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Is it legal for doctors to pay referral fees for patients?


No, it is not. Referral fees are illegal and are prosecuted by the federal government as kickbacks, especially if government medical insurance (Medicare and Medicaid) is used. Consider the case of U.S. v. Babaria, decided on December 31, 2014 by the Third Circuit Court of Appeals. Dr. Babaria, a radiologist, owned a business that provided diagnostic testing, including MRI's, CT scans and ultrasounds. From 2008 through 2011, he paid other physicians to refer their patients to his facility for diagnostic testing. He then billed Medicare and Medicaid for the testing procedures he performed. There was no evidence that he falsified patient records, billed for testing that was not medically necessary or otherwise compromised patient care. In other words, Dr. Babaria did everything right...except he paid the doctors who referred their patients to him referral fees. As a Jacksonville criminal defense lawyer, I have represented doctors and those involved in the health care field with these types of issues.

In the health care world, these payments are called kickbacks and in this case, the government sought and the court ordered forfeiture of the entire amount of money he billed for the procedures - some $2,014,600.85. This doesn't seem fair, does it? After all, he performed the necessary and proper services and did not bill Medicare or Medicaid anything extra - the monies he paid the other doctors came out of his own pocket. Nonetheless, this is what the court ordered - along with a prison sentence of 46 months for making illegal payments - kickbacks - in violation of the federal "anti-kickback statute", and a $25,000 fine. He sentence was further enhanced because the court also determined that he violated a position of trust. The court also noted that Dr. Babaria knew the rules and certified, year after year, that he was in compliance with the anti-kickback statute - and that he concealed the making of payments to the other doctors.

Lesson Learned:

When dealing with Medicare and Medicaid (and really all health insurance today) doctors must be absolutely compliant with the current health care laws...or suffer disastrous consequences, as Dr. Babaria did. The feds love prosecuting these cases, and more often than not, are tipped off (usually by a competitor) about these illegal practices. The competitor (or whomever it is doing the tipping off ) gets a portion of the proceeds that the government collects, so there's a big incentive to snitch on one's competitor or boss.

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