Home Health Referral Source Audits: Anti-Kickback and Stark Red Flags UPIC Investigators Look For

Introduction

Home health agencies (HHAs) depend on referrals from physicians, hospitals, skilled nursing facilities, assisted living facilities, and other sources. Those relationships are also among the highest-risk areas in home health compliance. Federal law prohibits paying for referrals, and it strictly limits financial relationships between HHAs and the physicians who refer patients to them.

Enforcement in this area is active. In January 2026, the Department of Justice announced that a home health company agreed to pay $34 million to resolve False Claims Act allegations involving medically unnecessary home health claims and financial benefits to referring physicians, after the company self-disclosed medical director arrangements that may have violated the Anti-Kickback Statute and the physician self-referral law. In 2022, another home health company and two former officers agreed to pay $22.9 million to resolve allegations that the company paid physicians to induce referrals under the guise of medical directorships. When CMS announced its nationwide home health and hospice enrollment moratoria in May 2026, it pointed to systemic fraud in these sectors.

Unified Program Integrity Contractors (UPICs), the HHS Office of Inspector General (OIG), and federal prosecutors look closely at referral patterns. This article explains the laws, the red flags investigators look for, and how HHAs can audit their referral relationships. It is educational and does not replace legal advice. Referral arrangements should always be reviewed by experienced healthcare counsel.

The Laws

The Anti-Kickback Statute

The federal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b), makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program. Remuneration includes anything of value, in cash or in kind. Violations can lead to criminal penalties, civil monetary penalties, exclusion, and False Claims Act liability, because claims resulting from kickbacks are considered false.

Safe Harbors

OIG's safe harbor regulations at 42 CFR 1001.952 protect certain arrangements that meet all of their requirements. Safe harbors relevant to home health include:

• Personal services and management contracts.

• Bona fide employees.

• Space and equipment rentals.

• Referral services, in limited circumstances.

Arrangements that do not fit a safe harbor are not automatically illegal, but they are evaluated based on facts and intent and carry more risk.

The Physician Self-Referral Law (Stark Law)

The physician self-referral law, 42 U.S.C. 1395nn, prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician, or an immediate family member, has a financial relationship, unless an exception applies. Home health services are designated health services. Stark is a strict liability law: intent does not matter. Claims resulting from prohibited referrals cannot be paid, and amounts collected must be refunded.

Exceptions at 42 CFR 411.357 that may apply to HHA arrangements include personal service arrangements, bona fide employment, fair market value compensation, and limited remuneration to a physician. Each exception has specific requirements, such as a signed writing, a defined term, compensation set in advance, fair market value, and compensation that does not take into account the volume or value of referrals.

Physician ownership of an HHA is a particular concern. The Stark exceptions that commonly protect ownership in other settings, such as in-office ancillary services, generally do not apply to home health.

Home Health Certification Rules

Under 42 CFR 424.22(d), a physician or allowed practitioner who has a financial relationship with an HHA that is prohibited under the regulation may not certify or recertify the patient's need for home health services or establish or review the plan of care for that HHA, subject to the rule's exceptions.

Beneficiary Inducement

The Civil Monetary Penalties Law, 42 U.S.C. 1320a-7a(a)(5), prohibits offering remuneration to Medicare or Medicaid beneficiaries that the offeror knows or should know is likely to influence the beneficiary to choose a particular provider. OIG has issued guidance on nominal value gifts, and there are limited exceptions.

State Laws

Many states, including Ohio, have their own anti-kickback, self-referral, and fee-splitting laws that may apply to all payers, including commercial insurance.

How UPICs and Investigators Find Referral Problems

UPICs and other investigators use data and field work to identify potential kickback and self-referral issues:

• Referral concentration. A large share of an agency's patients come from a small number of physicians.

• Physician certification patterns. A physician certifies an unusually high number of home health patients, or certifies for many different agencies.

• Geographic anomalies. Physicians certifying patients who live far from their practice, or agencies serving patients far outside their usual area.

• Physician-agency financial ties. Medical director agreements, employment, or ownership by referring physicians or family members.

• Patient recruitment indicators. Beneficiaries who report being approached at home, at senior housing, or by phone; beneficiaries who do not know their physician; or beneficiaries who received gifts.

• Unusual billing patterns. High recertification rates, long lengths of stay, or high case-mix indicators compared with peers.

• Beneficiary and staff interviews. Investigators may interview patients, families, employees, and former employees.

• Whistleblower complaints. Many cases begin with qui tam complaints filed by employees, competitors, or others.

Red Flags by Relationship Type

Medical Director Agreements

Medical director arrangements are one of the most frequently cited areas in home health kickback cases. Red flags include:

• Medical directors who are also significant referral sources, without careful structuring.

• Multiple medical directors for a single agency without a documented need.

• Compensation above fair market value or not based on the services actually provided.

• No documentation of services, such as time logs, meeting minutes, or work product.

• Agreements that are unsigned, expired, or signed after services began.

• Compensation that increases with referral volume.

• Medical directors chosen based on referral potential.

• Duties that are vague or duplicate those of other directors.

Marketers and Community Liaisons

• Independent contractor marketers paid per patient or per referral. The bona fide employee safe harbor protects compensation paid to employees, but per-referral payments to independent contractors are not protected.

• Employee bonuses tied directly to referral counts or admissions in ways that create risk under state law or other rules.

• Marketers who provide gifts, meals, or entertainment to referral sources beyond permissible limits.

• Marketers who recruit patients directly, especially door to door or at senior housing.

• Marketers who obtain physician signatures for patients the physician has not seen.

Hospitals, Skilled Nursing Facilities, and Discharge Planners

• Payments, gifts, or free services to discharge planners or case managers.

• Agency staff placed in hospitals or facilities to perform the facility's own discharge planning duties for free.

• Agreements to steer patients in exchange for something of value.

• Failure to provide patient choice lists as required.

Assisted Living and Senior Housing

• Gifts, event sponsorships, tickets, or other benefits to assisted living staff or operators in exchange for referrals.

• Free services, such as free staff, free wellness programs, or free nursing assessments, provided to facilities to generate referrals.

• Arrangements that allow agency staff to screen residents for home health without a physician's involvement.

Physician Practices

• Free staff, such as nurses or office assistants placed in physician offices.

• Paying for physicians' office expenses, such as rent or equipment.

• Free or discounted EHR or software services outside the applicable safe harbor and exception.

• Payments for certification paperwork or care plan oversight that exceed fair market value or are not documented.

• Joint ventures or ownership interests involving referring physicians or their family members.

Hospices and Other Providers

• Cross-referral arrangements in which an HHA and a hospice exchange patients or pay each other.

• Swapping referrals between related entities without legitimate clinical reasons.

Beneficiaries

• Gifts, cash, waived copayments for other services, transportation, or meals offered to recruit patients.

• Paying patients or family members to sign up.

• Marketing that promises benefits unrelated to care.

Conducting a Referral Source Audit

Step 1: Engage Counsel

Because referral audits can uncover potential violations, engage healthcare counsel to direct the audit and help protect privilege.

Step 2: Inventory All Arrangements

Create a complete list of financial relationships with actual or potential referral sources, including:

• Medical director agreements.

• Employment of physicians or their family members.

• Ownership or investment interests.

• Leases of space or equipment.

• Consulting or speaking arrangements.

• Marketing and liaison arrangements.

• Agreements with facilities, hospitals, and other providers.

• Gifts, meals, and sponsorships.

Step 3: Review Each Arrangement

For each arrangement, confirm:

• A signed written agreement covering all services.

• A defined term.

• Compensation set in advance and consistent with fair market value, supported by a documented valuation when appropriate.

• Compensation not tied to the volume or value of referrals.

• Documentation that services were actually provided, such as time records and work product.

• A legitimate business need for the services.

• Payments that match the agreement.

• Compliance with the applicable safe harbor and Stark exception.

Step 4: Analyze Referral Data

• Identify the agency's top referral sources and their share of admissions.

• Compare referral volumes with any financial relationships.

• Look for changes in referral volume after arrangements began or changed.

• Review whether referring physicians have seen the patients they refer.

• Review geographic patterns.

Step 5: Review Marketing Practices

• Review marketer compensation plans.

• Review marketing materials and activities.

• Review gift and meal logs.

• Interview marketing staff about practices.

Step 6: Review Patient Records for Recruitment Indicators

• Check whether certifying physicians documented face-to-face encounters and had real treatment relationships with patients.

• Look for patterns in referral intake that suggest recruitment.

Step 7: Address Findings

• Terminate or restructure noncompliant arrangements with counsel's guidance.

• Evaluate whether claims resulting from prohibited arrangements must be refunded.

• Consider self-disclosure through OIG's Health Care Fraud Self-Disclosure Protocol for potential Anti-Kickback violations, or CMS's Self-Referral Disclosure Protocol for Stark-only violations, as advised by counsel.

• Update policies and training.

Building a Compliant Referral Program

Policies

• Written policies on physician arrangements, marketing, gifts, and beneficiary inducements.

• A contract management system that tracks all referral source arrangements, renewal dates, and documentation.

• Fair market value review procedures.

• Approval requirements for new arrangements, including compliance and legal review.

Medical Director Best Practices

• Define a legitimate need and specific duties.

• Use written agreements signed before services begin.

• Set fair market value compensation in advance, not tied to referrals.

• Require time logs and documentation of work.

• Review medical director performance and need periodically.

• Avoid having more medical directors than needed.

Marketing Best Practices

• Use employees rather than per-referral independent contractors for marketing.

• Structure compensation to avoid tying pay directly to referrals in ways counsel advises against.

• Train marketers on the Anti-Kickback Statute, Stark, and beneficiary inducement rules.

• Prohibit direct patient recruitment and door-to-door solicitation.

• Track gifts and meals and set limits.

Training

• Train leadership, marketing, intake, and clinical staff on referral laws.

• Explain how to report concerns through the compliance hotline.

Monitoring

• Review referral concentration and patterns quarterly.

• Audit arrangements annually.

• Report results to the compliance committee and board.

Referral Arrangement Documentation Checklist

• Signed written agreement covering all services, executed before services began.

• Defined term, typically at least one year.

• Specific description of duties.

• Compensation methodology set in advance.

• Fair market value support, such as an independent valuation or benchmark data.

• Confirmation that compensation does not vary with referrals.

• Time logs or activity reports.

• Evidence of work product, such as meeting minutes, policy reviews, or training materials.

• Payment records matching the agreement.

• Compliance and legal approval.

• Renewal tracking.

• Screening of the physician against exclusion lists and licensure databases.

Gifts, Meals, and Events

Small courtesies to referral sources can still create risk if they add up or are tied to referrals.

• Set clear limits on the value and frequency of gifts and meals.

• Track all gifts and meals to referral sources in a log.

• Avoid cash and cash equivalents, such as gift cards.

• Avoid entertainment, such as sports tickets or trips, for referral sources.

• Avoid sponsoring events at facilities in exchange for access to patients.

• For physicians, the Stark Law includes a non-monetary compensation exception with an annual dollar limit that CMS adjusts each year, and amounts above the limit can create violations.

Patient Choice and Freedom of Choice

Medicare beneficiaries have the right to choose their home health agency. Hospitals must provide patients with a list of available agencies and respect patient choice as part of discharge planning. HHAs should never pressure facilities to steer patients or interfere with patient choice, and they should be cautious about arrangements that place agency staff in facilities where they could influence choice.

Employees as Referral Sources

Some HHAs employ the family members of referring physicians or hire former facility staff. These arrangements can be legitimate, but they should be reviewed carefully:

• Under Stark, employment of a physician's immediate family member can create a financial relationship.

• Compensation should be consistent with fair market value for the work performed.

• Hiring decisions should not be tied to referrals.

What to Do if a UPIC or OIG Asks About Referrals

• Contact counsel immediately.

• Preserve all records, including contracts, payment records, emails, and marketing materials.

• Do not alter or backdate documents.

• Respond to records requests through counsel.

• Prepare employees for possible interviews, respecting their rights.

• Evaluate whether internal investigation or self-disclosure is appropriate.

A Hypothetical Example

A home health agency's internal data shows that three physicians account for more than half of its admissions. A counsel-directed referral audit finds that two of the physicians serve as medical directors under agreements that expired a year earlier, with no time logs, and compensation that increased the year their referrals rose. The audit also finds that a marketer paid as an independent contractor receives a fee for each admission.

Under counsel's direction, the agency terminates the medical director agreements, converts the marketer to an employee role with a compliant compensation plan, quantifies claims connected to the arrangements, and evaluates self-disclosure. It adopts a contract management system, requires fair market value reviews, and trains staff. Counsel advises on the appropriate disclosure path and repayment.

Questions to Ask About Every Referral Relationship

• Would we have this arrangement if this person or entity did not refer patients to us?

• Is the payment consistent with fair market value for services we actually need and receive?

• Is the arrangement documented in a signed agreement that matches what actually happens?

• Would we be comfortable explaining this arrangement to an investigator?

Key Takeaways

• Paying for referrals in any form can violate the Anti-Kickback Statute, and claims from tainted referrals can be false claims.

• Physician financial relationships must fit a Stark exception, regardless of intent.

• Medical director agreements need a real need, written terms, fair market value pay, and documented services.

• Per-referral payments to independent contractor marketers are high risk.

• Gifts, free services, and beneficiary inducements can all create liability.

• UPICs use referral concentration and certification patterns to identify agencies.

• Audit arrangements regularly with counsel and fix problems promptly.

Frequently Asked Questions

Can an HHA have a physician medical director who also refers patients?

It can, but the arrangement must be carefully structured to meet a Stark exception and ideally an Anti-Kickback safe harbor, with fair market value compensation, documented services, and no link to referrals. Under 42 CFR 424.22(d), certain financial relationships also prevent the physician from certifying patients for that agency.

Can marketers be paid commissions?

Per-referral payments to independent contractor marketers are high risk under the Anti-Kickback Statute. Compensation for bona fide employees may be protected by the employee safe harbor, but state laws and other considerations apply. Counsel should review marketer compensation.

Is Stark violated even if there was no intent?

Yes. Stark is a strict liability law. If a financial relationship does not meet an exception, referrals for home health are prohibited regardless of intent.

What should we do if we find a problem?

Engage counsel, stop the problematic arrangement, quantify affected claims, and evaluate refund and self-disclosure options.

What do UPICs look for?

Referral concentration, physician certification patterns, geographic anomalies, financial ties with referring physicians, patient recruitment indicators, and unusual billing patterns.

Conclusion

Referral relationships are among the highest-risk areas for home health agencies. The Anti-Kickback Statute, the Stark Law, the home health certification rules, and beneficiary inducement rules all limit how HHAs can interact with referral sources and patients. UPICs and OIG use data, interviews, and whistleblower reports to find problems, and recent settlements show the cost of getting it wrong. By inventorying arrangements, documenting fair market value and services, structuring marketing compliantly, analyzing referral data, and addressing problems promptly with counsel, HHAs can reduce risk and build referral programs that stand up to scrutiny.

How HealthBridge Can Help

HealthBridge is a healthcare management consulting firm that supports home health agencies and their counsel with referral source inventories, arrangement documentation reviews, referral data analysis, marketing practice reviews, compliance training, and contract management processes. If you want to make sure your referral relationships will stand up to UPIC and OIG scrutiny, please get in touch with us. We will be happy to help you with this topic.

References

• Office of the Law Revision Counsel. 42 U.S.C. 1320a-7b, Criminal Penalties for Acts Involving Federal Health Care Programs. https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title42-section1320a-7b&num=0&edition=prelim

• Office of the Law Revision Counsel. 42 U.S.C. 1395nn, Limitation on Certain Physician Referrals. https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title42-section1395nn&num=0&edition=prelim

• Office of the Law Revision Counsel. 42 U.S.C. 1320a-7a, Civil Monetary Penalties. https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title42-section1320a-7a&num=0&edition=prelim

• Electronic Code of Federal Regulations. 42 CFR 1001.952, Exceptions (Anti-Kickback Safe Harbors). https://www.ecfr.gov/current/title-42/chapter-V/subchapter-B/part-1001/subpart-C/section-1001.952

• Electronic Code of Federal Regulations. 42 CFR 411.357, Exceptions to the Referral Prohibition Related to Compensation Arrangements. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-411/subpart-J/section-411.357

• Electronic Code of Federal Regulations. 42 CFR 424.22, Requirements for Home Health Services. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-424/subpart-B/section-424.22

• U.S. Department of Health and Human Services, Office of Inspector General. Fraud and Abuse Laws. https://oig.hhs.gov/compliance/physician-education/fraud-abuse-laws/

• U.S. Department of Health and Human Services, Office of Inspector General. General Compliance Program Guidance. https://oig.hhs.gov/compliance/general-compliance-program-guidance/

• U.S. Department of Health and Human Services, Office of Inspector General. Health Care Fraud Self-Disclosure Protocol. https://oig.hhs.gov/compliance/self-disclosure-info/

• Centers for Medicare & Medicaid Services. Self-Referral Disclosure Protocol. https://www.cms.gov/medicare/regulations-guidance/physician-self-referral/self-referral-disclosure-protocol

• U.S. Department of Justice. Traditions Health Agrees to Pay $34M to Resolve False Claims Act Liability Relating to Home Health Services Following Self Disclosure (January 22, 2026). https://www.justice.gov/opa/pr/traditions-health-agrees-pay-34m-resolve-false-claims-act-liability-relating-home-health

• U.S. Attorney's Office, Western District of Oklahoma. Oklahoma City Home Health Company and Two Former Corporate Officers Agree to Pay $22.9 Million to Settle Federal False Claims Act and Kickback Allegations (October 18, 2022). https://www.justice.gov/usao-wdok/pr/oklahoma-city-home-health-company-and-two-former-corporate-officers-agree-pay-229

• Centers for Medicare & Medicaid Services. CMS Announces Aggressive Nationwide Crackdown on Fraud with Six-Month Hospice and Home Health Agency Enrollment Moratoria (May 13, 2026). https://www.cms.gov/newsroom/press-releases/cms-announces-aggressive-nationwide-crackdown-fraud-six-month-hospice-home-health-agency-enrollment