these requirements, it falls outside the safe harbor and is subject to scrutiny by the Office of Inspector General (OIG) and could subject the parties to fines and penalties if the arrangement is determined to run afoul of AKS.

EKRA

The Eliminating Kickbacks in Recovery Act (EKRA), passed October 2018, also changes how sales and marketing representatives are compensated. EKRA was passed as part of the SUPPORT Act, which was drafted to address the opioid epidemic in the U.S. However, EKRA was drafted broadly, and it has a direct impact on sales and marketing arrangements for certain healthcare entities. Specifically, EKRA applies to recovery homes, clinical treatment facilities and laboratories (regardless of whether the laboratory engages in drug testing). It applies to all payers, whereas AKS is concerned only with arrangements that result in additional claims being submitted to a federal healthcare program, such as Medicare or Medicaid.

Under EKRA, you cannot pay a W-2 employee or independent contractor in a manner determined by or that varies by: