Invoking Anti-Kickback Statute Can Backfire

An Advisory Opinion issued last week by the Department of Health & Human Services’ Office of Inspector General highlights the danger of invoking the Anti-Kickback Statute as a contract negotiating strategy.

OIG Advisory Opinion 13-15 was issued in response to a request by an anesthesiology group, which had previously enjoyed an exclusive contract with a hospital. When a psychiatry group relocated to the hospital, the contract was amended to provide that the anesthesiology group would administer anesthesiology to the psychiatry group’s ECT patients, with a requirement that the anesthesiology group would provide at least six weeks of coverage to the new group. The new contract also included an “Additional Anesthesiologist Provision” stating that if the psychiatry group needed an additional anesthesiologist and could not come to terms with the anesthesiology group for those services, then the psychiatry group could contract with an anesthesiologist outside the anesthesiology group.

The psychiatry group decided that it needed an additional anesthesiologist and proposed paying the anesthesiology group a per diem for the added service. The anesthesiology group sought an Advisory Opinion on the arrangement, clearly hoping for a negative opinion. The group went so far as to recite in its request that the proposed per diem was “below fair market value.”

Not surprisingly, the IG refused to issue an opinion blessing the arrangement. What was  surprising, as well as frightening, was that the IG expressly called into question nearly everything about the arrangements among the hospital and the two groups, expressing concern that (a) the hospital accepted the additional anesthesiologist provision as remuneration for the psychiatry group’s referral of patients, (b) the hospital used control over its patients to induce the anesthesiology group to accept the provision, and (c) the anesthesiology group accepted the provision in return for the hospital’s referrals. The OIG noted that if the requisite intent were present, the agency could potentially impose administrative sanctions not only on the hospital and the psychiatry group, but also on the anesthesiology group.

The IG said, in effect, “a plague on all your houses.” Parties often threaten to use the OIG Advisory Opinion process as a means of gaining leverage in negotiations. For obvious reasons, OIG may prefer not to devote significant resources to resolving internecine disputes. While OIG will typically take at face value representations regarding the flow of remuneration in an arrangement (see, e.g., Advisory Opinion 02-04), that is not always the case. The success of an advisory opinion request often depends upon how the question if framed; part of that process involves thinking through how the regulators will view all aspects of an arrangement.

The clear lesson is that when organizations are negotiating a contract involving Medicare and Medicaid patients, it may be hazardous to attempt to cause OIG to rule that the other party’s position is illegal. Or, to put it succinctly, be careful what you ask for.

This post is a reprint of a client bulletin issued on November 16, and was provided by Norman Tabler Jr. and Thomas Beimers.

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