As a follow-up to our October 3, 2025 alert, another court, this time the US Court of Appeals for the Seventh Circuit, held that percent-based compensation is not per se a kickback. In the matter of United States of America v. Mark Sorensen, the Seventh Circuit reversed the district court’s guilty verdict against a seller of orthopedic braces under the federal Anti-Kickback Statute (AKS).
The case came before the Seventh Circuit on appeal from the US District Court for the Northern District of Illinois, Eastern Division, where a jury found defendant-appellant Mark Sorensen guilty of one count of conspiracy and three counts of offering and paying kickbacks in return for referral of Medicare beneficiaries to his company, SyMed Inc., a Medicare-registered distributor of durable medical equipment (DME). Sorensen made arrangements with a DME manufacturer, PakMed, two advertising companies, and a billing agency to create a plan to advertise orthopedic braces to patients, to obtain signed prescriptions from the patients’ doctors, to distribute the braces, and then to collect reimbursement from the federal Medicare program.
Under the business model, the advertising firms would market the braces to patients, and interested patients would fill out an unsigned prescription. The advertising firm would then fax the unsigned prescription to the patients’ physicians. The physicians then decided whether to sign and return the forms to SyMed. If the forms were signed, PakMed would ship the braces to patients and the billing company would bill Medicare on behalf of SyMed. SyMed would pay PakMed 79 percent of funds collected from Medicare or other insurance and keep 21 percent as a service fee. Out of its 79 percent share, PakMed paid the advertising firms based on the number of leads that each generated.
A federal grand jury indicted Sorensen on several counts, including conspiring to offer and pay remuneration, including kickbacks and bribes, in violation of the AKS. A jury then found Sorensen guilty on all counts. Sorensen appealed to the Seventh Circuit.
The Seventh Circuit found that the payments to the advertising companies were, in fact, for advertising and manufacturing services, not for patient referrals. The Seventh Circuit recognized that the purpose of advertising may be to influence decisions but not every influence is improper. The court also reiterated that percentage-based compensation structures, including the one between SyMed and PakMed, are not per se unlawful. The Seventh Circuit emphasized that the AKS is meant to protect against improper influence over healthcare decisions by those in a position to refer patients, which the defendants were not in a position to do. The court also noted that payments to nonphysicians are less common and require courts to consider whether a payee “leverages fluid, informal power and influence” over healthcare decisions. Since there was “simply no evidence” that the entities Sorensen paid leveraged any sort of informal power and influence over healthcare decisions, the Seventh Circuit found that there was insufficient evidence of a kickback.
FCA litigation continues to change and shift and will likely continue to do so, especially after the Trump administration reissued its memorandum reinstating the prohibition on the improper use of guidance documents. This memorandum is similar to the memorandum that President Trump issued during his first term but was reversed by the Biden administration.