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.