OIG Issues Unfavorable Advisory Opinion Related to Fee Arrangement

Earlier this week the OIG issued an unfavorable Advisory Opinion concerning the relationship between an Anesthesiology Group (defined as the “Requester” in the OIG opinion), a Psychiatry Group and a Hospital.  The Psychiatry Group performed electroconvulsive therapy (ECT) services at the Hospital, requiring related anesthesia services.  The Requester had an exclusive contract with the Hospital for the provision of anesthesia services.  The specific arrangements reviewed by the OIG dealt with the Hospital’s pressure on the Requester to carve out exceptions to its exclusive contract that would have the effect of allowing the Psychiatry Group to have access to a new anesthesia revenue stream.  Ultimately, the OIG determined that the Proposed Arrangement could potentially generate prohibited remuneration under the anti-kickback statute.

The Proposed Arrangement stemmed from negotiations between the Hospital and the Anesthesiology Group, which had held an 18 year exclusive relationship with the Hospital until 2011.  In late 2010 the Psychiatry Group relocated its practice, which centers around ECT services, to the Hospital; a member of the Psychiatry Group included an anesthesiologist.  In 2011 negotiations with the Anesthesia Group, the Hospital modified the exclusive relationship to allow the Psychiatry Group’s anesthesiologist to perform ECT anesthesia services, and to request the Anesthesiology Group’s coverage while he was not available.  In 2012, the Psychiatry Group requested a provision allowing it to bring in a part time anesthesiologist if the Psychiatry Group and the Anesthesiology Group could not agree on terms for those additional services.  After the 2012 contract went into effect, the Psychiatry Group notified the Anesthesiology Group that it wanted to bring in the additional anesthesiologist and asked the Anesthesiology Group to enter into the Proposed Arrangement.

The Proposed Arrangement provided that the Anesthesiology Group would provide the ECT anesthesia coverage services that were needed and would reassign all billing rights to Psychiatry Group.  In exchange the Anesthesiology Group would receive a per diem rate which the Anesthesiology Group asserts was less than fair market value and below what it would receive if it billed directly for the anesthesia services.  The Psychiatry Group would retain the difference between the amount collected and the per diem rate.  The OIG unequivocally rejected this Proposed Arrangement, finding that the per diem payment made to the Anesthesiology Group did not fall under the personal services and management contract safe harbor of the anti-kickback statute because it was not set in advance nor consistent with fair market value.  Further, the OIG determined that the fee generated for the Psychiatry Group was a door to solicit compensation for its patient referrals for ECT services:

 “The Proposed Arrangement appears to be designed to permit the Psychiatry Group to do indirectly what it cannot do directly; that is, to receive compensation, in the form of a portion of Requestor’s anesthesia services revenues, in return for the Psychiatry Group’s referrals of ECT patients to Requestor for anesthesia services. The Additional Anesthesiologist Provision gave the Psychiatry Group the ability to solicit this remuneration for its ECT patient referrals by allowing the Psychiatry Group to contract with an anesthesiologist other than Requestor if Requestor and the Psychiatry Group were not successful in negotiating the terms of an agreement for Requestor to provide ECT anesthesia services. The Proposed Arrangement therefore presents the significant risk that the remuneration Requestor would provide to the Psychiatry Group—i.e., the opportunity to generate a fee equal to the difference between the amounts the Psychiatry Group would bill and collect for Requestor’s anesthesia services, and the per diem amounts the Psychiatry Group would pay to Requestor—would be in return for the Psychiatry Group’s anesthesia referrals to Requestor. We discern no safeguards in the Proposed Arrangement that would minimize this risk.”

What perhaps might be the most interesting part of the opinion, are the OIG’s comments in concluding the opinion. Although not asked to opine on the Hospital’s relationships with the Psychiatry Group and Requester, the OIG commented in a footnote about the potential improprieties of the Hospital’s relationship with those parties:

“Although we have not been asked to opine on, and express no opinion regarding, any aspect of Requestor’s relationship with the Hospital, including the 2012 Contract or the Additional Anesthesiologist Provision, we cannot exclude the possibility that: (i) the Hospital agreed to negotiate for the Additional Anesthesiologist Provision in exchange for, or to reward, the Psychiatry Group’s continued referral of patients to the Hospital for ECT procedures; (ii) the Hospital leveraged its control over its large base of anesthesia referrals to induce Requestor to agree to the Additional Anesthesiologist Provision; and (iii) Requestor agreed to the Additional Anesthesiologist Provision in exchange for access to the Hospital’s stream of anesthesia referrals.”

This OIG opinion highlights the OIG’s continued concern regarding arrangements that allow referring providers access to new revenue streams in a manner that may be connected to the providers referrals.  Parties desiring to enter into these types of arrangements should take care to include as many safeguards (using the OIG’s language) to ensure that the payments are not related to referrals.  In the absence of such safeguards, it is pretty clear that the OIG will not look favorably upon the arrangement.

For more information about this particular OIG Opinion or the anti-kickback statute in general please contact Elana Zana or Don Black.


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