Something to Think About

How did you celebrate your birthday? Cake and ice cream with family? A night on the town with your pals? Me? I analyzed a brand new advisory opinion from the OIG about physician joint ventures involving DME. It’s all about the love, friends.

Let’s explore this opinion, officially known as AO 06-02, because it analyzes a private patient joint venture (no Medicare/Medicaid) offering insight on a topic not usually discussed by the feds. In AO 06-02, the OIG said that a proposed program that would allow physicians to become DME suppliers might violate Medicare’s anti-kickback statute even though it would apply only to private-pay patients.

The proposed venture included four financial components. First, a manufacturer/supplier would sell DME and orthotic products to the physician practice under a commercially reasonable pre-arranged fee schedule. Nothing wrong with that, right? Second, the manufacturer/supplier would rent continuous passive motion devices to the physician practice on an as-needed basis for a commercially reasonable daily rental amount. Still OK, right?

Third, the manufacturer/supplier would provide a trained technician to fit the joint venture patients, “complete in-home set-up of equipment, instruct patients on the use and maintenance of the products, monitor patient progress, obtain payer pre-certification, manage product inventory and procure additional products as necessary.” The physician practice would pay a commercially reasonable fixed monthly fee for the services of this technician. Copacetic, right?

Fourth, the manufacturer/supplier would provide comprehensive coding, billing and collection services to the physician practice for a commercially reasonable fixed monthly fee. We’re golden, right?

Finally, as a safeguard against inappropriate referral patterns, the physician practices would instruct their government-reimbursed patients to obtain DME “from any local … DMEPOS supplier.” What could be more reasonable?

Why, then, did the OIG conclude that this proposed program posed “a significant risk of fraud and abuse?”

What bothered the government is that the manufacturer/supplier essentially offered the physician practices a “turnkey” DME operation. OIG notes the manufacturer/supplier, “a would-be competitor of the new physician practice supplier, would provide virtually all of the key items and services” including the DME and orthotics products, personnel, day-to-day management, patient support services, inventory management and billing and collection services.

Unlike a person who decides to start a DME business, the physician practice would not have to purchase a significant amount of equipment nor hire or manage the trained technician, tie up capital by purchasing CPM machines or hire, train and supervise billing and collection personnel.

But doesn’t it make a difference that no government-reimbursed patients are involved? Well, yes and no. The OIG notes it has a “longstanding concern” about arrangements where non-federal beneficiaries are “carved out” from “otherwise questionable financial arrangements” because they may disguise “remuneration for federal referrals through the payment of amounts purportedly related to non-federal business.”

So how does that apply to the AO 06-02 proposed program? The OIG was worried, for example, about the participating physicians having “an extra incentive to steer beneficiaries” to the manufacturer/supplier to “demonstrate commitment” and “potentially secure more favorable pricing.”

Does this mean that joint ventures for private-pay patients are unsafe? Of course not. For there to be a connection to the anti-kickback laws or any other federal self-referral or anti-fraud and abuse laws, there must be actual unlawful behavior. In AO 06-02, the OIG was essentially saying that the proposed venture created the possibility of abuse.

Just think, you could have avoided all of this if you had just thrown me a birthday party.

Neil Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national health law practice in Greenville, S.C. He also is a principal with Caesar Cohen Ltd., which offers compliance training, outsourcing and consulting and the author of the Home Care Compliance Answer Book. He can be reached by e-mail at [email protected] or by telephone at 864/676-9075.