The federal anti-kickback statute applies where a federal health care program pays. Stark applies to Medicare referrals for designated health services. A clinic that takes no insurance sits outside both most of the time, and that is where the “we do not bill insurance” argument ends. Florida, Texas and California criminalize referral payments regardless of who pays. EKRA reaches laboratory referrals under any health care benefit program, including private plans. The Travel Act makes a state bribery offense a federal one the moment interstate commerce is involved. Cash-pay changes which statute applies, not whether one does.
Where the two famous federal statutes stop
The anti-kickback statute, 42 U.S.C. 1320a-7b(b), makes it a felony, up to ten years, to knowingly and willfully offer, pay, solicit or receive remuneration to induce referrals of items or services for which payment may be made in whole or in part under a Federal health care program. The federal-program element is in the statute. A cash-pay neurotoxin patient is not a federal program payment.
Stark, 42 U.S.C. 1395nn, bars a physician from referring a Medicare patient for designated health services to an entity with which the physician has a financial relationship, and bars the entity from billing for it. The designated services list at (h)(6) includes clinical laboratory services and outpatient prescription drugs. The statute keys to services payable under Medicare. No Medicare, no Stark.
Two caveats before you relax. First, “cash-pay” is a description of most of your patients, not all of them. A weight-management or hormone menu that ever touches a Medicare or Medicaid beneficiary, a lab that bills a federal program for any test, or a pharmacy that fills a federally covered prescription, pulls the arrangement back inside both statutes. Second, the exceptions matter: the AKS bona fide employee exception at (b)(3)(B) covers employees, not independent-contractor medical directors or marketers.
Where the federal net actually reaches cash-pay
EKRA, 18 U.S.C. 220, was written for the opioid-treatment industry and drafted wide. It prohibits soliciting, receiving, paying or offering remuneration in return for referring a patient to, or in exchange for an individual using the services of, a recovery home, clinical treatment facility or laboratory, where the services are covered by a health care benefit program. That phrase is defined by reference to 18 U.S.C. 24(b) and includes private plans, not only federal ones. Penalty: up to ten years per occurrence. If your model includes in-house or partner laboratory services, EKRA applies to referral payments around them regardless of whether Medicare is anywhere near the account. The exceptions include fixed employee compensation not tied to referral volume, and personal services contracts meeting the federal regulations.
The Travel Act, 18 U.S.C. 1952, criminalizes using interstate travel or the mail, including wires, to promote or carry on “unlawful activity,” which the statute defines to include bribery in violation of the laws of the State in which committed. Federal prosecutors have used it to charge health care kickbacks that fall outside the AKS by pairing it with state commercial-bribery and patient-brokering laws. A cross-state referral arrangement paid by wire is the fact pattern it was built for.
The state statutes that never had a payer requirement
| State | Statute | What it prohibits | Payer nexus | Penalty |
|---|---|---|---|---|
| Florida | Fla. Stat. 817.505 | Any commission, bonus, rebate, kickback or bribe to induce the referral of patients, by any health care provider or facility | None | Third-degree felony; second-degree at 10 to 19 patients; first-degree at 20 or more |
| Florida | Fla. Stat. 456.054 | Any kickback, direct or indirect, in cash or in kind, for referring or soliciting patients | None | Discipline and the penalties the section carries |
| Texas | Tex. Occ. Code 102.001 | Knowingly offering to pay or agreeing to accept remuneration for securing or soliciting a patient or patronage for or from a licensed person | None | Class A misdemeanor; third-degree felony on a repeat |
| California | Bus. & Prof. Code 650(a) | Any rebate, refund, commission, discount or other consideration by a licensee as compensation or inducement for referring patients | None | Up to a year in county jail on a first conviction, 650(i) |
Florida’s grading by patient count is worth reading twice. A marketer paid per booked consultation who brings twenty patients is the first-degree felony fact pattern, and the statute applies to the payer and the recipient.
The arrangements that get caught
- Marketing agencies paid per lead, per booked patient or per treatment. Compensation for securing patients under Texas 102.001; a commission to induce referrals under Florida 817.505.
- Influencer or “ambassador” programs that pay a cut of what referred followers spend. Same analysis, with the added problem that the influencer is often out of state, which is where the Travel Act appears.
- Cross-referral deals with a lab or pharmacy. EKRA for the lab side on any payer; state law on both sides. Pharmacy and lab clients carry this exposure whether or not the clinic does.
- Medical director pay that rises with patient volume. Fee splitting under the practice acts and, where the director steers patients, a referral payment under the criminal statutes. The percentage-of-revenue problem is the same problem from the physician’s side.
- Free or discounted treatments for patients who refer friends. Remuneration to induce referrals, paid in kind. Florida’s statute says “in cash or in kind” on its face.
What survives
Advertising that is paid for placement rather than per patient. Salaried marketing employees whose pay does not vary with volume. Fixed fees for services at fair market value, documented. Employment relationships that fit the statutory exceptions. Discounts disclosed and applied uniformly. The structural principle is the same everywhere: pay for work and for placement, never for people.
What this means for you
Stop using “we are cash-pay” as the answer to any referral-fee question. Instead run the state test first, because Florida, Texas and California apply to you today, then the federal tests: EKRA if a laboratory is anywhere in the model, the AKS and Stark if any federal beneficiary is, and the Travel Act if the arrangement crosses a state line. Rewrite every marketing, influencer, referral and director agreement so compensation is fixed, documented and independent of patient count. Structure the clinical entity and the management entity so that the clinical entity’s revenue is not the base for anyone’s referral-linked pay, which is what a properly built PC and MSO does. See in-house lab draws for the lab-specific rules and our services for how the clinical side is structured.
Related reading
Frequently asked questions
Does the anti-kickback statute apply to cash-only medical practices?
The federal statute, 42 U.S.C. 1320a-7b(b), applies to remuneration for referrals of items or services payable by a Federal health care program. A purely cash-pay practice with no federal beneficiaries is generally outside it. State anti-kickback and patient-brokering statutes in Florida, Texas and California apply regardless of payer, so the exposure moves rather than disappears.
Does Stark law apply if we do not bill Medicare?
Stark, 42 U.S.C. 1395nn, governs physician referrals for designated health services payable under Medicare. If no Medicare payment is involved, Stark does not apply to that referral. Clinical laboratory services and outpatient prescription drugs are designated health services, so a lab or pharmacy relationship that ever bills Medicare brings it back.
What is EKRA and does it apply to a med spa?
EKRA, 18 U.S.C. 220, criminalizes remuneration for referrals to recovery homes, clinical treatment facilities and laboratories where the services are covered by a health care benefit program, which includes private plans. A med spa with in-house or partner lab testing is exposed on the laboratory side regardless of whether Medicare is involved. Penalties run to ten years per occurrence.
Is it legal to pay a marketing company per patient?
In Florida, a commission to induce patient referrals is patient brokering under 817.505, a felony graded by patient count. In Texas, remuneration for securing or soliciting a patient is an offense under Occupations Code 102.001. In California, a licensee paying a commission for referrals violates Business and Professions Code 650(a). Pay for placement and for work, not per patient.
Can a med spa reward patients for referring friends?
Florida’s 817.505 and 456.054 reach remuneration in cash or in kind for referring patients, and California’s 650 covers discounts and other consideration as inducements. A referral reward is remuneration to induce a referral. Uniform, disclosed discounts available to everyone are treated differently from rewards tied to bringing in a specific person.
This is general information, not legal advice. Rules vary by state and change. Confirm your own facts with counsel.