In Advisory Opinion 13-02, the U.S. Department of Health & Human Services, Office of Inspector General (OIG) issued a favorable opinion approving an arrangement whereby a podiatrist and his wife would operate an LLC that would contract to provide orthotics to various entities.
This is the kind of situation where the arrangement can pose a technical violation to the anti-kickback statute, but the OIG determines that it will not impose administrative sanctions, under certain conditions.
The podiatrist here owns and operated a general podiatric medical clinic that bills federal healthcare entities for certain items and services. The LLC enters into arrangements with certain emploers to provide their employees with foot scans and customized orthotics. The LLC bills customers at fair market value (FMV) for the orthodics, and the price does not vary based on the value or volume of referrals to, or total income of, the LLC, the clinic, or any other entity owned by the podiatrist or his wife.
The LLC employs the podatrist and a licensed practical nurse who are also employed by the podiatric clinic. Compensation to these employees is at FMV and does not vary based on the value or volume of referrals to, or total income of, the LLC, the clinic, or any other entity owned by the podiatrist or his wife.
Some of the customers for orthotics are already patients of the podiatric medical clinic, and the LLC might determine that these customers require further services–in such case, the LLC would not refer them to the podiatric medical clinic, even though the clinic could provide such services.
The LLC would lease a foot scanner from the clinic, with the lease satisfying the applicable equipment rental safe harbor under the federal anti-kickback statute.
Based on these facts, the OIG noted that because the LLC and clinic are commonly owned by the podiatrist, the LLC is in a position to generate federal healthcare program referrals or business, which implicates anti-kickback concerns. The OIG expressed concerns about an unlawful tie-in or “swapping” arrangement. However, the OIG focused on the certification by the podiatrist and wife that they would bill orthotics at FMV, and without varying price based on value or volume or referrals or business.
Anti-kickback and fee-splitting concerns dominate proposed business arrangements involving licensed clinicians, both under federal anti-kickback laws and under state anti-kickback, fee-splitting, and patient brokering statutes. Such kickback concerns can affect:
- medical clinics
- medical spas
- healthcare centers under common ownership (also implicating self-referral or Stark concerns)
- other proposed business arrangements
Contact an experienced anti-kickback attorney familiar with legal rules governing kickbacks and fee-splitting, before entering into any suspect arrangements. An ounce of prevention is worth a pound of cure. The Cohen Healthcare Law Group can help you navigate enforcement risks with business structures that raise anti-kickback and fee-splitting issues.
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Summary of OIG Advisory Opinion 13-02 In Advisory Opinion 13-02, the U.S. Department of Health & Human Services, Office of Inspector General (OIG) issued a favorable opinion approving an arrangement whereby a podiatrist (Podiatrist) and his wife (together, the Requestors) would establish and operate a limited liability company (LLC) that would enter into arrangements with manufacturers and other entities to provide industrial orthotics (Orthotics) for use by those entities’ employees (Proposed Arrangement). OIG noted that while the Proposed Arrangement could generate prohibited referrals under the Anti-Kickback Statute (AKS) if the requisite intent were present, OIG would not impose administrative sanctions in connection with the Proposed Arrangement. The Podiatrist owns and operates a general podiatric medical clinic (Clinic) that bills federal healthcare programs for certain items and services. Under the Proposed Arrangement, the LLC would enter into arrangements with various employers, including manufacturers (Customers), to provide Orthotics to the Customers’ employees, some of whom might be federal healthcare program beneficiaries. In conjunction with providing the Orthotics, the LLC would also provide foot scans for the Customers’ employees, as well as manufacture, deliver, and customize the Orthotics for each employee. The Requestors certified that the LLC would bill the Customers for the Orthotics and related services at a price that would be consistent with fair market value (FMV) and would not vary based on the volume or value of referrals to, or total income of, the LLC, the Clinic, or any other entity owned or operated by the Requestors. The Requestors also certified that the LLC would not bill any federal healthcare program or third-party payor for the Orthotics or related services. The LLC would employ as providers, on a part-time basis, the Podiatrist and a licensed practical nurse currently employed by the Clinic. The Requestors certified that compensation by the LLC to its providers, including those providers also employed by the Clinic, would be consistent with FMV and not vary based on volume or value of referrals to, or the total income of, the LLC, the Clinic, or any other entity owned or operated by the Requestors. The Requestors certified that some recipients of the Orthotics may already be patients of the Clinic. Further, in the course of providing Orthotics to employees of the Customers, the LLC’s providers might determine that an individual requires other reasonable and medically necessary services beyond the scope of the Proposed Arrangement, which additional services might be available from the Clinic and payable by federal healthcare programs. The Requestors certified that the providers would notify the individuals of the need for such services, but would not refer such individuals to the Clinic. In order to provide the services related to furnishing the Orthotics, the LLC would also lease a foot scanner from the Clinic, and the Requestors certified that the lease would satisfy all of the requirements of the equipment rental safe harbor set forth at 42 C.F.R. Section 1001.952(c). |
In analyzing the Proposed Arrangement, OIG noted that sales transactions between a party that could generate federal healthcare program referrals or business and a party that could receive such referrals or business could implicate the AKS. OIG focused on the fact that the LLC and the Clinic are under common ownership, and the LLC is in a position to generate federal healthcare program referrals or business for the Clinic. OIG looked at whether or not there was a connection between: (1) the price the LLC offered to Customers for the Orthotics and related services; and (2) any federally payable business that the Proposed Arrangement might generate for the Clinic. OIG sought to confirm that the Proposed Arrangement did not constitute a suspect “swapping” arrangement. Such suspect arrangements generally involve a seller tying favorable pricing on an item or service that is not payable by a federal healthcare program to the purchase of an item or service (either from the seller or another company that is under common ownership with the seller) that is payable by a federal healthcare program. OIG noted that since Requestors certified that the LLC would bill the Customers for the Orthotics and related services at a price that would be consistent with FMV and would not vary based on the volume or value of referrals to, or the total income of, the LLC, the Clinic, or any other entity owned or operated by the Requestors, the Proposed Arrangement does not resemble a suspect swapping
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