OIG Maintains Its Position that "Carve Outs" of Federal Health Program Beneficiaries Implicate the Anti-Kickback Statute
A recent OIG Advisory Opinion concludes that a proposed arrangement, in which a commercial laboratory would contract with medical practices to assist them in developing their own clinical laboratories, to be used only for those patients not covered by a federal health benefit program, necessarily implicates the Anti-Kickback Statute.
On June 7, 2013, the U.S. Department of Health & Human Services, Office of Inspector General (the “OIG”) issued Advisory Opinion No. 13-03 regarding laboratory services provided by an independent commercial laboratory to medical practices (the “Practices”) for patients of the Practices who were not beneficiaries of a federal health benefit program (the “Proposed Arrangement”). The OIG concluded that the Proposed Arrangement could potentially generate prohibited remuneration under the federal Anti-Kickback Statute and that the OIG could impose administrative sanctions on the requesting party (the “Requestor”) in connection with the enforcement of the Anti-Kickback Statute.
The Requestor is a clinical laboratory company (the “Parent Laboratory”). Under the Proposed Arrangement, the Parent Laboratory would establish a new company (the “Management Company”) that would contract with the Practices to assist them in developing their own clinical laboratories (each, a “Practice Laboratory,” and collectively, the “Practice Laboratories”).
The Proposed Arrangement would be structured in the following manner:
- The Practices would enter into written, exclusive, full-time leases for certain office space that would house their individual Practice Laboratories. The lease payments would be consistent with fair market value and fixed in nature.
- The Management Company would provide certain administrative and management services to the Practice Laboratories pursuant to written agreements in a manner consistent with fair market value. The Management Company’s services would be provided on a fixed fee basis.
- The Practices would be permitted, but not required, to send specimens from federal health program beneficiaries to the Parent Laboratory.
- The Practices would be permitted, but not required, to license certain proprietary operational methods from the Management Company under a written agreement for which the fair market value compensation was not based on referrals for items or services payable by any federal health benefit program.
- The Practices would be permitted, but not required, to lease certain laboratory personnel and equipment from the Management Company pursuant to a written agreement and in exchange for fair market value compensation.
The OIG concluded that, under the Proposed Arrangement, the Practices were being provided remuneration, in the form of an opportunity to start a profitable lab business, with minimal or no financial risk. Such an opportunity, in the OIG’s view, could induce the Practices to make improper referrals to the Parent Laboratory for services covered under a federal health benefit program. In analyzing the Proposed Arrangement, the OIG once again noted its longstanding concern with respect to arrangements that effectively “carve out” items and services to be furnished to federal health benefit program beneficiaries, stating that such arrangements implicate the Anti-Kickback Statute.
Business relationships among and between health care providers, suppliers and vendors can give rise to potential violations of the Anti-Kickback Statute and other federal and state laws. With the advent of health care reform, entrepreneurs are approaching physicians and other providers with new commercial arrangements for health care delivery.
Saul Ewing attorneys have substantive experience in analyzing and structuring such arrangements to enable the participants to accomplish their business objectives while remaining in compliance with relevant laws and regulations, including the Affordable Care Act. If you have any questions about this Client Alert or would like more information, please contact Karilynn Bayus, or one of the other attorneys in our Health Practice, or the attorney in the Firm with whom you are regularly in contact.