Your newly responsible for growing revenue at a healthtech company. Your software background has you excited to create channel partnerships and you have visions of lead growth and big deals.

Now if you sell salestech or HR tech, or whatever kind of tech, you’re probably going after partners and saying things like “I’ll pay you 10% of any deals that you send my way.” And on the reverse, you’re saying “How about a piece of whatever I send your way?”

If this is Hubspot, Salesforce, Notion - no problem.

With EHRs, you could be breaking a federal criminal statute. 

First - I’m not a lawyer. But I’ve spent the past three years in companies where I’ve received training on everything from business models to stay compliant to how to talk about these topics in a compliant manner. So, don’t take this as legal advice, take this as my observations and interpretation of the world I’ve experienced and do with it what you will.

So, what’s the problem here?

There’s laws, policies, regulations, etc at play.

1. Anti-Kickback

2. Information Blocking practices (I’ll be writing about this in part 2)

What is the anti-kickback statute?

The AKS is a criminal law that prohibits the knowing and willful payment or "remuneration" to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies.

So, what does an EHR have to do with a service payable by the Federal health care programs?

Well, the Department of Justice has made it quite clear over the past ten years with multiple cases they’ve brought against EHRs. The DOJ has placed special watch over EHRs because there’s literally been federal dollars used to pay and incentivize providers to adopt this technology in the past. It’s also often seen as a “requirement” to operate a large practice so the government wants their to be fair buying and selling of EHR technology.

This quote was from the 2021 case that required Athena to pay more than $18 million dollars. Among other items, Athena was found to have provided trips to the Masters to prospective and existing customers and pay existing customers up to $3,000 for the referral of new business. This case is a great example that it doesn’t have to be straight cash, but excessive rewards and trips are also seen as kickbacks. But Athena wasn’t the only one, in 2022 popular specialty EHR Modernizing Medicine was fined $45 million for violating the anti-kickback statute and false claims act. Modernizing Medicine’s case sort of changed the landscape. In addition to getting penalized for paying customers, it was also quoted by the DOJ that they paid “influential sources in the healthcare industry.” This makes things very interesting as it throws into question how a company can use 1099 reps who have big audiences or form similar partnerships. NextGen is the most recent EHR to be fined in the Summer of 2023. If the trend continues, we’re likely to see another case go public in the coming months.

But, does this apply to every EHR and digital health tool?

Well, that’s the confusing thing about this statute. It’s not incredibly clear. Historically, if you look at these cases they have primarily focused on Certified Health IT technology which people often just lump in as ONC-certified EHRs. If you look at the cases, there’s nothing against HIPAA compliant CRMs, or billing platforms. It’s against ONC certified EHRs, ModMed, Athena, and Nextgen - and others.

Are there EHRs paying for referrals today? Yes, yes there are.

The most well known example is likely SimplePractice. SimplePractice has been around for years and is one of the largest EHRs in the country while focusing on mental health providers. Recently they surpassed 200,000 providers on their platform. SimplePractice has paid their existing customers for years and here’s a link to their current program, at the time of writing, that provides a $200 credit to existing customers.

So, how do I grow my business without getting fined?

Well, the AKS isn’t a black and white statute. To use other laws as examples, homicide is very black and white. You can not kill someone. On the other hand, speeding isn’t as clear. If the speed limit is 35mph, I would bet 99% of readers would feel comfortable driving 39, a smaller portion would feel comfortable at 44, and most likely noone would feel totally safe passing a police officer if they were going over 50. That’s kind of how the anti-kickback statute seems to work, you have to evaluate the risk you’re comfortable with and operate based on that risk.

This is where I’m going to throw that disclaimer in again. I’m not a lawyer. But here’s what I’ve been trained on. If you are looking for a lawyer, I highly suggest the following two firms.

• McDermott Will & Emery

• Nixon Gwilt Law

Great, now that’s out of the way… here’s some things to consider when you think about risk. This isn’t an exhaustive list but they are items that commonly can come up when thinking about growing a health tech product. If you want an exhaustive list of the “Safe Harbors” the government provides, that can be found here.

1. Do you have a Certified Health IT Product? If the answer is yes, that’s quite risky to pay for referrals. The easiest way to know you’re high risk is having an ONC certified EHR or feature. If not, well based on historical precedent you’re pretty safe, but consider the other factors.

   1. This is where non-certified EHRs and EHR products can feel safer with referral and affiliate programs. I’m putting emphasis on feel because it hasn’t been pursued yet but that doesn’t mean it never will.

2. Is the person getting you referrals a W2 employee? If the answer is yes, then you’re most likely fine. This is a normal sales employee and we’ve all got them. Where you might get risky is if you’re paying astronomically above fair market value, but otherwise it’s just a salesperson. If they’re not a W2 employee, keep reading.

   1. Here’s the government’s language from the Safe Harbor link above: “Employees. As used in section 1128B of the Act, “remuneration” does not include any amount paid by an employer to an employee, who has a bona fide employment relationship with the employer, for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs. For purposes of paragraph (i) of this section, the term employee has the same meaning as it does for purposes of 26 U.S.C. 3121(d)(2).”

3. Is the relationship success based? The government generally doesn’t like to see success based referral relationships. For example, it may be considered less risky to pay for a lead than it is to pay for a closed-won deal.

4. Are you paying fair market value? Similar to the government not liking success based relationships, the government also doesn’t like to see payments based on the $ of value provided or quantity provided. For example, having tiers where you’re paying more the more business they send is a red flag. Similar paying a % of the deal value to a non-W2 employee is a red flag because you’re paying based on the value of the deal. The government prefers to see payment based on the service being provided. This means you’re paying fair market value for the 30 minutes a doctor might have spent educating his doctor colleague on the value of your product. What’s the value of that 30 minutes? NOT, what’s the value of that next doctor who might buy your product. EHRs will literally hire third party valuation firms to get a third party’s calculation of fair market value.

   1. Here’s the government’s language on this (found at the link above for Safe Harbors): “Any payment the participant makes to the referral service is assessed equally against and collected equally from all participants and is based only on the cost of operating the referral service, and not on the volume or value of any referrals to or business otherwise generated by either party for the other party for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal health care programs.”

5. How long is the relationship? The government doesn’t want to see capitalizing on one time opportunities. For example, you have a great relationship with one customer, you talk to 4 EHRs and find one that will pay you, so you create a relationship with that EHR for a month to capitalize on the opportunity. Having arrangements for time periods of at least one year helps.

6. Is everyone being honest and transparent? If the government catches wind that people are lying about how great the product is or not disclosing that they receive payments for referrals that also increases risk.

So the next time you approach an EHR, keep AKS in mind. They’re not trying to be a pain by saying “Thanks for sending us business but we can’t do anything about it.” They may literally just be following the law.

Bonus: How does Zocdoc get away with literally charging for new patient appointments?

They went straight to the federal government and got an advisory opinion. The name of the “Requestor” has been removed but it’s generally known it was Zocdoc. A quick google search of “OIG Zocdoc” brings up tons of articles from legal offices and the OIG’s opinions. Here’s the OIG’s advisory opinion on the business model from 2019. In 2023, Zocdoc got an update that can be found here.

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