A sleep testing provider’s proposal to provide certain sleep testing equipment and services, including marketing services, for a hospital-owned sleep testing facility may potentially generate prohibited remuneration under the Anti-Kickback Statute, depending on the parties’ intent, the Department of Health and Human Services Office of Inspector General (OIG) said in a pair of Advisory Opinions issued November 4, 2010
In one opinion, OIG refused to protect the arrangement from the imposition of sanctions, but in the other, OIG concluded it would not impose sanctions.
Advisory Opinion 10-23
The opinion requestor, a corporate entity with no physician ownership,provides sleep disorder diagnostic testing and related services in both freestanding facilities and in hospital-owned facilities in multiple states.
The requestor contracts with a hospital to provide the equipment, technology, supplies, and staff necessary to operate a sleep testing facility at the hospital.
Under the arrangement, the requestor also provides the hospital with marketing services, including part-time services of a marketing manager who visits offices of physician referral sources to educate the physicians and their staffs about the hospital’s sleep testing services and the test ordering process.
The requestor charges the hospital a per-test fee that covers all items and services furnished in connection with the sleep test, including marketing services, the opinion explained.
OIG noted that “[c]areful scrutiny is especially warranted in this case because, in our experience, sleep testing services may be particularly susceptible to the risk of overutilization.”
In addition, the arrangement involves a “per-click” fee structure, “which is inherently reflective of the volume or value of services ordered and provided, and the Arrangement includes marketing by a party with a direct financial stake in the success of the
promotional efforts,” OIG said.
According to OIG, the requestor provides sleep testing services “under arrangements” to the hospital. And even though the requestor has certified that the arrangement is in full compliance with all “under arrangements” requirements, such an arrangement may still run afoul of the Anti-Kickback Statute, the opinion said.
Although the arrangement “does not appear to include many of the suspect characteristics of problematic ‘under arrangements’ transactions,” it still “must be carefully reviewed” since the requestor is in a position to generate referrals for the hospital’s sleep services because of the marketing aspect of the proposed arrangement, OIG said.
Finding this aspect of the arrangement troubling, OIG noted that “[m]arketing fees paid on the basis of successful orders for items or services are inherently subject to abuse because they are linked to business generated by the marketer.”
“Because the Requestor receives a fee each time its marketing efforts are successful, the Requestor’s financial incentive to arrange for or recommend the Hospital’s sleep testing facility is heightened,” the opinion concluded.
Although the requestor did include certain safeguards against fraud and abuse in the arrangement, OIG found such safeguards “insufficient to offset . . . the risk posed by the provision of sporadic, variable marketing services in exchange for opaque ‘success-based’ compensation.”
Advisory Opinion No. 10-24
The opinion requestor in this opinion also is a corporate entity with no physician ownershipthat provides sleep disorder diagnostic testing and related services in both freestanding facilities and hospital-owned facilities in multiple states.
Under the proposed arrangement, the requestor would contract with a hospital to provide the equipment, technology, supplies, and staff necessary to operate a sleep testing facility.
Requestor also would provide marketing and education services for the benefit of the hospital by supplying a full-time marketing specialist, the opinion noted.
The fee structure would include: (1) a fixed, annual fee for the use of requestor’s equipment that would not take into account the volume of value of referrals or other business generated between the parties; (2) a fee for marketing services that would be an aggregate, annual, set-in-advance, fixed fee, which would not take into account the volume or value of referrals or other business generated between the parties; and (3) an
aggregate, annual, set-in-advance, fixed fee for the other services and supplies specified in the agreement to be provided on an as-needed basis.
According to OIG, although the arrangement did not qualify for safe harbor protection, it contained many of the safeguards enumerated in the equipment lease and personal services and management contracts safe harbors.
“Although certain clinical and other services needed for the sleep center would be provided on an as-needed basis without resort to a predictable schedule, such services would not be separately billable by the Hospital and would be reasonably necessary to accomplish the purpose of an ‘under arrangements’ sleep center,” OIG said.
OIG further noted the arrangement lacked the characteristics of a suspect “under arrangements” transaction.
The only troublesome aspect of the arrangement, OIG said, was the marketing aspect. However, “even though the Requestor would be in a position to influence the generation of ‘under arrangements’ business, the provision of full-time services combined with the aggregate, set in advance, fair market value fee structure of the Proposed Arrangement (including the fees for the equipment rental, as-needed services and supplies, and marketing), which does not vary based on the value or volume of referrals or tests performed, would mitigate against any undue or additional incentive to generate unnecessary or an increased volume of sleep tests,” OIG concluded.
The OIG further found the arrangement contained an acceptably low risk of improperly influencing or rewarding referrals, highlighting that: the sleep testing services would be ordered and interpreted by physicians without a direct or indirect financial interest in requestor; remuneration under the arrangement would be consistent with fair market value in an arm’s-length transaction; the hospital would assume business risk and contribute substantially to furnishing the sleep testing services for which it bills; and the fees requestor would charge for equipment, marketing, and other services and supplies would be set in advance.
Advisory Opinion No. 10-23 (Dep't of Health and Human Servs. Office of Inspector Gen. Oct. 28, 2010).
Advisory Opinion No. 10-24 (Dep't of Health and Human Servs. Office of Inspector Gen. Oct. 28, 2010).