How Sales and Marketing Compensation Can Get Hospices Into Hot Water

Regulators are taking a closer look at how hospices pay their marketing and outreach workforces to curb fraudulent activity tied to referral streams.

Federal and state regulatory agencies have systems in place to detect fraud, waste and abuse in hospice, and some are honing on oversight of sales, marketing and outreach staff payment arrangements, according to Ellen Persons, shareholder at Polsinelli Law Firm. Persons is a former Assistant U.S. Attorney in the Civil Division for the Northern District of Georgia.

Methods of compensation for sales and marketing staff can paint a broader picture of potential malfeasance, including when it comes to the nature of referral arrangements, Persons said during Transcend Strategy Group’s GRO Summit.


“You really need to try and make sure you have dotted all your I’s and crossed all your T’s so that the government doesn’t come knocking,” Persons said during the event. “The goal is to prevent having money sway decision making in the health care space and deciding where to refer or send patients.”

Wage structures for marketing staff should not have any ties related to referral volume, Persons indicated. Hospices may be unaware of the hidden components that can signal referral-based incentives within their staff payment arrangements, she stated.

But in some instances, the regulatory risks can be high, according to Persons. Hospices can face both civil and criminal charges for suspected fraudulent activity, she said. These cases can be expensive and difficult to defend, Persons stated.


“[These cases are] essentially settlements where marketers and their activities, because of how they were being paid, were deemed to be violations of the anti-kickback statute,” Persons said. “Because the anti-kickback statute is both a civil and criminal statute, you have to be very careful. Prosecutors have wide discretion on how they want to pursue those claims.”

Along with False Claims Act (FCA) cases, anti-kickback violations are among the most commonly occuring forms of hospice fraud and abuse.

A number of qui tam cases have risen during recent years, which occur when a whistleblower, deemed a “relator” by courts, files a FCA suit in concert with the government. The relator can potentially receive a portion of any funds recovered via the lawsuit, typically ranging from 15% to 25%.

Anti-kickback cases have been percolating in hospice, including those addressing fraud tied to physician referrals. Many of these relate to the Stark Law, which prohibits physicians from referring Medicare patients to other providers with whom they have a financial relationship, according to the U.S. Centers for Medicare & Medicaid Services (CMS)

In 2021, the U.S. Department of Health & Human Services (HHS) Office of the Inspector General (OIG) in revised the anti-kickback statute to include a “safe harbor” regulation. The safe harbor regulation stipulates that certain payment and business practices are not treated as criminal offenses. Examples include personal services and management contracts and outcomes-based payment arrangements.

Though some payment arrangements fall within the scope of this exemption, wage policies for sales and marketing staff can wave hidden red flags for regulators, according to Persons. Remaining compliant requires vigilant navigation around how hospices structure pay for these workers, both contracted staff and employees, she said.

“It’s important to have some sort of methodology behind the compensation and how they are being paid to ensure that there is no tie between volume or the value of a referral,” Persons said. “That is a big debate. You need [to] figure out how to structure those arrangements such that they fit very cleanly in one of the anti-kickback statute safe harbors personal services.”

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