Mid-Atlantic Health Law TOPICS

A version of this article was published in The Daily Record on March 1, 2013.

The Office of the Inspector General of the federal Department of Health and Human Services - the OIG - recently released two advisory opinions clarifying the reach of the federal Anti-Kickback Statute. That law makes it illegal for anyone to pay or receive money or other benefits designed to induce the referral of a patient for items or services payable by a federal health care program, such as Medicare.

A. Anesthesiologists and ASCs

One of the opinions concerned an arrangement between a physician-owned Ambulatory Surgery Center (ASC) and an anesthesiology group. The parties proposed to enter into an arrangement whereby the group would pay the ASC a per-patient fee for "management services" including office space for the anesthesiologists and nursing support. The parties requested the OIG confirm that the arrangement falls into a safe harbor to the anti-kickback rules that applies when a referring entity receives a fair market value fee for services provided to an entity to which it refers.

The OIG rejected the request. The OIG said that since private payors and Medicare already pay the ASC a facility fee to include the cost of the space and administrative support, the management fee is essentially a double payment, and therefore not bona fide compensation for the services. Additionally, the safe harbor does not protect any fee arrangement that varies based on the volume of referrals (e.g., per-patient fees).

The OIG warned that the arrangement potentially violates the anti-kickback statute. The OIG noted its longstanding concern with anesthesiologist kickbacks to ASCs. The OIG reasoned that in this case, the management services fee may be an inducement to the ASC to refer procedures to the anesthesiology group.

The OIG also rejected a version of the arrangement whereby each physician owner of the ASC would form an independent company to bill payors for the ASC's anesthesiology services, while hiring the current anesthesiology group to perform the anesthesiology services for the independent companies.

B. E-Referral Services

The OIG's other opinion gave a green light to a publicly traded company offering a new electronic database and referral service. The service is offered to the company's existing client network of health care practitioners that use the company's proprietary electronic health records system.

The service is designed to make referring patients and accepting referrals easier, especially when the referral is between two practitioners that both use the service.

For a per-referral fee, the service allows a client referring a patient: (i) to search the company's database for an appropriate provider to receive the referral; (ii) to create a package of patient demographic, health, and payment information automatically generated from the electronic health record system, to transmit with the referral; and (iii) to transmit the referral request together with the patient information package.

Although this service can be used to refer patients to a practitioner that is not a client of the company, referring practitioners receive a discount when they do refer to another company client.

The OIG advised that no safe harbor to the anti-kickback statute applied. First, the safe harbor for referral services applies to a referral service used directly by patients, whereas the service addressed in the opinion is used by the referring provider. Second, the fees for the service vary based on the volume of referrals; the fee is charged per-patient. Finally, the fee discount for referrals to company clients could be an inducement to refer to certain providers.

Nevertheless, the OIG found that certain features of the service brought it outside the scope of the Anti-Kickback Statute. The OIG noted that (i) the service does not force a referrer to use a particular practitioner or even a company client; (ii) the fee is paid without regard to the value of business generated by the referral; (iii) the fee is paid whether or not the patient follows up on the referral (i.e., there is no "success" fee); and (iv) the discounts are too small to alter materially the practitioner a referrer selects for a referral.

C. Conclusion

The OIG has strongly warned ASCs and anesthesiologists to avoid entering into arrangements where anesthesiologists pay ASCs for items or service either unneeded or already paid for by payors. Regulators will consider such an arrangement a pretext for a kickback intended to secure the referral of anesthesiology services.

In contrast, the OIG has reassured physicians wishing to exploit e-referral services integrated into third party electronic health record systems that such services are permissible under Anti-Kickback rules, even if the service is paid on a per-referral basis. The fact-intensive nature of the OIG's advice, however, is a reason to examine carefully the relationship between service fees and referrals. Referring practitioners should still be wary of service features designed to induce referrals to other clients of the servicer, while practitioners seeking referrals should remain cautious about paying servicers to include them in a referral database.