Seventh Circuit clarifies Anti-Kickback Statute: Payments to marketers and advertisers not illegal without influence over healthcare decisions

There is now some new defenses for healthcare providers working with marketers that fall under the Seventh Circuit’s jurisdiction. On April 14, 2025, the Seventh Circuit issued an opinion in United States v. Sorensen, No. 24-1557 (7th Cir. Apr.  14, 2025),  which marks a significant development in the interpretation of the federal Anti-kickback State (AKS), particularly as it applies to payments for marketing and advertising services. The opinion marks a growing split amongst Circuit courts on what constitutes a “referral” and how payments to advertisers are treated: as either violations of AKS as paying for referrals or legitimate payment for a service.

What the AKS requires and prohibits

The federal Anti-Kickback Statute (AKS), codified at 42 U.S.C. § 1320a-7b(b), prohibits the knowing and willful offering, payment, solicitation, or receipt of any remuneration—directly or indirectly, overtly or covertly, in cash or in kind—in exchange for or to induce the referral of an individual for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program (such as Medicare or Medicaid).  The criminal statute is broadly written and covers not only cash payments, but also anything of value, including gifts, free rent or rent decreases, excessive compensation, or other benefits. Any form of remuneration intended to induce or reward referrals or the generation of business reimbursable by federal health care programs, regardless of whether the payee is a physician or a non-physician, if the payee is in a position to influence healthcare decisions The government must prove that the defendant acted knowingly and willfully, and that the remuneration was offered or paid with the intent to induce referrals or generate federal health care program business. Violations of federal AKS can also be the basis for False Claims Act cases.

Sorensen case details

Mark Sorensen owned and operated SyMed Inc., a Medicare-registered distributor of durable medical equipment. Sorensen entered into an arrangement with PakMed LLC (a manufacturer), Byte Success Marketing, and Dynamic Medical Management (a billing agency) to advertise orthopedic braces to patients.  The process involved marketing firms (Byte and KPN) publishing advertisements, collecting patient information, and forwarding it to call centers. Sales agents would then contact patients, obtain consent, and fax prefilled but unsigned prescription forms to the patients’ physicians. Physicians had full discretion to sign or ignore these forms, and in fact, 80% of the orders were declined or ignored. If a physician signed the prescription, SyMed would direct PakMed to ship the braces and Dynamic would bill Medicare. SyMed paid PakMed a percentage of the Medicare reimbursement, and PakMed, in turn, paid the marketing firms based on the number of leads generated.

Sorensen was indicted and convicted by a jury on one count of conspiracy and three counts of offering and paying kickbacks in violation of the AKS. The district court denied his motion for acquittal, and Sorensen appealed.

Seven Circuit adopts relevant decision-maker test

The central legal question in the Seventh Circuit's view was whether Sorensen’s payments to advertising and marketing companies constituted illegal kickbacks for patient referrals under the Anti-Kickback Statute. The statute prohibits knowingly and willfully offering or paying any remuneration to induce referrals of individuals for items or services reimbursable by federal healthcare programs.

The court clarified that the AKS primarily targets payments to individuals with influence over or access to patients, such as physicians or others who can control or influence healthcare decisions. The key inquiry is whether the payment was intended to induce referrals from a payee who is in a position to make or influence healthcare decisions, as opposed to compensating for legitimate services like advertising.

The court distinguished between:

• Payments to individuals who leverage existing relationships or informal power to influence healthcare decisions are potentially illegal under AKS.
• Payments for advertising services, where the advertiser does not have such influence, are not illegal under AKS.

Key holdings in Sorensen

The court found no evidence that the entities Sorensen paid (PakMed, KPN, Byte) had any authority or informal influence over healthcare decisions. The marketing firms merely advertised and forwarded patient information to physicians, who retained full discretion to prescribe or not prescribe the braces. Again, 80% of the forms, while filled out by marketers, were ignored when faxed to physicians. The Seventh Circuit held that payments to advertising and marketing companies for generating leads or advertising services, without more, do not constitute illegal kickbacks under the AKS, and the court relied on precedent from United States v. Miles, 360 F.3d 472 (5th Cir. 2004), and United States v. Polin, 194 F.3d 863 (7th Cir. 1999) to support its holding. Looking to these two opinions, the court emphasized that federal AKS is violated only when payments are made to induce referrals from someone with the power to influence healthcare decisions.  Here, the physicians’ independent judgment was not compromised, and the marketers did not exert improper influence.

The court further noted that percentage-based compensation structures are not automatically illegal under the AKS as the intent to induce unlawful referrals must also be present to violate federal AKS. Because there was no evidence that Sorensen paid anyone for actual referrals within the meaning of the AKS, the court reversed the conviction for insufficient evidence.

The court applied what is known as "relevant decisionmaker" test, focusing on whether the payee (recipient of payment) was in a position to influence healthcare decisions or referrals. With this test, merely generating patient leads while not having the ability to influence or control healthcare decisions does not constitute illegal kickbacks.  In the Sorenson case, the court emphasized that the physicians retained full discretion to prescribe or not prescribe the medical devices in question and that the marketers did not exert improper influence over those decisions.

Compare and contrast with past opinions and other courts

The Seventh Circuit’s approach in Sorensen cited and aligns with the Fifth Circuit’s reasoning in United States v. Miles, which held that payments to a public relations firm for advertising services did not violate the AKS because the firm did not have position or authority to influence healthcare decisions. The Seventh Circuit also cited United States v. Polin, where a sales representative’s recommendations were never overruled by physicians, making the sales representative a "relevant decisionmaker" whose payments could violate the AKS.

The 7^th Circuit further referenced and distinguished United States v. Marchetti, 96 F.4th 818 (5th Cir. 2024), in the Fifth Circuit. In this case, the conviction was affirmed only narrow circumstances as the marketer worked for two competing laboratories, which put him in a position to decide which laboratory received the referral, thus the marketer was acting as a relevant decisionmaker.

Other circuits, such as the Eleventh Circuit in United States v. Vernon, 723 F.3d 1234 (11th Cir. 2013), have not expressly adopted or rejected the "relevant decisionmaker" test, but have upheld convictions where the payee had the power to steer patients or influence provider selection.

Implications and limits of the new opinion

The Sorensen opinion provides clarity for providers and marketers in the Seventh Circuit (Illinois, Indiana, Wisconsin) and, by persuasive authority, in the Fifth Circuit (Texas, Louisiana, Mississippi). It establishes that payments for marketing and advertising services, without more, do not violate the AKS if the payee does not have the ability to influence healthcare decisions. This reduces risk for providers using third-party marketers, advertising agencies, or lead generators, provided those entities do not exert improper influence over healthcare decision-makers.

The opinion’s reach is limited to the Seventh and Fifth Circuits, and even within those circuits, it does not protect arrangements where the marketer or payee has the ability to influence or control healthcare decisions. The court was careful to note that percentage-based compensation structures are not, per se, unlawful but may be if intended to induce unlawful referrals. Providers must be aware that other circuits have not expressly adopted the "relevant decisionmaker" test, and the Department of Justice may continue to pursue aggressive theories in other jurisdictions.

State law considerations

Many states have their own anti-kickback statutes, which may be broader than the federal AKS and may not require proof of intent or may cover a wider range of conduct.  Providers must ensure compliance with both federal and state laws, as state enforcement authorities may take a different view of marketing arrangements, even if they are permissible under the federal AKS as interpreted by the Seventh Circuit.

Recommendations to providers on compliance with the AKS and court opinions regarding marketing

Providers can reduce their risk of violating the federal AKS and ensure that their marketing practices remain compliant with both federal and state law by considering incorporating the below practices:

For providers in circuits that have adopted the "Relevant Decisionmaker" Test (e.g., Seventh and Fifth Circuits), follow the recommendations below to maintain compliance.

1. Identify the Role of the Payee: Ensure that any individual or entity being compensated for marketing, advertising, or lead generation is not in a position to influence, control, or make healthcare decisions or referrals. Payments to parties who merely generate leads or advertise, without the ability to sway provider or patient choices, are less likely to violate the Anti-Kickback Statute (AKS).
2. Structure Compensation Appropriately: Compensation for marketing or advertising services should be based on fair market value for bona fide services rendered, not on the volume or value of referrals or business generated. Percentage-based or per-lead compensation may be permissible if the payee does not have influence over healthcare decisions, but arrangements should be carefully documented and reviewed.
3. Maintain Physician Independence: Ensure that physicians or other healthcare decisionmakers retain full discretion and independent judgment regarding patient care and provider selection. Marketers and advertisers should not have authority to approve, deny, or unduly influence medical decisions.
4. Document Services and Relationships: Keep thorough records of the services provided by marketing or advertising firms, including contracts, invoices, and evidence of fair market value. Clearly delineate the scope of services to avoid any appearance of paying for referrals in the actual agreements between the parties.
5. Avoid Improper Influence: Prohibit marketers, sales agents, or consultants from engaging in activities that could be construed as steering, pressuring, or incentivizing providers to refer patients to specific services or products.

In addition, the recommendation above, providers in Circuits that have not adopted the "Relevant Decisionmaker" Test, or where the law is unsettled, should also follow the below recommendations for compliance:

1. Exercise Heightened Caution with Marketing Arrangements: Recognize that some courts and enforcement agencies interpret the AKS more broadly than Fifth and Sevent Circuits, potentially viewing any payment for marketing or advertising as a technical violation if it relates to federally reimbursable services.
2. Avoid Volume- or Value-Based Compensation for Independent Contractors: The Office of Inspector General (OIG) has expressed concern about commission-based payments to independent contractors, especially if compensation is tied to the volume or value of business generated (see 42 CFR 1001.952(d); 54 Fed. Reg. 3093). Adopt less variable fee arrangements, like flat fees or hourly compensation structures, for independent contractors, and avoid per-referral or percentage-based payments unless the arrangement clearly fits a safe harbor.
3. Safe Harbor Utilization: Where possible, structure arrangements to fit within AKS safe harbors, such as the bona fide employee or personal services and management contracts safe harbors.

Additionally, the below tactics can help lower risk for all providers in all circuits.

• Careful Selection of Lead Generation and Referral Services: Only purchase leads from entities that do not actively steer or qualify patients for specific providers, and where fees are not contingent on whether the lead becomes a patient (see OIG Adv. Op. 08-19). Avoid arrangements where the lead generator collects health information or insurance details, or otherwise “qualifies” the lead.
• Do Not Subsidize Other Providers’ Marketing Expenses: Subsidizing another provider’s advertising or marketing costs may be viewed as a kickback, especially if the recipient is a referral source (see OIG Adv. Op. 06-16).
• Joint Marketing and Website Listings: If engaging in joint marketing with referral sources (e.g., physicians), ensure each party pays their fair share and that the arrangement is documented and at fair market value. Simple listings of medical staff on a hospital website may be permissible, but advertising or promoting a physician’s private practice may require compliance with Stark Law exceptions and AKS safe harbors.
• Comply with HIPAA and Other Privacy Laws: Do not use or disclose protected health information (PHI) for marketing without proper patient authorization, unless an exception applies. Execute business associate agreements with any marketing contractors who may access PHI.
• Monitor for Deceptive or Unethical Marketing: Ensure all advertising complies with federal and state consumer protection laws, medical practice acts, and professional ethical standards. Avoid false, misleading, or unsubstantiated claims, and do not use testimonials or endorsements that are not representative or factually supportable.
• Review State Laws: Even in circuits following the relevant decisionmaker test, state anti-kickback statutes may be broader or stricter than federal law. Always review and comply with applicable state requirements.
• Consult Qualified Counsel: Given the complexity and variability of AKS enforcement, always consult with experienced healthcare counsel before entering into marketing, advertising, or lead generation arrangements, especially in circuits where the law is unsettled or more restrictive.

Providers should tailor their compliance strategies to the jurisdiction in which they operate. In circuits following the relevant decisionmaker test, focus on ensuring that payees cannot influence healthcare decisions. In other circuits, or where state law is stricter, exercise greater caution—avoid volume-based compensation for independent contractors, steer clear of any arrangement that could be construed as paying for referrals, and always document the legitimate, fair market value nature of marketing services.

Compliance in the ever-changing healthcare regulatory field can be challenging. To ensure ongoing review and analysis on how to implement both federal and state laws for AKS and healthcare marketing, please reach out to Rachel Carey at rcarey@mcdonaldhokins.com.