OIG Cautions IDTF Arrangements Could Bring Up Anti-Kickback Concerns

WASHINGTON — The Office of Inspector General once again
cautioned providers to beware of the anti-kickback statute in an
eight-page advisory opinion addressing arrangements between DME
companies and independent diagnostic testing facilities.

Released June 21, the opinion (AO 11-08) said both an existing
arrangement and a proposed arrangement involving contracts between
a DME company that provides CPAP devices and a sleep lab could be
suspect.

In the first arrangement, the DME company pays the IDTF on a per
set-up basis for education and set-up services given to commercial
patients. The OIG confirmed that the “commercial patient”
distinction was not enough to avoid scrutiny.

According to attorney Jeff Baird, chairman of the Health Care
Group at Amarillo, Texas-based Brown & Fortunato, the OIG has
said repeatedly that “carving out” federal program patients from a
per-patient payment arrangement does not avoid anti-kickback
liability.

“If a referral source refers both Medicare and commercial
patients to a provider, and receives ‘per set-up’ compensation from
the provider, the parties cannot avoid the anti-kickback statute
merely by excluding the Medicare patients from the calculation of
the compensation,” said Baird. “In the OIG’s view, the payments are
compensation for referral of all patients, even if they are
calculated on the basis of commercial patients only. The parties
can avoid application of the anti-kickback statute only if the
referral source does not refer any federal program patients to the
provider.”

Attorney Neil Caesar, president of the Health Law Center,
Greenville, S.C., said the opinion reiterates much of what the OIG
has said in the past, with perhaps a slight change in vigor.

“What most [suppliers] may find surprising is the government’s
hesitation about anything resembling a blanket approval of a
private venture from the anti-kickback perspective,” said Caesar.
“Suppliers are pressured a lot these days to enter into deals with
referral sources that are supposedly safe because they only involve
non-government-reimbursed patients. This opinion emphasizes that it
is nowhere near that simple.”

In a second arrangement described by the requestor (the company
that asked for the opinion), the IDTF would refer Medicare patients
to the DME company, which would pay a flat monthly or annual fee to
the IDTF for its services to Medicare patients. The requestor
expressly stated that the fee might not be fair market value.

“A fixed annual fee is an important element in obtaining the
protection of the Personal Services and Management Contracts safe
harbor to the anti-kickback statute, but only if the fee is fair
market value,” explained Baird. “By declining to represent that the
fee will be fair market value, the requestor guaranteed that the
OIG would not approve the AO request …

“The requestor in this case may have been seeking a negative
opinion in the hope of dissuading its competitors from
participating in arrangements like these,” he continued. “It
appears that the OIG was happy to oblige.”

In addition to directly addressing the arrangements, OIG
officials sought to dissuade such questionable scenarios in the
future.

“The OIG used the occasion to deliver a harangue against
‘aggressive marketing by DME suppliers’ who coerce vulnerable
senior citizens into making inappropriate choices, with adverse
effects on the quality of care and financial harm to federal health
programs,” said Baird. “At the end of the day, the new advisory
opinion breaks no new ground. Its conclusions are exactly what one
would expect based on earlier OIG pronouncements, with the addition
of another broad attack on the HME industry.”

Find a PDF of OIG Advisory Opinion 11-08 at oig.hhs.gov/compliance/advisory-opinions/index.asp.