OIG: Providing Free Goods and Services Raises Compliance Risks
By Adrienne Dresevic, Esq. of The Health Law Partners, P.C.
On December 5, the OIG issued an advisory opinion (16-12) regarding a laboratory’s proposal to provide services, consisting of the labeling of test tubes and specimen collection containers, at no cost to dialysis facilities (the Proposed Arrangement). Specifically, the inquiry was whether the Proposed Arrangement would constitute grounds for the imposition of sanctions under the exclusion authority at section 1128(b)(7) of the Social Security Act, or the civil monetary penalty provision at section 1128A(a)(7) of the Social Security Act, as those sections relate to the Federal anti-kickback statute.
Since the OIG issued its earlier Advisory Opinion 08-06, CMS implemented a prospective payment system to reimburse facilities for furnishing renal dialysis services to patients with end-stage renal disease (the ESRD PPS). The ESRD PPS final rule became effective January 1, 2011, and instituted a bundled payment system in place of the previous casemix adjusted composite payment system and reimbursement methodologies for separately reimbursable outpatient items and services related to ESRD.
Under the bundled payment system, all ESRD-related laboratory tests are reimbursed as part of the ESRD PPS bundle. However, CMS recognizes that while a patient is in an ESRD setting, a physician may order laboratory tests that are unrelated to the patient’s ESRD. Due to this, CMS created a process to allow independent laboratories, hospital-based laboratories, and ESRD facilities to continue to receive separate payment for certain tests ordered in the ESRD facility setting when such tests are furnished for reasons other than for the treatment of ESRD. CMS also implemented billing modifiers for such non-ESRD-related laboratory tests. Similarly to the composite rate reimbursement system, CMS makes no separate payment under the ESRD PPS for administrative tasks associated with laboratory tests, such as labeling test tubes or specimen collection containers.
The lab in question asked the OIG to consider whether the Proposed Arrangement would constitute grounds for the imposition of sanctions if implemented under the ESRD PPS. The Proposed Arrangement would not fit in the safe harbor because the dialysis facilities would not pay any compensation to the lab for the labeling services, despite the fact that the labeling services would have value to the dialysis facilities. Importantly, the cost of such services would otherwise be borne by the dialysis facilities. However, the absence of safe harbor protection is not fatal; instead, arrangements that do not fit in a safe harbor must be evaluated on a case-by-case basis.
The lab’s provision of services to the selected dialysis facilities at no cost would be a tangible benefit to the dialysis facilities. Therefore most, if not all of the services the lab would provide under the Proposed Arrangement would substitute for services the dialysis facilities otherwise would be required to perform at their own expense.
In these circumstances, the OIG notes that an inference arises that the free labeling services would be intended to influence the dialysis facilities’ selection of a laboratory. This inference is consistent with, and supported by, the lab’s representation that the labeling services would be offered to the dialysis facilities when necessary to retain or obtain their business. Accordingly, the OIG concluded that the Proposed Arrangement could potentially generate prohibited remuneration under the anti-kickback statute and that the OIG could impose administrative sanctions.
OIG Advisory Opinion 16-12 is just one more example of the OIG’s consistent position that providing a referral source with a tangible benefit at no costs raises significant risk under the Federal anti-kickback statute and may result in significant penalties. Imaging providers and suppliers should take notice of this latest opinion, as the concepts and the analysis set forth by the OIG is readily applicable to all supplier and provider types.
Adrienne Dresevic, Esq. is a Founding Shareholder of The Health Law Partners, P.C., a nationally recognized healthcare law firm with offices in Michigan and New York. Practicing in all areas of healthcare law, she devotes a substantial portion of her practice to providing clients with counsel and analysis regarding compliance, Stark Law, Anti-Kickback Statute, and compliance related issues. Ms. Dresevic serves on the American Bar Association Health Law Section’s Council, which serves as the voice of the national health law bar within the ABA. Ms. Dresevic also serves as the ABA Health Law Section’s Co-Chair of the Physicians Legal Issues Conference Committee, Vice Chair of the Programs Committee (Executive Leadership), and Vice Chair of the Sponsorship Committee. She is licensed to practice law in Michigan and New York, and can be contacted at firstname.lastname@example.org.
The author is a member of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or at www.thehlp.com.