Referrals In The SUD Treatment Industry (Part 3 of 3)

Anti-kickback best practices

Aside from being illegal, kickbacks are ethically and socially indefensible.

However, it is important to acknowledge that economic challenges can blur judgment, and that some practices that, at first sight, may look like innocent marketing creativity are in fact kickbacks in disguise.

Does the current legal and regulatory environment provide efficient guidance to providers?

The answer is maybe. “Marketing” creativity is boundless, and only clear guidelines will help providers navigate our evolving environment.

-   Example one: Telemedicine evolution perfectly illustrates how challenging the concept of a kickback can be. More specifically, how is a company referring MD’s, PsyD’s, PHD’s for a fee to providers treated? Does the fee constitute a kickback? If yes, does the prohibition burden outweigh cost savings and efficacy benefits? If not, when does the fee become a kickback?

-   Example two: In the age of cyber information, calling centers (ex: Best Rehab Centers of XXX State ) is not an un-interested party providing information to the public on the internet but a marketing company selling its services to paying providers. This kind of labeling misleads consumers, and payments made by providers using these services may be deemed kickbacks

With these complex realities in mind, it is only good governance for providers to adopt and implement what is commonly accepted as “best practices.”

Best practices principles

Below we listed a few best principles that may be useful to providers. This list is not exhaustive, and more best practices principles may be warranted.

-   Client or potential client’s welfare always takes precedence over the provider’s interests.

-   Published information (e.g.,advertising) must be transparent, comprehensive, objective, and subject to unhindered verification by clients and potential clients.

-   Any provider who believes there is an exception to allow referral fees for clients is greatly mistaken.

If in doubt, share your concerns with your compliance officer, your lawyer, or a trusted colleague.

When it “does not feel right,” it probably is not (e.g., open account for exchanged services).

When it comes to “marketing” fees, ask yourself if

  • The fee paid is for guaranteed deliverables
  • The fee paid represents more than a reasonable marketing cost (quality marketers can provide you with marketing ROI)
  • The fee paid is directly linked to deliverables (by percentile, per unit, based on volume scale).

    • In any of these situations, there is a high likelihood it is a kickback in disguise.

    Best practices principles implementation

    To help providers, we created the summary below.

    -   Integrate best practices in your policies and procedures manuals

    -   Educate and train your staff to work with your compliance officer and management in case of doubt

    -   Educate and train your staff to report suspicious practices to your compliance officer and management

    -   Since referrals are part of a normal course of business, be open about them. To avoid misunderstanding, speculation, and retaliatory whistleblower complaints:

  • Document the framework of your cooperation with third parties,
  • Maintain a log of all referrals,
  • Samples of these documents can be found at 7seasventures.com (useful documents library)

    • Kickbacks and business valuation

    Even if a kickback perpetrator is not caught, the business valuation is greatly hampered by this practice.

    First, kickbacks are easy to spot in financials.To deduct expenditures, businesses have to record and report such expenditures. They will be itemized in their profit and loss statements. Some specific expenditures (e.g., marketing / sales costs) will be scrutinized if the amounts reported are greater than customary ( e.g., marketing expenditures greater than 12.5% of gross revenues), or handled by third parties (e.g., sales handled by independent contractors or third parties) If kickbacks are “off the books,” the situation is even worse, as it constitutes tax fraud, and perhaps money laundering.

    Second, during the due diligence process, suspicion of kickbacks will lead analysts to apply discounts and/or reserves during the appraisal process.

    Third, because a business’ performance is linked to kickbacks, the performance will falter once the kickback process is no longer, a reality that can invalidate the consummated sale of a business.

    In conclusion

    Kickback practices have no place in the SUD treatment industry. Management and staff must be vigilant to stay clear from kickback schemes as well as schemers, as one can be deemed guilty by association. Once a business has been identified as being part of a kickback network, investigative agencies will review all transactions from payers and payees, which may lead to costly defense, even if the business is an innocent bystander.