Joint Ventures Redux

I’m still thinking about the Office of Inspector General’s advisory opinion from April, in which the government decided that joint ventures between a home care company and medical groups might implicate the federal fraud-and-abuse rules — even when the joint venture only focused on private-pay patients.

In AO 06-02, the feds held that a joint venture that excluded all government-reimbursed patients could still raise fraud-and-abuse concerns if it included any special considerations that served to induce referrals by the physicians. I agree.

But the government also suggested that a private-pay joint venture could implicate the anti-kickback statute just because the physician felt like favoring his joint venture partner to establish a good relationship. Specifically, the OIG stated it was worried about physicians having an incentive to steer federally insured beneficiaries to the HME joint venture partner to “demonstrate commitment” or to “potentially secure more favorable pricing” to the private-pay joint venture.

This holding is much more troubling. Further, I think the government is really beating around the bush about its real agenda: discouraging all turnkey joint ventures.

I certainly agree that home care companies can get in trouble if they offer a business opportunity to a medical group that is too generous. The feds are not stupid. If a company gives away too many concessions in the deal, the government (as well as your competitors) will likely wonder why.

I’ve seen private-pay joint ventures where a home care company offered low-ball equipment pricing to a medical group expanding into the HME field. I have seen joint ventures where referral sources would not have to pay for purchased services for 90 days, or 120 days, or 180 days. I have seen ventures where the referring party did not have to pay for services until enough revenues came in so that there would never be a negative cash flow.

In each instance, it is not hard to speculate that the HME is offering special benefits in the venture in order to obtain the physician’s referral loyalty.

So that’s how I agree with the OIG. Private-pay deals can spill over to implicate the anti-kickback statute. But here’s how I disagree: None of these dangers applied to the joint venture discussed in the advisory opinion!

In that proposed venture, goods would be sold to a physician practice under a reasonable prearranged fee schedule, CPM devices would be rented to the practice on an as-needed basis and a technician would be provided for a monthly fee, as would coding, billing and collections. Finally, as a safeguard against inappropriate referral patterns, the practice would instruct its federally insured patients to obtain DME “from any local … DMEPOS supplier.” No sweetheart deals in sight.

The OIG said it was worried about whether the physician might want to “demonstrate commitment” by favoring Medicare referrals to the home care company. Not because the doctor was required to do so or would receive more money from doing so. Just “because.”

So what’s wrong with that? Where exactly are the special inducements or improper details that would induce the physician practice to steer federally insured patients to the HME company? If a physician decides on his own to be loyal to the company with whom he is most familiar, is that improper?

It’s clear that the government is very cynical about turnkey operations, where one party (here, the HME company) enables another party (here, the physician practice) to expand into a new line of service without any significant skill or investment risks. The government seems to believe it unlikely that an HME would offer a turnkey venture to physicians without expecting referral loyalty for federally insured patients. But if the terms of the deal are fair and the loyalty is in no way coerced or rewarded, it’s hard to see how this sort of situation truly triggers the anti-kickback statute.

So, I think the government is skating on thin ice with its new philosophy about private-pay turnkey joint ventures. But you know what? It’s the government’s skating rink, and if they want to skate on thin ice, who will tell them they can’t?

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