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Posts Tagged ‘Remuneration’

Differential Valuations and the Anti-kickback Statute

Monday, April 3rd, 2017

Ambulatory Surgery Case Demonstrates Differential Value Theory of Renumeration

ASC Fraud and Abuse RemunerationA relatively recent case involving buy-in terms in an ambulatory surgery center demonstrates how different valuations for referral sources and non-referral sources can be evidence of remuneration under the Medicare Anti-Kickback Statute (42 U.S.C. § 1320a-7b(a)-(b)).  The case also demonstrates how the initial investment terms that favor referral sources can foreclose reliance on safe harbor regulations.

The case involved an ambulatory surgery center management company what purchased an interest in an ambulatory surgery center.  The company then offered shares of the company for investment to physicians who were in a position to refer surgical cases to the surgery center.  The physician investment was structured to meet the terms of the safe harbor regulations for ambulatory surgery center investments (“ASC Safe Harbors”).  The ASC Safe Harbors provide protection from remuneration that is received by a referring physician as a return on investment as long as the physician meets certain minimum practice revenue and surgical volume requirements. Physician investors must generally receive at least 1/3 of their practice income from the provision of surgical procedures and perform at least 1/3 of their surgical procedures in the center in which they hold an investment interest.

The problem with the way that the investment interest was structured was the different valuation that applied to the purchase that was made by the management company and the investment offer made to the referring physicians.  The management company purchased its investment at a much higher price than was offered to the physicians.  The differential valuation violated a threshold requirement of the safe harbor regulations that prohibits the initial investment interest to be based, in whole or in part, on the volume or value of referrals that the investor might make to the entity.  It was very difficult for the parties to justify the different value applied to physician investment.  The only apparent difference appeared to be that the physician investors were the referral sources for the surgery center.

This case specifically involved an ambulatory surgery center investment but the concept of differential valuation could apply in other situations involving the Anti-Kickback Statute.  Different values paid to or received from referral sources and non-referral sources can suggest that at least one of the reasons for the differential is the volume or value of potential referrals.  This points out a general area of risk assessment for all health care providers.  Areas where different pricing is applied to referral sources and non-referral sources could signify a potential violation of the Anti-Kickback Statute.

Referral Fee Fine Despite Kickback Concerns – OIG Advisory Opinion 14-01

Friday, January 24th, 2014

Independent Placement Agency Fee By Senior House Approved By OIG

senior housing kickback oig opinionThe Office of Inspector General posted its first advisory opinion of the year this past Tuesday.  OIG Advisory Opinion No. 14-01 responds to a nonprofit senior housing and geriatric care provider’s question of whether it may pay an independent placement agency a fee for referring new residents to its facilities.  Despite concerns that the arrangement could potentially generate prohibited remuneration under the anti-kickback statute, the OIG opinion states it would not impose sanctions in connection with the arrangement.

Here’s the facts:

  • The senior care provider operates 11 senior residential communities, two skilled nursing facilities, and a management company.
  • The residential communities offer to their residents various services – including skilled nursing services (e.g. wound care) and help with daily living activities (e.g. housekeeping).
  • A Medicaid program pays for services provided to residents in three of the residential communities.  Other than this, the skilled nursing facilities are the only entities that provide federally reimbursed health care services to residents.
  • Two of the residential communities pay an independent placement agency for referring new residents.  The placement agency receives a fee for every referral – a percentage of the new resident’s charges for his or her initial month or two.
  • The placement agency is prohibited from referring, and the residential communities are prohibited from accepting, residents who are known to rely on Medicaid, Medicare, or other state or federal funding.
  • Neither of the residential communities provide services reimbursed by Medicare.

Although the two residential communities pay a placement fee for a resident who may in the future receive federally reimbursed services from one of the senior care provider entities (which would potentially be illegal remuneration under anti-kickback laws), the OIG advisory opinion indicates that this referral arrangement is fine because:

  1. The placement fee is calculated only considering initial rent and services.
  2. The contracts underlying the arrangement prohibit both placement and acceptance of potential residents who are known to rely on government funding for their health care.
  3. Neither of the residential communities using the referral arrangement provide services reimbursed by Medicare.
  4. The senior care provider does not track referrals or common residents or patients nor do they limit their residents’ choice of providers.

Please feel free to contact John Fisher, CHC, CCEP, in the Ruder Ware Health Care Industry Focus Group for more information.

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
Fax 715.845.2718

Ruder Ware is a member of Meritas Law Firms Worldwide

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