Mexico Simplifies Procedures Before Its Federal Commission for Protection Against Sanitary Risks
On March 27, 2025, Mexico’s Federal Commission for the Protection Against Sanitary Risks (COFEPRIS) published an agreement in the Official Gazette of the Federation (DOF) outlining simplification measures for COFEPRIS procedures.
Key simplification actions include:
(i) Eliminating mandatory use of the “Notice of Operation, Sanitary Responsible and Modification or Cancellation” form for filing notices of operation and sanitary responsibility for health-related supply establishments and environmental health establishments, in their various modalities.
(ii) Eliminating mandatory use of the “Notice of the original establishment responsible for the cancellation of the sanitary responsible” when modifying or cancelling notices of operation and/or sanitary responsibility for health-related supply establishments and environmental health establishments, in its different modalities.(iii) Merging procedures COFEPRIS-05-006-A, COFEPRIS-05-006-B, COFEPRIS-05-006-C, COFEPRIS-05-006-D, and COFEPRIS-05-006-E into “Notice of operations and sanitary responsible for health-related supply establishments,” with different modalities.(iv) Merging procedures COFEPRIS-05-007-A, COFEPRIS-05-007-B, COFEPRIS-05-007-C, COFEPRIS-05-007-D, and COFEPRIS-05-007-E into “Notice of Modification or Cancellation of the Notice of Operation and/or Sanitary Responsibility of the Health-Related Supply Establishments,” with different modalities.
The agreement will enter into force 15 business days after its publication in the DOF.
Colorado Passes Bill Banning Most Physician Non-Compete Agreements
Ever since a reference to a “legislative ban on physician non-compete agreements” was made in the Colorado attorney general’s Stipulated Consent Agreement and Judgment with U.S. Anesthesia Partners of Colorado, Inc., filed Feb. 26, 2024, health law practitioners in Colorado have waited to see if the Colorado General Assembly would enact such a ban. On April 21, 2025, the General Assembly made good on the promised legislative ban when it enacted Senate Bill 25-083. If the governor signs it into law, SB 25-083 would broadly impact the use of most restrictive covenants in agreements with physicians, physician assistants, dentists, and advanced practice registered nurses entered or renewed after SB 25-083’s expected effective date of Aug. 6, 2025.
Prior to SB 25-083, subsection (5)(a) of the statute had rendered “void” a restrictive covenant that “restricts the right of a physician to practice medicine,” but permitted enforcement of “provisions that require the payment of damages in an amount that is reasonably related to the injury suffered by reason of termination of the agreement,” including “damages related to competition.” That is, under subsection (5)(a) of the statute prior to SB 25-083’s enactment, it was not possible to obtain an injunction preventing a physician from going to work for a competitor, but it was possible to enforce a damages provision.
SB 25-083 deletes altogether the prior language in subsection (5)(a) of the statute, thereby eliminating the prior exception for physician restrictive covenants. Instead, subsection (5)(a) now provides that “[a] provision of an employment agreement or any other agreement enforceable at law that does not include an unlawful restrictive covenant remains enforceable and subject to any damages or equitable remedy otherwise available at law.”
Additionally, prior to SB 25-083, the statute also had permitted restrictive covenants designed to protect trade secrets or to bar solicitation of customers in certain limited circumstances. In SB 25-083, the General Assembly exempted from the trade secret and non-solicitation provisions any “covenant not to compete that restricts the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry.” A covenant is “deemed” to be as much if it “prohibits or materially restricts a health-care provider” from disclosing to existing patients prior to the provider’s departure the following information: “(a) the health-care provider’s continuing practice of medicine; (b) the health-care provider’s new professional contact information; or (c) the patient’s right to choose a health-care provider.” As a result, a covenant not to compete that is deemed to restrict the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry in the manner SB 25-083 defines cannot instead be labeled and enforced as a provision to protect trade secrets or to bar the solicitation of customers.1
To which types of licensed professionals these provisions would relate is not entirely clear. Although SB 25-083 refers to “a covenant not to compete that restricts the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry,” it also defines “health-care provider” to include an individual licensed as a certified midwife. It also defines the “practice of medicine” to include practice as a physician assistant.
Finally, the General Assembly revised and narrowed the portion of the statute permitting a restrictive covenant related to purchasing and selling a business, a direct or indirect ownership share in a business, or all or substantially all of the assets of a business. Specifically, the General Assembly narrowed the duration of years an individual who “owns a minority ownership share of the business and who received their ownership share in the business as equity compensation or otherwise in connection with services rendered” may be subject to a restrictive covenant, according to a specific formula set forth in SB 25-083. Notably, however, the General Assembly did not except from this provision any “covenant not to compete that restricts the practice of medicine, the practice of advanced practice registered nursing, or the practice of dentistry,” as it did with the trade secrets and non-solicitation provisions. Accordingly, a restrictive covenant entered in connection with the sale of a medical or dental practice, or the like, may still be permissible under the statute.
By the terms of SB 25-083, the changes to the statute would apply to only covenants not to compete entered or renewed on or after the bill’s effective date of Aug. 6, 2025. This means that SB 25-083 should not be interpreted to invalidate restrictive covenants in agreements that predate Aug. 6, 2025. However, going forward, Colorado employers using restrictive covenants in their agreements with “health-care providers” should evaluate whether contract templates comply with the new provisions of SB 25-083.
1 Nothing in SB 25-083 authorizes the misappropriation of trade secrets.
The Changing Food Regulatory Landscape
You have probably heard the term “ultra-processed food.” What does that mean? Unprocessed food probably requires little explanation. For example, a whole raw apple that has not been cut, cooked or otherwise prepared would be unprocessed. From there, a range of processing might be done – the apple could be cut in slices and packaged for snacking – that would be some degree of processing. It could be mixed with sugar and lemon juice and cooked down to make apple butter. That would be more processing. It could also be mixed with numerous other ingredients, including artificial colors, sweeteners, hydrogenated oils, starches, enriched flours, and preservatives to make shelf-stable snack cakes. That would be an ultra-processed food. Ultra-processed foods provide convenience and help reduce the cost of foods by providing longer shelf life. Many of the current staples of American life are ultra-processed foods – think about chips, crackers, frozen meals, soft drinks, many breakfast cereals, processed meats (like hot dogs), candies, ice cream, and some common fast foods.
Certain ingredients used in ultra-processed foods have been associated with health problems such as cancer, cardiovascular disease, diabetes, mental / behavioral conditions, and obesity. The FDA has authorized the use of ingredients found in ultra-processed foods available in the United States. However, certain countries, including those within the European Union, have prohibited the inclusion of these ingredients in their food supplies.
On January 15, 2025, the FDA banned Red Dye number 3 from food after research linked the dye to higher rates of thyroid cancer in animals, but not humans. While the FDA has not banned many ingredients prohibited in other countries, states have been taking independent action. California leads the nation in regulating food ingredients. In 2023, California passed legislation banning Red Dye number 3, propylparaben (a preservative to prevent the growth of mold and bacteria), potassium bromate (used to make bread rise better and to improve the texture), and brominated vegetable oil (used to stabilize citrus flavorings in drinks).
Other states have also begun to take action. Below is a chart outlining recent and pending state legislation aimed at food regulation.
State
Legislation
Status
Arizona
Banned from public schools food containing:Potassium bromatePropylparabenTitanium dioxideBrominated vegetable oilYellow dye 5Yellow dye 6Blue dye 1Blue dye 2Green dye 3Red dye 3Red dye 40
Passed by the Senate
Arkansas
Prohibited from foods:Potassium bromate Propylparaben
Referred to Senate Public Health Welfare And Labor
If passed, effective 1/1/2028
Connecticut
Prohibits from foods:Red dye number two Red dye number four Green dye number one Green dye number two Violet dye number one Butter yellow dye Orange dye number one Orange dye number two Red dye number forty Yellow dye number fiveYellow dye number six Blue dye number one Blue dye number two Carmoisine Erythrosine
Pending before the Joint General Law Committee
California
Banned from foods:Brominated vegetable oil Potassium bromatePropylparabenRed dye 3
Enacted on 10/7/23, effective on 1/1/2027
Delaware
Prohibits from food:Red dye number 3Red dye number 40
Pending before the Senate Health & Social Services Committee
If passed, effective 1/15/2027
Florida
Prohibits from food:Brominated vegetable oilPotassium bromatePropylparabenRed dye 3Blue dye 1Yellow dye 5BenzidineButylated hydroxyanisoleButylated hydroxytoluene.
Pending in the Appropriations Committee on Agriculture, Environment, and General Government
Effective 1/1/2028 if passed
Hawaii
Prohibits from foods in public schools:Blue dye number 1 Blue dye number 2 Green dye number 3 Red dye number 40 Yellow dye number 5 Yellow dye number 6
Pending before the Senate Education Committee
Effective 7/1/2025 if passed
Illinois
Prohibits from food:Brominated vegetable oil Potassium bromate Propylparaben Red dye number 3
Pending before the Senate
If passed, effective 1/1/2027
Indiana
Prohibits in food:Blue dye number 1Blue dye number 2 Green dye number 3 Brominated vegetable oil Propylparaben Potassium bromate Red dye number 3Red dye number 40Yellow dye number 5 Yellow dye number 6
Referred to Public Health Committee
If passed, effective 7/1/2025
Iowa
Prohibits in foods in public schools:Red dye number 40Yellow dye number 7Margarine
Referred to Education Committee
Kentucky
Prohibits in foods in public schools:Brominated vegetable oil Potassium bromatePropylparabenTitanium dioxideRed dye number 3 Red dye number 40Yellow dye number 5 Yellow dye number 6 Blue dye number 1 Blue dye number 2 Green dye number 3
Referred to Primary and Secondary Education Committee
Louisiana
Prohibits from food in public schools:Blue dye number 1Blue dye number 2 Green dye number 3Red dye number 3 Red dye number 40 Yellow dye number 5 Yellow dye number 6 AzodicarbonamideButylated hydroxyanisole (BHA)Butylated hydroxytoluene (BHT)Potassium bromate PropylparabenTitanium dioxide
Requires warnings on foods containing:Acesulfame potassium.Acetylated esters of mono- and diglycerides (acetic acid ester)Activated charcoalAnisoleAtrazineAzodicarbonamide (ADA)Butylated hydroxyanisole (BHA)Butylated hydroxytoluene (BHT)Bleached flour.Blue dye number 1Blue dye number 2Bromated flourCalcium bromateCanthaxanthinCarrageenanCertified food colors FDACitrus red dye 2 DiacetylDiacetyl tartaric and fatty acid esters of mono- and diglycerides (DATEM)Dimethylamylamine (DMAA).Dioctyl sodium sulfosuccinate (DSS)FicinGreen dye number 3Interesterified palm oilInteresterified soybean oilLactylated fatty acid esters of glycerol and propylene glycolLyeMelatoninMorpholineOlestraPartially hydrogenated oil (PHO)Potassium aluminum sulfatePotassium bromatePotassium iodatePotassium sorbatePropylene oxidePropylparabenRed dye number 3Red dye number 4Red dye number 40Sodium aluminum sulfateSodium lauryl sulfateSodium stearyl fumarateStearyl tartrateSynthetic or artificial vanillinSynthetic trans fatty acidThiodipropionic acidTitanium dioxideToluene.Yellow dye 5 Yellow dye number 6
Restaurants using must disclose to customers the use of the following seed oils:Canola or rapeseed oilCorn oilCottonseed oilFlaxseed oilGrapeseed oilRice bran oilSafflower oilSoybean oilSunflower oil
Pending before the Senate Health & Welfare Committee
If passed, effective for the 2026-2027 school year
If passed, effective 1/1/2027
If passed, effective 1/1/2027
Maryland
Prohibits in foods:Brominated vegetable oil (BVO)Potassium bromate Propylparaben
If passed, effective 10/1/2028
Massachusetts
Prohibits in schools and school events food and beverages containing:Blue dye number 1Blue dye number 2Green dye number 3Red dye number 3Red dye number 40Yellow dye number 5Yellow dye number 6
Referred to Public Health CommitteeIf passed, effective 12/31/2028
Missouri
Requires warning labels for foods containing:AcrylamideArsenicBisphenol A (BPA)Blue dye number 1CadmiumDi(2-ethylhexyl)phthalate (DEHP)LeadMercuryRed dye number 40Yellow dye number 5Yellow dye number 6
Prohibits in foods in public schools:Potassium bromate PropylparabenTitanium dioxide Brominated vegetable oil Yellow dye number 5 Yellow dye number 6Blue dye number 1 Blue dye number 2Green dye number 3Red dye number 3Red dye number 40
Pending before the House
If passed, effective 2026-2027 school year
New Jersey
Prohibits foods with:Brominated vegetable oil Potassium bromate Propylparaben Red dye number 3
If passed, effective the first day of the 13th month following enactment
New York
Banned from foods:Red dye number 3Potassium bromate Propylparaben
Banned from foods sold in public schools:Red dye number 3Red dye number 40Blue dye number 1Blue dye number 2Green dye number 3Yellow dye number 5Yellow dye number 6
Pending before the NY Senate
Effective 1 year after passage (with an up to 3 year exception based upon a product’s best by date)
North Carolina
Prohibiting from foods:Brominated vegetable oil Potassium bromate Propylparaben Red dye number 40 Yellow dye number 5 Yellow dye number 6 Blue dye number 1Blue dye number 2Green dye number 3
If passed, effective 1/1/2027
Oklahoma
Banned from foods and drugsBlue dye number 1Blue dye number 2Green dye number 3Red dye number 3Red dye number 40Yellow dye number 5Yellow dye number 6.
If the FDA revokes is authorization of use, the following would also be banned:Aspartame; Azodicarbonamide (ADA) Brominated vegetable oil Butylated hydroxyanisole (BHA)Butylated hydroxytoluene (BHT) Ethylene dichlorideMethylene chloride Potassium bromate; Propyl gallate; Propylparaben;Sodium benzoate; Sodium nitrate;
If signed by the governor, ban in foods effective on 1/15/2027 and in drugs on 1/18/2028
Warnings would also be required for the enumerated ingredients.
Oregon
Prohibits from foods in schools:Red dye number 3Potassium bromatePropylparaben
Also limits fats, sugars, calories and caffeine in some snacks and drinks available for students
If passed, effective 7/1/2017
Rhode Island
Prohibits from foods in schools:Blue dye number 1 Blue dye number 2Green dye number 3Red dye number 40Yellow dye number 5Yellow dye number 6
If passed, effective 1/1/2027
Texas
Prohibits in foods in schools:Blue dye number 1Blue dye number 2 Green dye number 3Red dye number 40Yellow dye number 5Yellow dye number 6 And any additive that is substantially similar to any of the above
Also prohibits in foods in schools:Red dye number 3 Red dye number 40 Yellow dye number 5 Yellow dye number 6 Blue dye number 1 Blue dye number 2 Green dye number 3 caramel
Prohibits from food in schools and foods available through supplemental nutrition programs:Red dye number 3 Red dye number 40 Yellow dye number 5 Yellow dye number 6 Blue dye number 1 Blue dye number 2 Green dye number 3 Citrus red dye number 2 Orange B dye
Prohibits in foods:aspartameartificial flavoringpropylparabenazodicarbonamide (ADAbutylated hydroxyanisole (BHA) Butylated hydroxytoluene (BHT)color additivedimethylpolysiloxane (PDMS)monosodium glutamate (MSG)Tert-butylhydroquinone (TBHQ)Partially hydrogenated oilsSodium benzoateSodium nitrateSodium nitritemethylparaben
Prohibits is foods available under SNAP programs:brominated vegetable oil (BVO)potassium bromate propylparabenazodicarbonamideButylated hydroxyanisole (BHA)Red dye number 3Titanium dioxide.
Prohibits from foods in schools:brominated vegetable oil (BVOpotassium bromatepropylparabenazodicarbonamidebutylated hydroxyanisole (BHAtitanium dioxidered dye 3 blue 1 blue 2 green 3 red 40 yellow 5 yellow 6
Effective immediately upon passage if it receives a 2/3 vote. If passed with less than a 2/3 vote, effective 9/1/2025
Effective immediately upon passage if it receives a 2/3 vote. If passed with less than a 2/3 vote, effective 9/1/2025
If passed, effective 9/1/2025
Effective immediately upon passage if it receives a 2/3 vote. If passed with less than a 2/3 vote, effective 9/1/2025
Effective immediately upon passage if it receives a 2/3 vote. If passed with less than a 2/3 vote, effective 9/1/2025
Utah
Prohibits from foods in public schools:Potassium bromate;Propylparaben;Blue dye number 1Blue dye number 2Green dye number 3Red dye number 3Red dye number 40Yellow dye number 5 Yellow dye number 6
If passed, effective 5/7/2025
Vermont
Prohibits in foods:brominated vegetable oil potassium bromate propylparaben red dye no. 3
If passed, effective 1/1/2027
Virginia
Prohibited in food available in public and secondary schoolsBlue dye number 1Blue dye number 2 Green dye number 3Red dye number 3 Red dye number 40 Yellow dye number 5 Yellow dye number 6
Signed by the governor on 3/27/2025 with an effective date of 7/1/2027
West Virginia
Banned from foods:butylated hydroxyanisole propylparabenBlue dye number 1Blue dye number 37 Green dye number 3Red dye number 3Red dye number 40 Yellow dye number 5Yellow dye number 6
Approved by the governor on 3/24/2025:Effective 1/1/2028.Dyes prohibited in school foods effective 8/1/2025
Stay tuned for more regulatory changes. With nationwide distribution common among food manufacturers, an ingredient ban in one state can effectively function as a nationwide ban. Plus, with the new administration in Washington, D.C., it is anticipated that the FDA will impose additional regulations on food ingredients. Bottom line, regulations at the state and federal levels may lead manufacturers to reformulate or discontinue some foods.
Health Care Marketing: The Seventh Circuit Addresses “Referrals” Under The Anti-Kickback Statute
Health care organizations working with marketers, independent sales representatives, advertising, and other consulting support to promote sales of products or services received welcomed news that their arrangements may be lower risk than some believe. On April 14, 2025, the United States Court of Appeals for the Seventh Circuit issued an opinion providing a crucial interpretation of the meaning of “referrals” under the federal Anti-Kickback Statute (AKS), found at 42 U.S.C. § 1320a-7b.
The case, United States v. Sorenson, addressed whether a Medicare-registered distributor violated the AKS in making payments to advertising, marketing, and manufacturing companies that worked to sell orthopedic braces to Medicare patients. The court held that such payments were not “referrals” within the meaning of the AKS because the payments were made to entities that were neither physicians in a position to refer their patients nor other decisionmakers in positions to “leverage fluid, informal power and influence” over health care decisions.
Background
The AKS is a criminal law that prohibits the knowing and willful offering, paying, or receiving any form of compensation or benefit — known as “remuneration” — in exchange for patient referrals or generating business related to services or items reimbursable by federal health care programs (e.g., Medicare or Medicaid-covered drugs, supplies, or health care services). Remuneration is broadly defined to include anything valuable beyond just cash payments, such as free rent, luxury hotel accommodations, expensive meals, or inflated payments for consulting roles and medical directorships. The statute targets arrangements involving individuals who can influence patient decisions or have access to patients, thus affecting patient health care choices. A common example would be a physician receiving money for referring patients to specific health care providers, like hospitals or specialists, but the statute can reach non-physicians, as well, although such cases seem to be less common among those prosecuted. The AKS is also used as a basis for the assertion of civil false claims that are tainted or caused by a violation of the AKS.
In Sorenson, SyMed Inc., a Medicare-registered distributor of durable medical equipment, entered into a complex series of arrangements with a durable medical equipment manufacturer, PakMed LLC, a marketing agency, Byte Success Marketing, and a medical billing agency, Dynamic Medical Management, to advertise orthopedic braces to patients, to obtain signed prescriptions from the patients’ doctors, to distribute the braces, and then to collect reimbursement from Medicare.
The business model involved multiple steps. Initially, Byte and another marketing company, KPN, ran advertisements for orthopedic braces. Patients interested in the braces responded by submitting electronic forms containing their names, addresses, and physician contact details. These details were then sent to call centers, where sales agents from Byte or KPN reached out to patients to discuss brace orders and prepare prescription forms. Once additional details were collected and patient consent was obtained, the sales agents faxed prefilled, unsigned prescription forms to the patients’ doctors. The prescription forms prepared by Byte included SyMed’s name and corporate logo, along with a list of devices to be ordered.
Critical to the court’s analysis, physicians who received these unsigned prescription forms had complete discretion to either sign and return them to SyMed and Dynamic for further processing or to ignore them entirely. Physicians rejected approximately 80% of the orders originating from KPN and frequently disregarded those from Byte. If a physician decided to sign and approve a prescription, SyMed instructed PakMed to deliver the braces directly to patients, while Dynamic submitted billing to Medicare on SyMed’s behalf. SyMed retained a 21% service fee from the Medicare or insurance payments, from which it compensated Dynamic for its billing services, and forwarded the remaining 79% to PakMed. PakMed then used part of its share to pay KPN and Byte, the marketing firms, based on how many patient leads each had generated.
Based on this business model, a federal grand jury indicted Sorensen on four counts. Count One charged Sorensen with conspiring to offer and pay remuneration, including kickbacks and bribes, for furnishing services for which payment may be made in whole or in part under a federal health care program in violation of the AKS. Counts Two, Three, and Four charged Sorensen with substantive violations of the AKS citing three specific payments. The district court characterized the question as a “close call,” but ultimately convicted Sorensen because the evidence regarding willfulness allowed the jury to find beyond a reasonable doubt that Sorensen “knew from the beginning of the agreement in 2015 that the percentage fee structure and purchase of the doctor’s [sic] orders violated the law.”
Analysis
On appeal, the Circuit Court considered whether the payment fell within the prohibitions of the AKS, which require that a payor act with the intent to induce referrals from the payee (recipient) to implicate the statute. As the court noted, in considering whether a payment falls within the prohibitions of the AKS, the focus is on an intent to induce referrals — as opposed to the titles or formal authorities — from the payee in order to “broaden liability to reach operatives who leverage fluid, informal power and influence” over health care decisions. Payments to non-physicians, however, present uncommon scenarios, as the power to guide patients to specific providers and approve care presents a significantly lower risk in comparison to such power held by a physician.
The Department of Justice (DOJ), which had commenced the prosecution, made the argument that the term “refer” is broad, “encapsulating both direct and indirect means of connecting a patient with a provider.” In DOJ’s perspective, the inquiry was to be focused on substance, not form, and thus a non-physician makes a referral within the meaning of the AKS when he or she “steer[s] a patient to a particular provider,” even if the referring person is neither a “‘relevant decisionmaker”’ nor “in a similar position as the relevant decisionmaker.” The court, however, rejected such a broad interpretation, noting that DOJ produced no evidence that Sorensen, PakMed, KPN, or Byte authorized medical care in such a way to implicate the AKS referral prohibition.
Moreover, the fact that SyMed shared revenue with PakMed on a percentage basis did not render the arrangement illegal. The court noted that “percentage-based compensation structures are not per se unlawful.” Instead, to violate the AKS, “payments have to be made in order to induce an unlawful referral,” which “requires proof beyond showing that a percentage-based compensation contract existed.”
Fundamentally, due to an advertiser’s lack of “any sort of informal power and influence over healthcare decisions,” here, the Court concluded that there was no referral under the AKS. There was a notable difference “between a payment to induce referrals from a payee who is in a position to make or influence healthcare decisions, which violates the statute, and a payment for advertising services, which does not.” Without authority to act on behalf of a physician, authorize medical care, or unduly influence physician decision making, a violation of the AKS did not exist. Under the arrangement in question, physicians always had ultimate control over their patients’ health care choices and applied independent judgment in exercising that control.
One interesting observation of the Court was that if the entities and the advertisers had all worked for the same company, their actions would never have been viewed as federal crimes. To align incentives, employers regularly structure compensation based on how much business employees generate. The AKS recognizes this common practice. Among its exclusions, for example, the statute contains a safe harbor provision, 42 U.S.C. § 1320a-7b(b)(3)(B), that exempts payments by “an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services․” Though this comment was resigned to a footnote, perhaps the Court was signaling that the distinction between independent contractor and employer is not as critical as some commenters have worried in the past.
Conclusion
Both physicians and non-physicians can wield formal or informal influence over patients’ choices of health care providers, often leveraging personal relationships to limit competition and harm patients, and consequently increasing costs for federal health care programs. The AKS explicitly prohibits payments intended to induce improper influences, which is consistent with public policy. In this case, however, Sorensen’s payments to PakMed, KPN, and Byte were compensation for legitimate, routine services — such as advertising, manufacturing, and product delivery — and not in exchange for patient referrals.
Although refraining to comment on the broader social implications or desirability of aggressive, even intrusive, marketing strategies like Sorensen’s, the court noted that vigorous advertising alone was not equivalent to illegal patient referrals. Since no evidence was presented that would permit a reasonable jury to conclude beyond a reasonable doubt that Sorensen made payments or agreements in exchange for referrals as defined by the AKS, the district court’s judgment was reversed.
This decision does not mean that providers, manufacturers, or others engaged in the health care ecosystem need to change any current practices. But it does stand for an important milestone in the ongoing interpretation of the AKS, one of the key fraud and abuse enforcement tools, that will be closely monitored by entities defending against AKS or FCA actions premised on certain compensation arrangements that previously had been questioned. Under the Court’s ruling, heath care providers may structure compensation arrangements involving marketing and sales without implicating AKS, as non-physician recommendations may evade classification as an illegal referral. The Court’s ruling, emphasizing the payee’s inability to leverage influence or power over health care decisions, suggests that providers could, with the proper safeguards in place, utilize percentage-based compensation structures or per lead compensation arrangements with marketing and sales teams. Providers should consult legal counsel on structuring any such arrangement to ensure AKS compliance and meet any applicable safe harbor protections.
Navigating the Rise of Accommodation Requests in Life Sciences [Podcast]
Accommodation requests are evolving, and life sciences employers are witnessing a surge in diverse and creative requests.
CMS Extends Revalidation Deadline for Skilled Nursing Facilities to August 1, 2025
In its April 17 MLN Newsletter, the Centers for Medicare and Medicaid Services (CMS) once again extended the deadline for skilled nursing facilities (SNF) to submit their off-cycle revalidation from May 1 to August 1, 2025.
This new deadline gives SNFs additional time to collect the ownership and Additional Disclosable Party (ADP) information necessary for the revalidation filing, and for many SNFs, the extension comes with a wave of relief.
In mid-March, the American Health Care Association and National Center for Assisted Living (AHCA/NACL) reported that fewer than 20% of SNFs had submitted their required revalidation applications. Based on our experience, even for those facilities that have submitted their revalidations, the applications have been frequently returned through development letters requesting additional information, often with multiple rounds of review to address deficiencies. Application development requests have varied widely depending on the analyst reviewing the application and the Medicare Administrative Contractor (MAC).
The inconsistencies in MAC responses and the ever-changing guidance by CMS have left many SNFs with more questions than answers. Most recently, CMS again updated its ADP revalidation guidance on April 9, 2025, to include additions in Section IV related to therapy providers and the FAQs to address requirements for ADPs.
To ensure a timely response to this newly extended deadline, plan ahead to gather the necessary information from ADPs and expect a long process of review, potentially with multiple rounds of inquiries from the MAC. Please review our previously published article to learn about the updated reporting requirements.
Skilled Nursing Facilities: CMS Extends Medicare Revalidation Deadline
On April 17, 2025, the Centers for Medicare and Medicaid Services (CMS) announced another extension of the deadline by which skilled nursing facilities (SNFs) must revalidate their Medicare enrollments:
Enrolled skilled nursing facilities should collect data on ownership, managerial, and related party information and submit their revalidation. CMS extended the deadline to August 1, 2025.[1]
Prior to the extension, the revalidation deadline for all Medicare-enrolled SNFs was May 1, 2025. However, as recently as April 9, 2025, CMS published guidance attempting to clarify new disclosure requirements.[2] This round of revalidations comes in the wake of the Final Rule CMS published in the Federal Register on November 17, 2023[3], which became effective on January 16, 2024. These regulations set forth additional requirements for SNFs in disclosing ownership and control interests and additional disclosable parties (ADPs) as part of their Medicare enrollment.[4]
Under these regulations, SNFs must disclose the members of the facility’s governing body, officers, directors, members, partners, trustees, managing employees, and additional disclosable parties (and their organizational structures)[5], which include any person or entity who does any of the following:
(1)
Exercises operational, financial, or managerial control over the facility or a part thereof.
Provides policies or procedures for any of the operations of the facility; or
Provides financial or cash management services to the facility.
(2)
Leases or subleases real property to the facility; or
Owns a whole or part interest equal to or exceeding 5% of the total value of such real property.
(3) Provides—
Management or administrative services.
Management or clinical consulting services; or
Accounting or financial services to the facility.[6]
As the basis for these disclosure requirements, CMS referenced concerns with private equity ownership of SNFs and its desire to assess the impact of such ownership on quality of patient care. CMS stated that:
Part of the challenge CMS faces in ensuring quality care at nursing homes is our lack of sufficient knowledge of all the parties associated with the nursing home’s ownership, operations, and management. Without a complete understanding of the full scope of the facility’s operations and its relationship with other persons and entities, it can be challenging to pinpoint the origin within the organization’s overall structure of any quality-of-care problems, as well as whether taxpayer funding is being appropriately spent on care.[7]
Additionally, in response to comments regarding the administrative burden and operational difficulties these reporting requirements may impose on SNFs, CMS determined that “the importance of quality care and the potential saving of lives justifies additional burden on the part of the nursing facilities.”[8]
CMS’ public announcement does not cast light on its rationale for the deadline extension, but the sheer scope of the administrative lift for SNFs to comply with these reporting requirements may be a contributing factor. Given the Trump Administration’s scrutiny of existing HHS guidance and even existing regulations that are deemed to be overly burdensome, we cannot rule out the possibility of a change in course as to CMS’ focus on ownership and control transparency. Given the additional time for completion, providers should watch carefully for additional guidance with respect to the completion of their revalidations.
[1] Centers for Medicare & Medicaid Services, 2025-04-17-MLNC (April 17, 2025) https://www.cms.gov/training-education/medicare-learning-network/newsletter/2025-04-17-mlnc#_Toc195616278.
[2] Centers for Medicare & Medicaid Services, GUIDANCE FOR SNF ATTACHMENT ON FORM CMS-855A (April 9, 2025) https://www.cms.gov/files/document/guidance-snf-attachment-855a.pdf.
[3] 88 FR 80141 (Nov. 17, 2023).
[4] 42 C.F.R. § 424.516(g).
[5] Id.
[6] 42 C.F.R. § 424.502.
[7] 88 FR 80141, 80147 (Nov. 17, 2023).
[8] Id. at 80148.
Safety Perspectives from the Dallas Region: OSHA’s Evolving Investigation Tactics and Communications [Podcast]
In this episode of our Safety Perspectives From the Dallas Region series, John Surma (Houston) and Frank Davis (Dallas) delve into the intricacies of OSHA’s Rapid Response Investigation (RRI) letters and the emerging trend of OSHA’s use of email questionnaires that the agency doesn’t treat like an RRI letters. Frank and John discuss the implications of these communications, how employers can respond, and the potential legal ramifications of responding to these communications, providing valuable insights for navigating OSHA’s investigative processes.
Seventh Circuit Decision Clarifies Distinction Between Face-to-Face Sales and Advertising Under the Anti-Kickback Statute
Overview
In a significant decision, United States v. Sorensen, — F.4th —-, 2025 WL 1099080 (7th Cir. Apr. 14, 2025), the United States Court of Appeals for the Seventh Circuit reversed the conviction of Mark Sorensen, who was previously found guilty of conspiracy and kickbacks under the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)). This ruling aligns with recent Fifth Circuit cases that draw a clear distinction between illegal kickbacks for face-to-face sales and lawful payments for advertising and marketing services.
Case Background
Mark Sorensen, owner of SyMed Inc., a Medicare-registered distributor of durable medical equipment, was convicted of conspiracy and offering kickbacks for payments made to advertising and marketing companies. These companies were involved in promoting orthopedic braces to Medicare patients. The government argued that these payments constituted illegal referrals under the Anti-Kickback Statute.
Business Model for Orthopedic Product Sales
The business model for selling orthopedic braces involved several steps:
Advertising Campaigns: Byte Success Marketing (“Byte”) and KPN, the marketing firms involved, published advertisements for orthopedic braces. These ads targeted potential patients who might benefit from the braces.
Patient Engagement: Interested patients responded to the advertisements by filling out electronic forms with their personal information, including names, addresses, and doctors’ contact details.
Sales Agent Interaction: The collected information was forwarded to call centers where sales agents from Byte or KPN contacted the patients to discuss ordering a brace. These agents also generated prescription forms for the braces.
Physician Approval: The sales agents, with the patients’ consent, faxed the prefilled but unsigned prescription forms to the patients’ physicians. These forms included SyMed’s name and corporate logo and listed the devices to be ordered. Physicians had the discretion to sign and return the forms or ignore them. Notably, physicians declined 80 percent of the orders sent by KPN and regularly ignored forms sent by Byte.
Order Fulfillment: If a physician signed and approved a prescription, SyMed directed PakMed, the manufacturer, to ship the braces to the patients. Dynamic Medical Management, a billing agency, then billed Medicare on behalf of SyMed.
Revenue Sharing: SyMed paid PakMed 79 percent of the funds collected from Medicare or other insurance, keeping 21 percent as a service fee. Out of its 79 percent share, PakMed paid the advertising firms, KPN and Byte, based on the number of leads generated.
Seventh Circuit’s Analysis
The Seventh Circuit found insufficient evidence to support the conviction, emphasizing that the payments made by Sorensen were for advertising services and not for referrals. The Court highlighted that the physicians retained ultimate control over patient prescriptions and decisions, which is a critical factor in determining whether a payment constitutes an illegal referral.
Key Points from the Decision
Advertising vs. Face-to-Face Sales: The Court distinguished between payments made for advertising services and those made to induce referrals through face-to-face sales interactions. Payments to advertising companies that promote medical products do not fall under the Anti-Kickback Statute if the physicians retain independent decision-making authority. In contrast, face-to-face sales interactions, where sales representatives may exert influence over healthcare decisions, are more likely to be scrutinized under the statute.
Physician Control: The Court noted that the physicians who received the prescription forms from the marketing companies had the discretion to approve or reject the prescriptions. This autonomy is crucial in differentiating lawful advertising from illegal kickbacks. In face-to-face sales scenarios, the potential for undue influence is higher, making it essential to ensure that physicians’ decisions remain independent.
Legal Precedents: The decision aligns with the Fifth Circuit’s rulings in cases such as United States v. Miles and United States v. Marchetti. In these cases, the Fifth Circuit also overturned convictions where payments were made for marketing and advertising services rather than for referrals. The courts emphasized the importance of distinguishing between general advertising activities and direct sales efforts that could influence healthcare decisions.
Implications for Healthcare Providers
This decision provides clarity for healthcare providers and marketers regarding the boundaries of the Anti-Kickback Statute. It underscores the legality of compensating advertising and marketing firms for their services, provided that the ultimate decision-making authority remains with the physicians. However, it also highlights the need for caution in face-to-face sales interactions, where the risk of violating the statute is higher.
Conclusion
The Seventh Circuit’s decision in United States v. Mark Sorensen reinforces the distinction between lawful marketing activities and illegal kickbacks, particularly differentiating between general advertising and face-to-face sales efforts. Healthcare providers should ensure that their marketing practices comply with this legal framework, maintaining clear boundaries to avoid potential violations of the Anti-Kickback Statute.
Health-e Law Episode 17: Navigating AI: Governance and Innovation at UCSD Health With Ron Skillens of UCSD Health [Podcast]
Welcome to Health-e Law, Sheppard Mullin’s podcast exploring the fascinating health tech topics and trends of the day. In this episode, Ron Skillens, Chief Compliance and Privacy Officer at UC San Diego Health, joins host Michael Orlando to discuss the transformative potential of AI in healthcare and the importance of balancing innovation with compliance.
What We Discussed in This Episode:
How could AI transform patient care and hospital operations in the next five years?
With health data being as sensitive and valuable as it is, why is an AI governance structure crucial for the creative and compliant use of AI?
How can AI usage be effectively managed and coordinated between stakeholders to strike the right balance of innovation and risk?
What have been some of the biggest challenges and lessons learned when establishing an AI governance structure?
In what ways does patient interest shape the evaluation of AI applications in healthcare?
What is the best way to keep staff and stakeholders updated on the latest AI advancements, emerging trends and best practices?
New Seventh Circuit Decision Signals Greater Flexibility for Healthcare Marketing Services
On April 14, 2025, the United States Court of Appeals for the Seventh Circuit issued a decision in a case involving the federal Anti-Kickback Statute (“AKS”) and marketing services that the court framed as an appeal “test[ing] some of the outer boundaries of the [AKS]….”
In United States vs. Mark Sorensen, the Court of Appeals overturned the judgment of conviction against Mark Sorensen from the United States District Court for the Northern District of Illinois. In the district court case, Sorensen, the owner of SyMed Inc., a durable medical equipment (“DME”) distributor, was found guilty of one count of conspiracy and three counts of offering and paying kickbacks in return for the referral of Medicare beneficiaries to his DME company, which the United States claimed resulted in SyMed’s fraudulently billing $87 million and receiving $23.6 million in payments from Medicare. The district court judge denied Sorensen’s post-trial motions for acquittal and for a new trial, finding that the evidence regarding willfulness allowed the jury to find beyond a reasonable doubt that Sorensen “knew from the beginning of the agreement in 2015 that the percentage fee structure and purchase of the [doctors’] orders violated the law.” He was sentenced to 42 months in prison and ordered to forfeit $1.8 million.
The charges against Sorensen stemmed from SyMed’s arrangements with several advertising and marketing companies, a DME manufacturer, and a billing company. Under the business model for which Sorensen was convicted, the marketing companies published advertisements for orthopedic braces, to which interested patients could respond using an electronic form providing their names, addresses, and doctors’ contact information. This information was forwarded to call centers where sales agents from the marketing companies would contact the patients to discuss ordering braces and generating prescription forms. After collecting additional information, and with consent from patients to proceed, the sales agents faxed the prefilled, but unsigned, prescription forms to patients’ physicians. The prescription forms contained SyMed’s name and corporate logo and listed the devices to be ordered. SyMed paid the DME manufacturer 79 percent of the payments it received from Medicare or another payor, and kept 21 percent, from which it paid the billing company for its services. The DME manufacturer paid the marketing companies out of its 79 percent share based on the number of leads each company generated. The government argued that the payments to these marketing companies constituted illegal kickbacks under the AKS because they were intended to induce the referral of Medicare beneficiaries.
According to the Seventh Circuit, a critical fact leading to its reversal of Sorensen’s conviction was that the physicians who received these unsigned prescription forms got to decide whether to sign and return the forms to SyMed and the billing company for review—or to ignore them. According to the court’s decision, physicians declined 80 percent of the orders from one of the marketing companies and “regularly ignored forms sent by” the other marketing company.
The appellate court reversed the district court’s decision for insufficient evidence, noting that “[t]he other individuals and businesses Sorensen paid were advertisers and a manufacturer. They were neither physicians in a position to refer their patients nor other decisionmakers in positions to ‘leverage fluid, informal power and influence’ over healthcare decisions.” The Seventh Circuit characterized the marketing companies’ communications to physicians as “proposals for care, not as referrals”, noting that to the extent they could be considered “recommendations” to physicians, “they were frequently overruled.” The appellate court further stated, “[t]he key point is that, on this record, physicians always had ultimate control over their patients’ healthcare choices and applied independent judgment in exercising that control.” Consequently, the appellate court concluded that “Sorensen’s payments thus were not made for “referring” patients within the meaning of the statute.” Interestingly, the court focused more on the percentage payments to the DME manufacturer and less on the “per lead” payments to the marketing companies. This was likely due to the low use or conversion of orders for orthopedic braces by physicians using these prefilled forms by the marketing companies which, to the court, demonstrated that the physicians retained and exercised control over whether an orthopedic brace would be ordered for their patients.
In considering whether the 80 percent declination rate experienced by the one marketing company was dispositive, the Seventh Circuit declined to adopt a bright-line rule. Instead, the appellate court noted in a footnote to its decision that “[o]ur focus is on whether a payee exerts informal but substantial influence so that a physician’s choice of care becomes a formality rather than an exercise of independent medical judgment.”
The Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) has previously considered pay per lead arrangements with advertising companies in advisory opinion (“AO”) 08-19. In AO 08-19, the HHS-OIG allowed a pay per lead arrangement involving chiropractors under the limited circumstances presented in that AO: the advertising company was not a health care provider, the advertising did not target only Federal health care program beneficiaries, fees paid by the chiropractors would not depend on whether the lead became an actual patient, and the advertisers would not steer patients to a particular chiropractor. The OIG’s analysis in AO 08-19 also relied on the fact that the advertising company did not collect any health care information, such as payor information, medical history, or diagnosis information about prospective patients using the advertiser’s platform.
The Seventh Circuit’s decision signals that payments to marketing firms for services like advertising and lead generation are less likely to be considered illegal kickbacks, provided that (1) the marketing firms do not exert direct influence over prescribing physicians, and (2) physicians retain genuine autonomy in their medical decisions, in which one factor that may be considered is the conversion rate of a marketing lead to a physician order. While the Seventh Circuit did not provide an explicit definition of the term “referrals” for purposes of the AKS, the court’s emphasis on the independent decision-making of the physicians suggests a potential limit on what actions by a third party can be considered to trigger the AKS’s prohibition against payments for referrals. This could create a clearer path forward for legitimate marketing activities while still prohibiting direct inducements to healthcare providers for specific referrals. We will monitor how other Circuits treat similar issues and report back on our findings.
Federal Court Finds False Claims Act Penalty Unconstitutionally Excessive
On February 26, 2025, the U.S. District Court for the Northern District of Texas issued a significant False Claims Act (FCA) ruling in United States of America ex rel. Cheryl Taylor v. Healthcare Associates of Texas, LLC, finding that the application of the FCA’s mandatory per-claim penalty violated the Eighth Amendment. The Court upheld the jury verdict finding the defendants liable under the FCA, but substantially reduced the $448 million in penalties imposed, citing the Eighth Amendment’s Excessive Fines Clause.
The relator-whistleblower alleged that the defendants employed fraudulent Medicare billing practices in violation of Medicare billing rules. After a two-week trial, the jury found that Healthcare Associates of Texas (HCAT) submitted 21,844 false or fraudulent claims and collected $2,753,641.86 in overpayments.
In assessing potential damages under the FCA, the overpayment amount—roughly $2.75 million in this case—is merely the starting point. The statute allows private whistleblowers or the Government to seek up to three times that amount and to impose penalties between $13,946 and $27,894 for every single false claim. As a practical matter, the Department of Justice often settles FCA cases by applying a multiplier between 1.25 and 2 times the amount of actual damages, while seeking per-claim penalties is far less common.
Relator sought treble damages as well as the maximum statutory penalties. Although the amount of the overpayment was less than $2.75 million, the jury imposed per-claim penalties and awarded Relator $448,817,000—more than 100 times the amount the Government actually reimbursed Defendants for the allegedly fraudulent claims.
HCAT argued that such an award would violate the Excessive Fines Clause, which prohibits “grossly disproportional” fines relative to the offense. The Court agreed, noting that the ratio of statutory to actual damages was over 100 to 1 and that the conduct at issue was based on rules violations as opposed to more egregious conduct like billing for fictitious services. Thus, based on constitutional concerns under the Excessive Fines Clause, the Court reduced the statutory damages to three times the actual damages, setting total liability at $16,521,851.16.
While the FCA mandates per-claim penalties, which often result in extraordinary damage calculations, courts increasingly ask whether they are constitutional and may reduce excessive fines when they result in disproportionate liability. Given these concerns, those facing disproportionally large FCA penalties may consider raising Eighth Amendment arguments early in the litigation, particularly when statutory fines vastly exceed actual damages.
This ruling highlights critical considerations for health care providers and their legal counsel navigating FCA enforcement actions.