Advertising Versus Referrals: Defining the Reach of the Anti-Kickback Statute in United States v. Sorensen

Introduction

In United States v. Mark Sorensen, 24-1557 (7th Cir. Apr. 14, 2025), the Seventh Circuit confronted for the first time whether payments made to advertising and marketing companies fall within the federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b). Defendant Mark Sorensen, owner of SyMed Inc., a Medicare-registered distributor of durable medical equipment, was accused of paying marketing firms (Byte Success Marketing and KPN) and a manufacturer (PakMed LLC) on a percentage basis to generate leads and distribute orthopedic braces to Medicare beneficiaries. The government charged him with one count of conspiracy and three substantive counts under the Anti-Kickback Statute. The district court denied Sorensen’s motion for judgment of acquittal, a jury convicted him, and he received a 42-month prison sentence. On appeal, the Seventh Circuit reversed for insufficient evidence, holding that payments for advertising and manufacturing services did not constitute prohibited “remuneration … to induce referrals.”

Summary of the Judgment

The Seventh Circuit, in an opinion by Judge Hamilton, reversed Sorensen’s convictions under Federal Rule of Criminal Procedure 29(a) and (c) because no rational jury could find beyond a reasonable doubt that Sorensen’s payments were intended to induce “referrals” of Medicare patients within the meaning of the Anti-Kickback Statute. Key findings:

The statute targets payments to individuals who exert formal or informal influence over healthcare decisions (e.g., physicians, referral agents).
The advertising firms and the manufacturer in this case (Byte, KPN, PakMed) did not refer patients or wield influence over physicians’ independent decisions to authorize care.
Physicians received unsigned prescription forms from call-center agents and exercised independent judgment—approving only about 20% of the leads.
Pursuant to United States v. Polin, Shoemaker, and the Fifth Circuit’s decisions in Miles and Marchetti, payments for ordinary advertising or manufacturing services do not violate the statute absent evidence of improper inducement of referrals.

Because the government introduced no evidence that Sorensen paid any party to “refer” patients or to leverage informal power over physicians, the court concluded the evidence was insufficient and reversed the convictions.

Analysis

Precedents Cited

The court’s analysis turned on earlier applications of the Anti-Kickback Statute:

United States v. Polin, 194 F.3d 863 (7th Cir. 1999): Upheld convictions where a pacemaker sales representative’s recommendations—never overruled by physicians in 14 years—were deemed referrals.
United States v. Shoemaker, 746 F.3d 614 (5th Cir. 2014): Emphasized focus on intent to induce referrals and “fluid, informal power” over medical decisions.
United States v. George, 900 F.3d 405 (7th Cir. 2018): Held non-physician home care agency employee’s payments for patient referrals did violate the statute because she leveraged her relationships with doctors.
United States v. Miles, 360 F.3d 472 (5th Cir. 2004): Distinguished payments for pure advertising (permissible) from kickbacks to referral agents (prohibited).
United States v. Marchetti, 96 F.4th 818 (5th Cir. 2024): Affirmed conviction only where defendant became a decisionmaker between competing labs; held advertising-only payments outside the statute’s ambit.

Legal Reasoning

The court applied the statutory text—“any remuneration … to induce … referrals of individuals for furnishing … services”—and focused on two elements:

Intent to induce referrals: Payments must be made “for” or “to induce” referrals. Mere compensation for services (advertising, manufacturing, billing) does not suffice.
Role of payee: The payee must be a person who can directly or indirectly influence healthcare decisions. Physicians, hospital executives, or agents with ongoing personal ties to prescribers qualify; pure advertisers do not.

Here, KPN and Byte supplied leads and advertising, and PakMed made and shipped braces. Physicians independently chose whether to sign forms—rejecting the majority. No evidence showed any undue influence or that advertisers functioned as de facto referral agents. Thus, under the holdings in Miles and Marchetti, Sorensen’s commercial arrangements fell outside the statute.

Impact

This decision clarifies the Anti-Kickback Statute’s outer boundary in three respects:

It affirms that payments to pure advertising or manufacturing vendors, even if compensation is percentage-based, do not constitute illegal “remuneration … to induce referrals.”
It warns prosecutors that proving a violation against non-physician payees requires evidence of actual or attempted improper influence on healthcare decisionmakers.
It protects legitimate commercial marketing practices in the Medicare/Medicaid space, distinguishing them from referral-based kickback schemes.

Going forward, defendants who rely on common service providers—marketing firms, call centers, billing agencies, device manufacturers—can invoke Sorensen when the record lacks proof of improper inducement of referrals or power over prescribers.

Complex Concepts Simplified

Remuneration: Any payment or benefit of value—including cash, rebates, in-kind services—exchanged between parties.
Referral: Directing or arranging for a patient to receive services from a particular provider, often relying on the referrer’s professional authority or personal influence.
Fluid, informal power: Influence that arises from relationships, reputation, or ongoing interaction with decisionmakers (e.g., physicians), even absent formal authority.
Independent judgment: Physicians retain ultimate authority to approve or reject care. If they regularly override recommendations, the recommender lacks referral power.

Conclusion

United States v. Sorensen establishes that aggressive marketing and percentage-based compensation for advertising and manufacturing services, standing alone, do not trigger the federal Anti-Kickback Statute. The ruling reinforces the core principle that only those payments made “to induce referrals” from individuals who wield formal or informal power over healthcare decisions can give rise to criminal liability. By vacating Sorensen’s convictions for insufficient evidence, the Seventh Circuit draws a clear line between lawful commercial practices and illegal kickback schemes, providing important guidance for healthcare providers, marketers, and enforcement authorities alike.