OIG Posts Three Advisory Opinions: 07-06; 07-07 and 07-08*

On July 30, 2007, the OIG posted three Advisory Opinions: 07-06 (which addresses the management by a health care industry consultant a pharmaceutical assistance program), 07-07 (which addresses a cash donation to a senior residence program from a charitable foundation which shares ties with the program and with a local health system), and 07-08 (which addresses a durable medical equipment supplier’s proposed arrangement to provide patients with a free in-home congestive heart failure assessment).

Each of these Advisory Opinions is briefly described below:

Advisory Opinion 07-06.

Advisory Opinion 07-06 addresses a charitable foundation’s arrangement to subsidize pharmaceutical obligations owed by financially needy Medicare and Medicaid patients with certain chronic diseases. The foundation was conceived of, and started by, employees of a health care consulting company with commercial clients that included pharmaceutical manufacturers whose products are used, or might be used, by patients receiving foundation support. Under the arrangement, the consulting company provides certain administrative services to the foundation. However, the foundation is governed by an independent board of directors, which performs the policy-making functions for the foundation, such as patient eligibility requirements.

Although the arrangement implicates the Anti-Kickback Statute and the Civil Monetary Provision of the Social Security Act, as the arrangement is structured, the OIG concluded that they would not impose penalties. Specifically, the OIG found that the foundation awards assistance in a truly independent manner that severs any link between donors and beneficiaries, without regard to any donor’s interests, and without regard to the applicant’s choice of product, provider, practitioner, supplier, or insurance plan. In addition, no donor or donor affiliate exerts direct or indirect control over the foundation or its programs. Finally, the OIG approved of the foundation’s practice of providing assistance based on a uniform measure of financial need and not providing donors with any data that would allow a donor to correlate the amount or frequency of its donations with the frequency of the use of its products. For these reasons, the OIG concluded that they would not impose penalties for the proposed arrangement.

For a full copy of the OIG’s Advisory Opinion, click here.

Advisory Opinion 07-07.

Advisory Opinion 07-07 concerns a charitable donation from a foundation established by a health system to a new program instituted by a retirement community whose residents are insured by Medicare and Medicaid in a medically underserved area. All three entities are non-profit and the leadership (e.g. directors and officers) has limited overlap. The solitary unrestricted $100,000 donation would be on par with the amounts donated by other businesses of a similar size in the region.

While the OIG recognized the possibility of a prohibited remuneration from the donation, they concluded that the donation, as given, would not constitute a kickback for which they would prosecute under the Anti-Kickback Statute because the requisite intent was not present. Specifically, the OIG enumerated a number of factors that lead them to believe that this was a valid charitable contribution:

there would be no referral relationship tied to the donation;

there would be no tracking of referrals or other business generated from the retirement community to the health system;

the payments made to physicians or others affiliated with the health system would be at fair market value and not related to the volume or value of referrals;

patients would be advised in writing that they are free to choose whichever provider they like; and

the payment was a one-time, fixed donation for which the funds could be used without restrictions.

In addition, the OIG stated that public policy dictated that such donations be permitted, especially in underserved areas, because overlap of patients for health institutions is to be expected, and the new program instituted by the retirement community would be an asset to the region.

For a full copy of the OIG’s Advisory Opinion, click here.

Advisory Opinion 07-08.

Advisory Opinion 07-08 addresses an arrangement in which a durable medical equipment (DME) supplier proposed to provide patients diagnosed with congestive heart failure (CHF) a free in-home CHF assessment with over-night oximetry testing as well as provide the patients with education about CHF, tips for self-management, and pulse oximetry testing. Although Medicare and some Medicaid programs cover oximetry testing, the DME supplier indicated that it would not seek reimbursement for the oximetry test or any other portion of the services performed. The OIG concluded that this proposed arrangement implicates the Anti-Kickback Statute and that it could potentially impose Civil Monetary Penalties based upon the following reasons:

1. The OIG focused on the value of the items being provided to the beneficiaries and concluded that the CHF assessment with oximetry testing does, in fact, constitute remuneration, and is more than nominal. In addition, the OIG stated that even if there were no economic value to the testing, the nature of the Proposed Arrangement would cause a reasonable beneficiary to believe that he or she is receiving a valuable service.

2. The OIG expressed concern that the Proposed Arrangement would likely influence beneficiaries to select the DME supplier for oxygen and other Medicare-payable goods and services. Although the OIG acknowledged the existence of the freedom of choice disclosures, they concluded that it was not a sufficient safeguard to prevent inducements.

3. The OIG pointed to the DME supplier’s proposal that the testing be offered to beneficiaries who were diagnosed with CHF and said that these groups of patients are expected to require oxygen and other federally-payable goods and services in the future.

For a full copy of the OIG’s Advisory Opinion, click here.

* Anjali Downs, Shawn Gilman and Karen Schandler are Summer Associates (not admitted to the practice of law) in the firm's Washington, DC office and contributed significantly to the preparation of this summary.