WASHINGTON--The Department of Health and Human Services Office of Inspector General said a proposed program that would allow physicians to become DME suppliers could violate Medicare's anti-kickback statute.
A DME manufacturer and supplier, whose name was withheld, recently had inquired whether this and a similar program would constitute grounds for sanctions.
Under a proposal that would allow physicians to become DME suppliers, the manufacturer/supplier would sell DME and orthotics to physicians under a pre-arranged fee schedule. The program would only apply to patients who are not members of a federal health care program.
In the second program--which would apply to patients of both federal and non-federal health plans--the manufacturer/supplier would remain the DME supplier by renting product storage space from the physician, paying the physician a percentage of the revenues generated from the sale and rental of products and providing the physician practice with a trained technician.
In a posted response, the OIG said these programs could potentially violate Medicare's anti-kickback statute and result in administrative sanctions.
"The first proposed program would essentially amount to a contractual joint venture for private pay business," the OIG said. "The proposed program offers physician practices the potentially lucrative opportunity to expand into the DME and orthotics business with little or no business risk and to retain a share of profits from DME and orthotics business generated by the physician practice."
In the second program, leasing space from a physician could pose a problem, the OIG explained.
"While we are precluded from determining whether the rental amount under the consignment closet portion of the arrangement would be fair market value, a key element of compliance with the space rental safe harbor, we have a long-standing concern that such rents may exceed fair market value and may be disguised kickbacks to a physician-landlord for federal program referrals," the OIG said.
But, the response continued, "any definitive conclusion regarding the existence of an anti-kickback violation requires a determination of the parties' intent," which is "beyond the scope of the advisory opinion process."
To read the OIG advisory opinion, click here.