Can a Gift Card Program be an Illegal Kickback?

At 1818 Legal, we have had several clients, mainly in the medical field, who have asked about whether a gift card or rewards program would be considered an illegal kickback.  This article delves into the subject of whether gift cards might run afoul of anti-kickback laws. 

If, after reading this article, you have more questions about a gift card or reward programs in your practice, then we welcome you to contact us at 1818 Legal.  We represent businesses that need information, counsel, and representation in Chicago and throughout the region.  Call us today at (312) 584-5444 or fill out our online contact form.

Anti-Kickback Statutes – the Basics 

When talking about a medical practice, a “kickback” refers to something of value given or received to encourage patient referrals.  Kickbacks are illegal under both state and federal law.

As between providers, anti-kickback statutes have been put in place to ensure that medical professionals are always looking out for their patient’s best interests rather than being motivated by a financial incentive to refer to a particular provider. Similarly, providers should not pay patients and non-providers for referrals because medical and treatment decisions should be driven by best practices in health care and never financially induced. To fully understand the anti-kickback statutes, it is essential to remember that there are both federal and state anti-kickback statutes, and they are not identical. 

1. The Federal Anti-Kickback Law

The federal anti-kickback statute prohibits a provider from giving gift cards, cash, discounted services, or anything else of value in exchange for referrals if federal insurance programs, such as Medicare and Medicaid, are involved. The penalties are severe, so it is essential to understand what constitutes a kickback. 

The U.S. Department of Health and Human Services has repeatedly confirmed that offering discounted or free items or services in exchange for something of value to patients who participate in a government program may be a violation of the anti-kickback statute.  It may be permissible, however, if there is a statutory or regulatory exception or if specific safeguards have been implemented to prevent program fraud and abuse.

2. The Illinois State Anti-Kickback Law 

While Illinois law and federal law have a great deal of overlap, the Illinois anti-kickback law is a bit stricter compared to the federal law.  In Illinois, it is illegal to give or receive anything, directly or indirectly, in an attempt to encourage or reward patient referrals.  However, state law only prohibits kickbacks where insurance benefits are involved or an insurance claim will be made.  Additionally, under Illinois law, if you’re solicited to offer a kickback, and you don’t report it to law enforcement, you are violating the law even if the kickback never actually takes place.  

So, Are Gift Cards Considered Illegal Kickbacks?

Giving patients gift cards in exchange for patient referrals will likely violate the anti-kickback statutes because they are just a cash substitute.  However, in some circumstances, it may be permissible to give patients gift cards.  

The Office of The Inspector General (OIG) recently determined that offering gift cards to patients as a way to incentivize them to utilize healthcare services for themselves presents a low risk for fraud and abuse.  While giving or accepting gift cards may implicate the anti-kickback statutes, if the gift cards are not intended to induce referrals, it is likely that administrative sanctions will not be imposed. 

The OIG’s determination was in connection with a particular case in which a federally qualified healthcare center (FQHC) was not sanctioned for providing patients with $20 gift cards.  The gift cards were provided as a one-time incentive to persuade patients to attend their appointments.  If a patient under the age of 19 missed two appointments, it was permissible to offer a $20 gift card as a way to encourage attendance at appointments.

The OIG concluded that sanctions against the practice, in that circumstance, were not necessary because there were a significant number of safeguards in place to limit the risk of fraud and abuse with those $20 gift cards.

Specifically, some of the reasons the OIG found the medical provider would not be subject to punishment were as follows:

• Small Pool of Existing Patients. Since the eligible patients only included people who missed two appointments, the OIG determined that there was a fairly low risk of inappropriate patient steering because the patients had already established a relationship with the provider. Had the provider been offering gift cards as an incentive to procure new patients, this likely would have been an issue.
• Would Not Lead to an Increase in Cost to Federal Health Care Programs.  Because the FQHC gave the gift cards only to existing patients, there was no risk that patients would see this provider simply to receive a gift card.  Therefore, any patient who was incentivized by this and rescheduled an appointment would just reflect the expected utilization of the federal health care program.
• Not A Harm to Competing Providers.  It is highly unlikely that offering gift cards to existing patients would create a harm for any other competing providers. Again, the patients already chose this provider and were simply being incentivized to take care of their health, not to choose one provider over another.
• The Goal Was to Improve Patient Care.  The purpose of offering the gift cards was very explicit: encourage patients to attend their appointments and prioritize their health. There was no requirement that the patient had to attend any further visits in order to receive their gift card. Additionally, the FQHC also provided education to the patients.

Keep in mind that the OIG’s decision was based on the specific facts of the medical practice in response to a question about its own gift card program. OIG determinations are fact-specific and not blanket rules for all medical providers. 

If you want to have a gift card program, make sure that they are not offered as referral incentives. The gift cards should be for a reasonably small amount, and the provider must treat everyone equally and not show any favoritism based on the number of referrals a person makes.  Most importantly, be sure to consult with an experienced attorney for guidance in this area.

Conclusion

Creating a gift card or rewards program can be a risky prospect because severe anti-kickback penalties could result.  That is why you should be sure to consult an experienced attorney who assists medical providers to make sure your program does not run afoul of the law.  We invite you to call 1818 Legal to help you with your efforts.  We are experienced attorneys who are ready to help you protect the value of your business.  Call us today at (312) 584-5444 or fill out our online contact form.  Remember, 1818 knows government.

The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.