The Office of the Inspector General (“OIG”) regularly issues opinions on potential arrangements, providing guidance as to whether those arrangement pass muster under Anti-Kickback statute scrutiny. For those unfamiliar, the anti-kickback statute “makes it a criminal offense knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program.” The statute has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals. The opinions issued serve as a roadmap to those of us responsible for structuring arrangements for clients, which is one reason why its important to stay in tune with OIG.
A recent opinion issued on November 16, 2011, OIG Advisory Opinion No. 11-17, caught my eye for discussion because it tackles a regular situation in healthcare – where a practice gets approached by an “ancillary service provider” – a company offering separate services than are offered by the practice, marketed to the practice’s existing patients. The analysis provided by OIG would be applicable in a myriad of other potential arrangements and provides guidance to the viewing public on what types of arrangements may or may not pass muster under review by a regulatory agency.
The situation presented to OIG is as follows: A lab company is offering to provide allergy testing and immunotherapy lab services to physician practices, and the lab would provide all necessary lab personnel (including techs), equipment, supplies, training and billing and collection services. Additionally, the lab would assist physician clients with marketing allergy services to patients. The Physicians would provide spaces, scheduling services, supplies and furniture, insurance and physician supervision and interpretation of laboratory results. The physician would pay the lab a fee of 60% of gross collections from allergy testing and immunotherapy items.
In its analysis, first OIG discards the possibility that this arrangement would meet an applicable safe harbor and therefore be a proper arrangement. Specifically, OIG states that this arrangement would not meet the “equipment lease” or “personal services” safe harbor because: (1) the services would be provided on an as-needed basis, and therefore any agreement would not specify the schedule of intervals for testing as required, and (2) the applicable safe harbor requires that the aggregate compensation to be paid under the contract be set in advance and not be determined in a manner that takes into account the volume or value of referrals.
Second, OIG looks to the totality of the circumstances to determine whether there is potential liability with a proposed arrangement. OIG outlines a number of factors in identifying why this arrangement may be suspect, the main being that the lab’s fee would not be tied to actual and necessary services, instead compensation would be directly linked to the volume and value of ref errals, rather than at fair market value. Here, OIG found this arrangement may likely result in potential liability given the factors set off above.
Interestingly, in its determination, OIG also points out how had this arrangement been presented with slight variations, the lab would have been able to conduct its testing potentially within applicable safe harbors and without potential kickback exposure. When structuring and entering into a new arrangement, oftentimes the devil is in the details. In this opinion, the parties got the details wrong, and would require some retooling to pass muster. So, the gist of today’s email, if you are looking to increase revenue by partnering with an “ancillary revenue provider” or integrating any new service into your practice, you should seek the assistance of counsel to ensure your new additions are not equal part liability to an equal part potential, whether because of general exposure or improper structure.
Copyright © 2011 by Kirschenbaum & Kirschenbaum PC.
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