HHS' Office of Inspector General issued 22 advisory opinions in 2012. Six of these contain guidance specific to hospitals, surgery centers and other providers. These are briefly described below. The first three advisory opinions closely address issues that surgery centers and hospitals are currently facing, while the remaining three address issues that may have peripheral importance, such as an advisory opinion concerning a radiology group that proposed to offer free pre-authorization services to physicians and patients which has potential application to hospital-based specialists and to independent practitioners.
A. Advisory Opinion 12-22. OIG Advisory Opinion 12-22 involved a co-management arrangement between a hospital and a cardiology group wherein the cardiology group agreed to provide management and medical director services to the hospital's cardiac catheterization laboratories in exchange for compensation that included a performance bonus. Based on a highly fact-specific analysis, the OIG approved of the arrangement, despite first (i) expressing its concern over similar arrangements while acknowledging that such arrangements could be properly structured to meet valid goals; and (ii) identifying the regulatory schemas implicated by cost-savings programs like the one in the proposed arrangement:
C. Advisory Opinion 12-06. OIG Advisory Opinion 12-06 addressed anesthesia arrangements between surgery centers and anesthesia groups. In this opinion, the OIG disapproved two arrangements between anesthesiologists and surgery centers. Under the first arrangement, the anesthesia group proposed to serve as the surgery center's exclusive provider of anesthesia services while paying the surgery center a per-patient fee for certain management services rendered by the surgery center. Under the second arrangement, the anesthesia group proposed to provide certain anesthesia-related services on an exclusive basis to a subsidiary of the surgery center formed to provide the surgery center anesthesia services. The OIG perceived each arrangement as a means to facilitate kickbacks from the anesthesia group to the surgery center in exchange for referrals. The second arrangement in particular contained elements of a suspect joint venture arrangement as identified by the OIG in earlier guidance:
A. Advisory Opinion 12-01. In its first advisory opinion for 2012, the OIG offered guidance related to a group purchasing organization formed to service the resource management needs of a variety of healthcare organizations, facilities and providers. The requestor for this opinion proposed (i) to establish a GPO that would be wholly owned by an entity that would in turn wholly own many of the potential participants in the GPO and (ii) to pass through to participants in the GPO a portion of the administrative services fee paid by vendors to participate in the GPO. The key question underlying arrangements such as this is whether the vendors are in essence providing a kickback to induce the GPO buy their products. The OIG ultimately concluded that, based on the existence of certain precautionary features, the proposed arrangement presented an acceptable level of fraud and abuse risk. However, prior to making the foregoing conclusion, the OIG was careful to point out its growing skepticism toward the beneficial impact of GPOs:
C. Advisory Opinion 12-08. In this opinion, the OIG approved of a situation where an independent diagnostic testing facility proposed to hire a physician to read and interpret test results. The actions of the employed physician (e.g., reading and interpreting of test results) under scrutiny in this specific advisory opinion appeared relatively benign. Rather, it seemed that the requestor was seeking an advisory opinion for another purpose — for example, to use as a sales tool to show interested parties that it had received an advisory opinion even though the advisory opinion dealt only minimally with any sort of referral patterns and largely skirted issues that usually arise with the involvement of employed physicians. Questions that remain unanswered include: are employed physicians reading test results for other referring physicians? Is the IDTF structured to allow physicians to profit for services they refer but do not handle personally? It is unclear whether or not the OIG shared these suspicions; however, the OIG was clear that its opinion assumed that the employed physician qualify as a bona fide employee for purposes of the anti-kickback statute:
I. Co-Management, Call Coverage and Anesthesia Arrangements
A. Advisory Opinion 12-22. OIG Advisory Opinion 12-22 involved a co-management arrangement between a hospital and a cardiology group wherein the cardiology group agreed to provide management and medical director services to the hospital's cardiac catheterization laboratories in exchange for compensation that included a performance bonus. Based on a highly fact-specific analysis, the OIG approved of the arrangement, despite first (i) expressing its concern over similar arrangements while acknowledging that such arrangements could be properly structured to meet valid goals; and (ii) identifying the regulatory schemas implicated by cost-savings programs like the one in the proposed arrangement:
B. Advisory Opinion 12-15. OIG Advisory Opinion 12-15 involved a per diem call coverage arrangement between hospitals and physicians. Ultimately, the OIG approved the proposed call coverage arrangement but did articulate concerns with covert kickbacks that might be in the form of call payments. In its analysis the OIG noted specific types of problematic competitive structures:
Properly structured, arrangements that compensate physicians for achieving hospital cost savings can serve legitimate business and medical purposes. Specifically, properly structured arrangements may increase efficiency and reduce waste, thereby potentially increasing a hospital's profitability. However, such arrangements can potentially influence physician judgment to the detriment of patient care. Our concerns include, but are not limited to, the following: (i) stinting on patient care, (ii) "cherry picking" healthy patients and steering sicker (and more costly) patients to hospitals that do not offer such arrangements, (iii) payments to induce patient referrals, and (iv) unfair competition among hospitals offering incentive compensation programs to foster physician loyalty and to attract more referrals.
Hospital cost-savings programs in general, and the Arrangement in particular, may implicate at least three Federal legal authorities: (i) the civil monetary penalty for reductions or limitations of services provided to Medicare and Medicaid beneficiaries, sections 1128A(b)(1)–(2) of the Act; (ii) the anti-kickback statute, section 1128B(b) of the Act; and (iii) the physician self-referral law, section 1877 of the Act.18.
There is a substantial risk that improperly structured payments for on-call coverage could be used to disguise unlawful remuneration. Covert kickbacks might take the form of payments that exceed fair market value for services rendered or payments for on-call coverage not actually provided. Problematic compensation structures that might disguise kickbacks could include, by way of example:
(i) "lost opportunity" or similarly designed payments that do not reflect bona fide lost income;
(ii) payment structures that compensate physicians when no identifiable services are provided;
(iii) aggregate on-call payments that are disproportionately high compared to the physician’s regular medical practice income; or
(iv) payment structures that compensate the on-call physician for professional services for which he or she receives separate reimbursement from insurers or patients, resulting in the physician essentially being paid twice for the same service.
C. Advisory Opinion 12-06. OIG Advisory Opinion 12-06 addressed anesthesia arrangements between surgery centers and anesthesia groups. In this opinion, the OIG disapproved two arrangements between anesthesiologists and surgery centers. Under the first arrangement, the anesthesia group proposed to serve as the surgery center's exclusive provider of anesthesia services while paying the surgery center a per-patient fee for certain management services rendered by the surgery center. Under the second arrangement, the anesthesia group proposed to provide certain anesthesia-related services on an exclusive basis to a subsidiary of the surgery center formed to provide the surgery center anesthesia services. The OIG perceived each arrangement as a means to facilitate kickbacks from the anesthesia group to the surgery center in exchange for referrals. The second arrangement in particular contained elements of a suspect joint venture arrangement as identified by the OIG in earlier guidance:
Like the Owner in the arrangement described in the Special Advisory Bulletin [titled “Contractual Joint Ventures”, 68 Fed. Reg. 23,148 (Apr. 30, 2003)], the Centers' physician-owners would be expanding into a related line of business — anesthesia services — that would be wholly dependent on the Centers' referrals. The Centers' physician-owners would not actually participate in the operation of the Subsidiaries but rather would contract out substantially all of the operations exclusively to the Requestor [(the anesthesia service provider)]. And, like the Owner in the Special Advisory Bulletin, the Centers' physician-owners' actual business risk would be minimal because they would control the amount of business they would refer to the Subsidiaries.
Other elements described in the Special Advisory Bulletin that are present in Proposed Arrangement B include:
a. the Requestor is an established provider of the same services that the Subsidiaries would provide, and otherwise would be a competitor providing the services in its own right, billing insurers and patients in its own name, and collecting and retaining all available reimbursement; and
b. the Requestor and the Centers' physician-owners would share in the economic benefit of the Centers' new business, with the Requestor receiving its share in the form of a negotiated rate and the Centers' physician-owners receiving their share in the form of the residual profits from the new business.
II. GPOs, Pre-Authorization Services and IDTFS
A. Advisory Opinion 12-01. In its first advisory opinion for 2012, the OIG offered guidance related to a group purchasing organization formed to service the resource management needs of a variety of healthcare organizations, facilities and providers. The requestor for this opinion proposed (i) to establish a GPO that would be wholly owned by an entity that would in turn wholly own many of the potential participants in the GPO and (ii) to pass through to participants in the GPO a portion of the administrative services fee paid by vendors to participate in the GPO. The key question underlying arrangements such as this is whether the vendors are in essence providing a kickback to induce the GPO buy their products. The OIG ultimately concluded that, based on the existence of certain precautionary features, the proposed arrangement presented an acceptable level of fraud and abuse risk. However, prior to making the foregoing conclusion, the OIG was careful to point out its growing skepticism toward the beneficial impact of GPOs:
B. Advisory Opinion 12-10. OIG Advisory Opinion 12-10 responded to a proposal by a radiology group to offer free insurance pre-authorization services to physicians and patients using the requestor's radiology services. Based upon the existence of legitimate business interests and various safeguards, the OIG approved the proposed arrangement. Notwithstanding this approval, it appears clear that the OIG has not diverted from its general opposition to the provision of free or discounted goods or services to referral sources:
In addressing this issue, we turn to the history of the GPO safe harbor. In 1986, Congress amended the anti-kickback statute to create an exception for amounts paid by vendors to GPOs, as long as certain conditions were met. According to the legislative history, Congress believed that GPOs could "help reduce health care costs for the government and the private sector alike by enabling a group of purchasers to obtain substantial volume discounts on the prices they are charged." Subsequently, the OIG promulgated the regulatory safe harbor described above. However, in the years following, both Congress and the OIG began to question whether GPOs were achieving this key goal — i.e., whether purchases made through GPOs actually reduce health care costs for the government and the private sector.
The OIG's position on the provision of free or below-market goods or services to actual or potential referral sources is longstanding and clear: such arrangements are suspect and may violate the anti-kickback statute, depending on the circumstances. For example, in 2005, the OIG issued its Supplemental Compliance Program Guidance for Hospitals, which explained that "[t]he general rule of thumb is that any remuneration flowing between hospitals and physicians should be at fair market value."
Obtaining pre-authorization from insurers is an administrative service with potential independent value to physicians; however, whether that service confers a benefit upon a particular referring physician depends on the facts and circumstances. Where a referring physician's contract with an insurer specifically allocates responsibility for obtaining pre-authorization to that physician, an imaging provider's free pre-authorization service would relieve that physician of having to perform administrative duties for which he or she otherwise would be responsible. In cases where a referring physician's contract with an insurer allocates responsibility for obtaining pre-authorization to imaging providers or patients — or does not allocate responsibility to any party — an imaging provider would not be relieving an express financial obligation the physician would otherwise be required to incur, but the physician may be receiving remuneration nonetheless (e.g., a physician whose staff is devoting considerable time to pre-authorizations might realize significant savings).
C. Advisory Opinion 12-08. In this opinion, the OIG approved of a situation where an independent diagnostic testing facility proposed to hire a physician to read and interpret test results. The actions of the employed physician (e.g., reading and interpreting of test results) under scrutiny in this specific advisory opinion appeared relatively benign. Rather, it seemed that the requestor was seeking an advisory opinion for another purpose — for example, to use as a sales tool to show interested parties that it had received an advisory opinion even though the advisory opinion dealt only minimally with any sort of referral patterns and largely skirted issues that usually arise with the involvement of employed physicians. Questions that remain unanswered include: are employed physicians reading test results for other referring physicians? Is the IDTF structured to allow physicians to profit for services they refer but do not handle personally? It is unclear whether or not the OIG shared these suspicions; however, the OIG was clear that its opinion assumed that the employed physician qualify as a bona fide employee for purposes of the anti-kickback statute:
The IDTF certified that it would hire the Physician as a bona fide employee whose only duties would be to read and interpret sleep tests and perform certain, related administrative duties. Whether an employee is a bona fide employee for purposes of the employee exception to the anti-kickback statute is a matter that is outside the scope of the advisory opinion process. See section 1128D(b)(3)(B) of the Act. Thus, for purposes of rendering this advisory opinion, we assume that the Physician would be a bona fide employee in accordance with the definition of the term set forth at 26 U.S.C. § 3121(d)(2) and IRS interpretations of that provision as codified in its regulations and other interpretive sources. If the Physician is not a bona fide employee under this definition, this advisory opinion is without force and effect. Because the Physician would be a bona fide employee, and he would be compensated for furnishing a service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care program, we conclude that the Physician’s compensation under the Proposed Arrangement would be protected by the statutory exception and regulatory safe harbor for employee compensation.