“Buying Business” Leads to 42-Count Indictment for Home Health Agency

September 24, 2015

Medical LawA recent case discussing both the federal Stark Act and the Anti-Kickback Statute (AKS) was affirmed on appeal.  It is U.S. vs. Patel, 778 F.3d 607 (7th Cir. 2015).  The lower court decision is at 17 F. Supp. 3d 814 (N.D. Ill. 2014).  The AKS provisions at issue in Patel can be found at 42 U.S.C. §1320a-7b(b)(1)(A).  The main issue in this case seems to be what definition of “refer” should be used, since there is no definition provided within the AKS itself.

Summary of Facts.

When business declined for Grand Home Health in 2002-2003, the owners allegedly decided to introduce a compensation model to essentially buy the business.

Grand Home Health is a Medicare certified home health agency based in Chicago.  Approximately 95% of Grand’s patients are Medicare recipients.

Due to a separation of partners and the subsequent formation of a competing agency that brought along with it most of Grand’s patients, Grand’s owners, Nixon Encinares and Maria Buendia, were forced to drum up new business.  When efforts at introductions to area physicians proved unsuccessful, Encinares and Buendia reportedly began offering physicians sums of money in exchange for Medicare patient referrals.

One of the physicians who purportedly acquired such a financial relationship with Encinares and Buendia, was Dr. Kamal Patel, a geriatric internal medicine specialist.  Grand had previously received patients from Dr. Patel, but this had not been the case since the other partners left the agency.

Patel was allegedly one of 20 physicians who shared in a financial relationship with Grand.  Following the compensation arrangement, Grand provided home health care services for a reported two to four patients of Patel’s on a monthly basis.

The Payment for Home Health Referrals Scheme.

Following are the reported facts surrounding this arrangement:

(1)        Dr. Patel was compensated by Grand at a rate of $400 cash for each new patient and $300 cash for each re-certification.

(2)        Grand began treating approximately two to four patients of Dr. Patel’s again on a monthly basis after Dr. Patel was approached by Encinares and Buendia regarding the compensation plan.

(3)        A majority of Patel’s patients continued to receive services from other providers.  Patel made about ten general home health referrals monthly.

(4)        Dr. Patel and his medical assistant, Jeanette Sungvoom, allegedly provided home health eligible patients with 10-20 different brochures for various providers, including Grand, but did not direct or influence patients to choose Grand as their provider.

What’s the Harm?

The government began investigating Grand, and consequently Patel, for health care fraud in the spring of 2011.  As a result, the government filed a 42-count indictment in November of 2012, against Patel, Encinares, Buendia, and others involved in the scheme, alleging violations of the federal Anti-Kickback Statute (AKS).

Dr. Patel waived his right to a jury trial and was convicted of violating the AKS in February of 2014, following a 3-day bench trial in the U.S. District Court of the Northern District of Illinois.  The Seventh Circuit Court of Appeals affirmed the district court’s decision the following year on February 10, 2015.

The AKS was enacted for the purpose of protecting patients and federal health care programs from fraud and abuse.  It is designed to prohibit the exchange of anything of value (whether monetary or otherwise) as a means to reward or entice referrals of business under any federal health care program.

The law serves to protect against:

(a)        increased costs in Medicare and Medicaid programs;

(b)        abusive practices that result from physician decisions arising from self-interest rather than cost, quality of care, or necessity of such services; and

(c)        the skewed medical judgment of doctors in treating patients due to improper financial considerations.

The case at issue specifically discussed the following provision of the AKS:

“…whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind– in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program [shall be guilty of a felony].”  Section 1320a-7b(b)(1)(A), 42 United States Code.  [Emphasis added.]

Attempting to Defend Against the Prosecution Under the AKS.

While Patel reportedly never denied receiving payments from Grand, he allegedly still maintained he was not in violation of the AKS.  His defense argued that he did not direct (refer) his patients to Grand and therefore, he did meet the referral requirement of the law.

While the Stark Law contains specific language to define the term “referral,” the AKS does not.  Therefore, Patel allegedly refuted the prosecution’s interpretation of “referring,” and argued per Sanders v. Jackson, 33 F. Supp. 2d 693 (N.D. Ill. 1998), “the cardinal rule is that words used in statutes must be given their ordinary and plain meaning.”

Patel reportedly relied on the definition of “refer” to mean personally recommending a particular provider.  A physician cannot be said to have referred a patient to a particular provider if the patient, of his or her own volition, chooses a provider with no direct influence from the physician.

Patel alleged that the certifications and re-certifications for home health care would have necessitated his signature for services to be rendered to the patients from Grand regardless of whether or not payment was being provided to Patel from Grand.

However, the government maintained that the term “referral” as it is used in the AKS should allow for a more broad interpretation based on the underlying purpose of the statute.  Their definition of “referral” would include not only a physician’s direct recommendation to a specific provider, but the physician’s actual authorization of care by a particular provider.  Pursuant to this definition, the signing of certifications and re-certifications which was necessary for Grand to provide patients with home health care services and charge Medicare for the same, would constitute “referring” under the AKS.

Patel’s Argument Falls Flat and Penalties Ensue.

The Seventh Circuit Court of Appeals affirmed the district court’s decision for the following reasons:

(1)        The sole purpose of the AKS is to protect patients and federal health care programs from fraud and abuse and a narrow interpretation of the term “referring” would defeat that purpose.

(2)        Patel acted as a medical and financial gatekeeper.  Grand could not bill Medicare for services rendered to patients without Patel’s signature on the certifications and re-certifications.  Therefore, the prospect of a kickback for signing the forms provided Patel with an increased incentive to bill Medicare for the services.  This is exactly the type of incentive the AKS was enacted to eliminate.

(3)        A physician need not direct a patient to a particular provider.  The physician serves as a “gatekeeper” in providing authorization for care by a particular provider and that is sufficient to constitute a “referral” per AKS and the statute’s underlying purpose.

Based on the Court’s ruling, Patel was found guilty on 6 counts of violating the AKS and 1 count of conspiracy to violate the AKS.  He was sentenced to 8 months in prison, 200 hours of community service, and required to forfeit $31,900 in kickbacks.

Furthermore, Patel was stripped of his medical license and will be automatically excluded from Medicare and Medicaid.  He and Grand also have suffered significant personal and professional damage to their reputations as a result.

If you find yourself facing allegations of AKS violations, don’t hesitate to immediately contact an experienced health attorney who can properly evaluate your case and inform you of your rights.


Are you clear on what constitutes a “referral” per anti-fraud laws?  Are you currently accepting kickbacks, or have you ever been offered kickbacks, for potential referrals?