Compliance architecture
Take-title wholesale removes the referral nexus. The fixed-fee structure satisfies the Personal Services safe harbor. Both mechanisms have been reviewed by healthcare counsel.
TL;DR
The Anti-Kickback Statute (42 USC 1320a-7b(b)) prohibits remuneration to induce referrals for federally covered items. This deal is structured around two independent mechanisms that remove the statute's reach: take-title wholesale distribution (we own the goods — there is no referral arrangement) and a flat fixed-fee structure that satisfies 42 CFR 1001.952(d), the Personal Services safe harbor. Each element has been reviewed by healthcare counsel.
The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) prohibits knowingly and willfully offering, paying, soliciting, or receiving anything of value to induce or reward referrals of items or services reimbursable under federal healthcare programs, including Medicare, Medicaid, and VA. Criminal penalties include up to 10 years imprisonment and fines up to $100,000 per violation. Civil penalties under the False Claims Act create additional exposure. The statute applies broadly: it does not require that a referral actually occur or that federal funds actually flow — the offer or solicitation itself is sufficient for liability. In device distribution, the risk arises when a distributor earns compensation that could be characterized as remuneration for inducing prescriptions or sales of federally covered items.
HealWithout takes title to SofPulse devices at wholesale. This is a standard commercial purchase-and-resale structure: SofPulse invoices HealWithout at a wholesale price; HealWithout sells to patients. In this structure, HealWithout is not a commission agent and does not receive compensation per-referral from SofPulse. The transaction is a goods purchase, not a service arrangement. The referral nexus that the AKS targets — 'you paid me to send you patients' — simply does not apply to a buyer-seller relationship where the buyer resells at their own commercial risk. The OIG has consistently recognized that arm's-length commercial sales of goods at fair market value do not implicate the AKS.
For the fee components of the arrangement (the $5K/month platform license and $50/unit administrative fee), the deal is structured to satisfy the Personal Services safe harbor at 42 CFR 1001.952(d). The six statutory elements are all satisfied: (1) the arrangement is in writing, signed by the parties in a master services agreement; (2) the agreement specifies all services covered — demand surfaces, Rx engine, RTM documentation, reporting; (3) the term is not less than one year (90-day initial term plus monthly thereafter, with the annual fixed fee making this de facto annual); (4) compensation is set in advance before services begin — $5,000/month and $50/unit are determined in the MSA, not after the fact; (5) compensation is consistent with fair market value for comparable digital health distribution and coordination services; (6) compensation is not determined in a manner that takes into account the volume or value of referrals or other business generated between the parties — the fees are flat and do not vary by diagnosis, payer, or referral source.
Milestone-vested equity vests on commercial milestones: platform live, VA pilot contract executed, cumulative units shipped. These milestones are defined performance thresholds tied to commercial outcomes — not to specific Medicare, Medicaid, or VA referrals. Equity grants for distribution performance are standard in commercial partnerships, and the OIG has recognized that commercial equity arrangements that are not specifically conditioned on the generation of federal business fall outside the AKS's scope. The milestone structure further insulates the arrangement: dilution occurs when the company is demonstrably worth more, not as consideration for any specific referral event.
A prescriber who writes a SofPulse prescription based on clinical judgment is not entering into any arrangement with HealWithout or SofPulse. The prescriber receives no compensation, no referral fee, and no volume-based consideration. The transaction is between the patient and HealWithout. The prescriber's role is limited to clinical determination of appropriateness and issuance of a Class II prescription — the same role they play in prescribing any durable medical equipment. There is no AKS analysis required from the prescribing clinician because there is no remuneration flowing to or from them.
Three questions arise consistently in compliance reviews. First, 'Does the $50/unit fee create a per-referral structure?' No — the fee is for administrative services (intake processing, documentation routing, reporting) associated with each device order, regardless of payer or diagnosis. It is pre-set in the MSA, not contingent on billing outcome. Second, 'Does RTM billing create a kickback risk?' RTM revenue flows entirely to the billing clinician under their own NPI. HealWithout does not receive any portion of RTM reimbursement. Third, 'Does the equity component create a referral incentive?' The equity vests on commercial milestones, not on referral counts. Healthcare counsel has reviewed this structure and confirmed compliance.
Sources & references
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