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Spring 2010

Healthcarare Marketing: Navigating the Regulatory Landscape

Adrienne Dresevic, Esq.
Carey F. Kalmowitz, Esq.
The Health Law Partners, P.C., Southfield, MI

Marketing is an integral component of any business enterprise’s efforts to maintain and expand its economic base. Many healthcare providers (including pain and anesthesia practices) likely have been strategizing about their marketing programs as they contemplate the prospects of declining reimbursement and heightened regulatory scrutiny. As practices develop their plans, they must be mindful that marketing practices which are commonly applied in most other industries potentially might implicate significant compliance risks for healthcare providers. While the healthcare regulatory framework is extensive and highly complex, this article will focus solely on the principal federal laws that govern many healthcare providers’ marketing practices with referral sources, in particular, the Medicare and Medicaid Anti-Kickback Statute (the “AKS”), and the Federal Stark Law (“Stark”).

Healthcarare Marketing and the AKS

The AKS is an intent-based statute which contains both civil and criminal penalties. Any arrangement in which anything of value is exchanged between a referral source and a third party in connection with the provision of services paid for by a federal program potentially implicates the AKS. Since marketing inherently is designed to cultivate business (including health care items and services reimbursed by federal programs) through the offering of incentives, many common marketing activities potentially violate the AKS. Thus, together with evaluating the efficacy of a particular marketing activity, practices should design their marketing with a view towards mitigating the attendant compliance risks.

Healthcare providers customarily entertain and offer gifts and other items, (e.g., tickets, dinners, etc.) to physicians and other persons in a position to refer or arrange for referrals. In a progressively more competitive environment, the pressure to enhance revenue often leads practices to expand their networks of referral sources, and marketing often is viewed as the means to do so. As discussed in compliance guidance issued by the Office of the Inspector General, gifts, gratuities, and other entertainment activities trigger potential AKS risks when they involve parties in a position to refer services or influence referrals to the provider. As a result, providers should implement certain safeguards designed to reduce these risks. Below are certain procedural safeguards that practices should consider when structuring their marketing programs:

  • The practice’s administration should be notified of all marketing activities with referring physicians (and other referral sources). This will permit the practice to coordinate, monitor, track, and evaluate such activities from a compliance perspective.
  • The practice should never provide referral sources with cash gifts. Any non-monetary gifts can never be tied to referrals, should be nominal in value, and be tied to educational/business sessions.
  • In the event that a referring physician (or other referral source) suggests or represents that referrals or continued referrals are conditioned upon providing entertainment or gifts to such individual, the practice should immediately refrain from any marketing effort with that individual. Also, the practice must avoid making any statements to a referral source that could be construed to mean either (a) that increased referrals will translate into more lavish entertainment, or (b) conversely, that any decrease in referrals will result in a reduction of entertainment.
  • The practice must not correlate its marketing expenditures to the volume or value of referrals related to the referral source.
  • When entertainment takes the form of dining, the practice should spend a significant portion of time discussing business/education matters with the individual.
  • The practice must be aware of the amount expended on entertainment, both in terms of any specific episode (e.g., dinner), and the aggregate expenditure on any single referral source during a year. Simply put, the likelihood of the arrangement being viewed as an inducement to refer increases in proportion to the level of entertainment expenditures.

Healthcarare Marketing and Stark

Stark is a broad prohibition that bans physician referrals of Medicare beneficiaries to entities with which they (or immediate family members) have a financial relationship for “designated health services” (“DHS”), which include, among others, diagnostic testing services, hospital services, and physical therapy services, unless an exception applies. For Stark purposes, a financial relationship may arise from a compensation arrangement, which includes the provision of anything of value to a referring physician. As a result, practices that provide DHS which market to physicians or physician-owned entities should be cognizant that such activities directly implicate Stark. If Stark is triggered, and an exception is not met, a provider will be subject to severe sanctions, including denial of claims for those referred services.

Stark contains an exception for “non-monetary” compensation that applies to certain marketing activities. Under this exception, a DHS provider that furnishes something of value (e.g., meals, entertainment, non-cash gifts such as tickets, etc.) to a referring physician up to an annual limit of $355 will be protected. Notably, if a DHS provider’s marketing activities do not comply with this exception, it will not be able to lawfully bill for any DHS ordered by that referring physician.

As noted above, practices should implement certain procedural safeguards when engaging in marketing activities that involve providing gifts to, and/or entertaining, physician referral sources. These should include, in particular, those principles discussed above. In the event that a DHS provider inadvertently exceeds the limit (by not more than), Stark provides that the excess can be corrected by the referring physician repaying such excess by the end of the calendar year or 180 days from the date of such payment, whichever is first.


Given the complex healthcare regulatory framework, practices engaging in marketing activities need to ensure that they adhere to certain procedural safeguards when marketing to referral sources. In practice, this should cover any and all activities, involving, for example, entertainment activities and the offering of any gifts to referral sources. While practices realistically cannot forego marketing, by implementing the safeguards discussed above, they can meaningfully reduce the AKS and Stark risks associated with marketing.

Adrienne Dresevic, Esq. is a founding member of The Health Law Partners, P.C. Ms. Dresevic practices in all areas of healthcare law and devotes a substantial portion of her practice to providing clients with counsel and analysis regarding Stark and fraud and abuse. Ms. Dresevic can be reached at

Carey F. Kalmowitz, Esq. is a founding member of The Health Law Partners, P.C. Mr. Kalmowitz practices in all areas of healthcare law, with specific concentration on the corporate and financial aspects of healthcare, including structuring transactions among physician group practices and other healthcare providers, development of diagnostic imaging and other ancillary services joint ventures, physician practice, IDTF and home health provider acquisitions, certificate of need, compliance investigations, and corporate fraud and abuse/Stark analyses. Mr. Kalmowitz can be reached at