AKS compliance in healthcare marketing after the Seventh Circuit ruling

A recent ruling by the Seventh Circuit has provided new clarity on what constitutes a "referral" under AKS, potentially reshaping marketing strategies for healthcare organizations.

Understanding the Anti-Kickback Statute

According to Practical Law, “The Anti-Kickback Statute (AKS) is a criminal statute. It protects health care beneficiaries and federal health care programs from the influence of money over medical decision-making and corruption caused by bribes.” 

42 U.S.C. § 1320a-7b(b) makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any form of remuneration—directly or indirectly—in exchange for:​

1. Referring individuals for services or items reimbursable by a federal health care program.
2. Purchasing, leasing, ordering, or recommending any goods, services, or items covered by such programs.​

Violations can result in penalties, including criminal charges, substantial fines, and exclusion from federal healthcare programs.

Healthcare marketers have operated in a gray area, balancing the need to generate leads while avoiding arrangements that could be interpreted as illegal kickbacks. The recent Seventh Circuit ruling provides insights into where that line may now be drawn.

The Sorensen case

On April 14, 2025, the U.S. Court of Appeals for the Seventh Circuit overturned Mark Sorensen's criminal conviction under AKS, narrowing the interpretation of what constitutes a "referral" in the marketing context.

Case background

Sorensen owned SyMed Inc., a durable medical equipment (DME) company that partnered with marketing firms to advertise orthopedic braces. These marketing partners:

• Collected lead information from interested patients online
• Faxed prefilled, unsigned prescriptions to doctors
• Allowed physicians to independently decide whether to sign and authorize these forms

The government had alleged these marketing arrangements resulted in $87 million in fraudulent Medicare billings, with SyMed receiving $23.6 million in payments. Sorensen was originally sentenced to 42 months in prison and ordered to forfeit $1.8 million.

The court's reasoning

The Seventh Circuit made several points in its reversal:

1. The marketers were neither physicians nor decision-makers who could leverage "fluid, informal power and influence" over healthcare decisions
2. Physicians maintained "ultimate control" over patients' healthcare choices
3. Doctors applied independent judgment, rejecting approximately 80% of the marketing company's prefilled prescription forms
4. The marketing arrangements didn't directly influence physician decision-making

The court concluded that advertisers and manufacturers did not "refer" patients under the AKS definition, stating: "The key point is that, on this record, physicians always had ultimate control over their patients' healthcare choices and applied independent judgment in exercising that control."

OIG Advisory Opinion 08-19

The HHS Office of Inspector General's Advisory Opinion 08-19, issued in October 2008, remains a guide for healthcare marketing arrangements even after the Sorensen ruling. This opinion addressed a proposed arrangement between a health information website and healthcare providers, offering insights that complement the Seventh Circuit's recent decision.

Elements of Advisory Opinion 08-19

The arrangement reviewed in this opinion involved:

• A website offering health information to consumers
• A service connecting consumers with potential healthcare providers
• A "pay-per-lead" compensation model where providers paid for contact information of interested consumers
• No specific recommendations of providers to consumers
• Consumer choice in selecting providers from multiple options

The OIG determined this arrangement presented minimal risk under AKS because:

1. Consumer autonomy: The website did not recommend specific providers but presented multiple options, allowing consumers to make independent choices.
2. No clinical decision influence: The marketing entity had no influence over clinical decisions or treatments.
3. Fixed, fair market value fees: The fees paid were set in advance, consistent with fair market value, and not tied to the volume or value of referrals.
4. Transparency: The website clearly disclosed the paid nature of the arrangement to consumers.
5. No federal healthcare program targeting: The arrangement wasn't specifically designed to generate federal healthcare program business.
   
   

Advisory Opinion 08-19 in light of Sorensen

The Sorensen ruling aligns with and potentially expands upon Advisory Opinion 08-19 in several ways:

• Both emphasize the importance of independent decision-making by consumers (08-19) and by physicians (Sorensen).
• Both recognize legitimate roles for marketing intermediaries that don't directly influence healthcare decisions.
• While Opinion 08-19 focused on consumer-directed marketing, Sorensen addresses provider-directed marketing materials.

However, important distinctions remain:

• Opinion 08-19 involved consumers selecting from multiple provider options, whereas Sorensen involved sending prefilled prescription forms to specific doctors.
• Opinion 08-19 required transparency about the paid relationship, which wasn't addressed as prominently in Sorensen.
• The advisory opinion offered protection only to the specific arrangement reviewed, while Sorensen potentially establishes a broader precedent.
  
  

Practical application of Opinion 08-19 principles

Healthcare organizations seeking to align with both Opinion 08-19 and the Sorensen ruling should consider:

• Implementing fixed fee structures unrelated to federal program business volume
• Clearly documenting and disclosing marketing relationships
• Ensuring marketing communications don't pressure or unduly influence clinical decisions
• Preserving choice—either for patients selecting providers or for providers deciding on treatments
• Avoiding targeting federal healthcare program beneficiaries specifically

Implications for healthcare marketing

This ruling potentially creates more breathing room for healthcare marketing strategies, particularly for:

• Lead generation companies
• Digital health marketers
• Telehealth platforms
• DME providers
• Healthcare advertising agencies

The decision suggests that marketing arrangements may not violate AKS if they:

• Merely propose services without exerting pressure on providers
• Maintain physician autonomy in the decision-making process
• Don't influence clinical judgment
• Allow healthcare providers to independently evaluate each case

Where HIPAA intersects with marketing compliance

While the Sorensen case focuses on AKS compliance, healthcare marketers must also navigate HIPAA regulations. When implementing marketing strategies similar to those in the Sorensen case, organizations must ensure:

1. Patient Authorization: Marketing activities involving protected health information (PHI) typically require explicit patient authorization.
2. Data Security: Any patient information collected through marketing channels must be securely handled and transmitted according to HIPAA standards.
3. Business Associate Agreements: Marketing partners handling PHI must sign Business Associate Agreements (BAAs) outlining their HIPAA compliance obligations.
4. Limited Data Use: Information collected should only be used for the specific purpose for which it was authorized.

In the Sorensen case, the marketing firms collected patient information directly from interested individuals online, which may have avoided certain HIPAA complications. However, once this information entered the healthcare ecosystem, HIPAA requirements would apply.

Related: HIPAA compliance in digital marketing

Balancing compliance considerations

Healthcare organizations should view the Seventh Circuit ruling with cautious optimism. While it provides more flexibility for marketing strategies, it represents just one circuit's interpretation. Organizations should consider:

• Circuit variations: Organizations operating across multiple jurisdictions should be aware that other circuits may interpret AKS differently.
• Ongoing OIG guidance: The HHS Office of Inspector General's Advisory Opinion 08-19 still offers relevant guidance, providing limited safe harbor for certain "pay-per-lead" models under specific conditions.
• State-level regulations: State anti-kickback and fee-splitting laws may be more restrictive than federal interpretations.
• Documentation of independence: Organizations should document evidence that healthcare providers maintain independence in their decision-making process.

State law considerations

While the Sorensen ruling provides important guidance on federal AKS interpretation, healthcare marketers must remember that state laws often impose additional—and sometimes more stringent—requirements. Operating in compliance with federal standards does not automatically ensure compliance with state regulations.

Varying state anti-kickback provisions

State anti-kickback and fee-splitting laws can differ from federal AKS in several ways:

• Broader application: Many state laws apply to all healthcare services, not just those reimbursed by federal programs. For example, California's anti-kickback statute applies to any referral for healthcare services, regardless of payer source.
• Stricter prohibitions: States like New York, Florida, and Massachusetts have enacted provisions that may prohibit arrangements that would be permissible under federal standards. New York's fee-splitting prohibitions, for instance, are notoriously strict and have few exceptions.
• Limited safe harbors: While federal AKS provides numerous safe harbor protections, many state laws offer fewer exceptions or safe harbors, creating compliance challenges even for arrangements that meet federal requirements.
• Different standards of proof: Some states do not require proof of "knowing and willful" intent, making it easier to establish violations at the state level compared to federal prosecution.
  
  

States with notably strict requirements

Healthcare organizations should be cautious when operating in states known for rigorous enforcement and strict anti-kickback provisions:

• New York: The New York Education Law § 6530(19) prohibits healthcare practitioners from sharing professional fees or splitting revenue with non-licensed individuals or entities, severely limiting certain marketing arrangements.
• California: Business & Professions Code Section 650 prohibits compensation for patient referrals and has been interpreted broadly by courts and regulators.
• Florida: The Patient Brokering Act (Florida Statutes § 817.505) prohibits any form of remuneration for patient referrals, with limited exceptions that may not align with federal safe harbors.
• Texas: The Texas Occupations Code prohibits "improper solicitation of patients" and imposes strict limitations on healthcare marketing arrangements.
• Massachusetts: Massachusetts General Laws Chapter 175H has anti-kickback provisions that apply to both public and private healthcare services.

FAQs

Does the Sorensen ruling apply to arrangements involving Medicaid or private insurance?

The Sorensen ruling specifically interprets the Anti-Kickback Statute, which applies to federal healthcare programs like Medicare and Medicaid, but not directly to private insurance.

Can marketing firms offer bonuses to staff for generating more healthcare leads?

Bonuses tied to the volume or value of referrals can raise AKS concerns and should be carefully structured or avoided.

Does transparency with patients fully shield a marketing arrangement from AKS liability?

Transparency helps reduce risk but does not guarantee protection if other elements suggest improper influence or inducement.

How does the concept of “fair market value” apply to marketing services under AKS?

Payments for marketing must reflect fair market value for actual services rendered, independent of the volume or value of the resulting business.

Are there safe harbors under AKS that protect certain marketing practices?

Yes, but very few marketing arrangements qualify for AKS safe harbors without specific structuring and legal review.