backSeventh Circuit Reverses AKS Conviction Involving Payments to Marketers and DME Manufacturer
On April 14, 2025, the U.S. Court of Appeals for the Seventh Circuit issued its opinion in United States v. Sorensen, No. 24-1557, reversing the criminal conviction of Mark Sorensen, the owner of SyMed Inc., a Medicare-enrolled distributor of durable medical equipment. In reversing the conviction, the court determined that the government failed to establish that the recipients of the payments were in a position to influence healthcare decision-making. Because there was no evidence that Sorensen’s payments influenced a relevant healthcare decision maker, the court held that the AKS had not been violated. The Seventh Circuit’s ruling supports the proposition that payments to individuals or entities that do not influence healthcare decisions may fall outside the scope of conduct prohibited by the AKS.
Mr. Sorensen had been convicted of conspiracy and multiple counts of violating the federal AKS based on payments made to marketing companies, a manufacturer of orthopedic braces, and a billing entity. Under the arrangement, the marketing companies published advertisements of the orthopedic braces produced by the DME manufacturer. If an interested patient responded, the marketing companies would obtain additional information from the patient and generate prefilled but unsigned prescription forms, which would then be sent to physicians. If the physician signed the order, the DME manufacturer would ship the braces to patients. SyMed would pay the DME manufacturer seventy-nine percent of funds collected from Medicare (or other insurance) and retain twenty-one percent as a service fee. Out of that 21 percent, SyMed would pay the billing entity for its role in billing Medicare for the braces. The DME manufacturer would pay the marketing companies based on the number of leads they generated. The government alleged that these payments constituted illegal kickbacks intended to induce referrals for Medicare-reimbursed DME.
However, the Seventh Circuit found insufficient evidence that the payments were made with the intent to induce referrals in violation of the AKS. Central to the court’s reasoning was its analysis of the “relevant decisionmaker,” which hinges on whether the recipient of the funds is in a position to improperly influence healthcare decisions. The court determined the marketing companies and DME manufacturer were not involved in the patient’s healthcare decisions or directing referrals.
The court explained that the marketing companies “provided only advertising services” and noted that it has not “consider[ed] the [AKS’s] application to advertising activities.” In reaching its conclusions, the court distinguished “payment[s] to induce referrals from a payee who is in a position to make or influence healthcare decisions, which violates the [AKS], and a payment for advertising services, which does not.”
While the marketing companies would receive consent from patients before faxing unsigned prescriptions to the physicians for review, the court explained that the physicians did not simply “rubber stamp” those orders, but “more often than not decided not to authorize the requested care.” The court highlighted the fact that physicians declined 80 percent of the orders issued by one of the marketing companies and regularly ignored forms sent by the other marketer. Thus, the marketing companies did not (and were not positioned to) exert influence over the physicians’ independent medical judgment and the “physicians retained full discretion to determine whether to prescribe the advertised care.”
Ultimately, the court concluded that “there is no evidence that anyone whom Sorensen paid had any special relationship with or influence over patients’ physicians so as to subject them to improper influence” and that “no evidence suggests that Sorensen or his associates exerted any sort of special informal influence on the physicians making healthcare decisions.” The court found Mr. Sorenson’s conduct did not violate the AKS and reversed the jury conviction.
The Seventh Circuit’s decision is available here.
Reporter, Dennis Mkrtchian, Los Angeles, + 1 213 218 4046, dmkrtchian@kslaw.com.
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