HHS OIG Finds Potential Anti-Kickback Violations in Online Referral Service

In an advisory opinion dated May 13, 2011, the Department of Health and Human Services, Office of the Inspector General (“OIG”) warned the operator of an online referral system that charging health care providers a fee to list their services on the system could potentially violate the Anti-Kickback Statute and lead to administrative sanctions, including civil penalties and exclusion from Federal health care programs.

The entity that requested the advisory opinion is a for-profit company that provides a variety of products and services to hospitals across the country.  One of its services is an online referral system that “provides hospitals with access to a nationwide listing of all licensed post-acute care providers, including skilled nursing facilities, home health agencies, and assisted living facilities.”  This system is geared to assist hospitals to “identify and select” the various providers and facilities “that are best-suited to meet the post-acute care needs of hospital patients who are ready to be discharged, including Federal health care program beneficiaries.”  Hospitals also use the system to send referral requests and appropriate medical documentation to the providers.  The company populates this list by reviewing state licensure databases.

The hospitals currently pay a fee for this service, but the providers listed on the service do not.  The company sent OIG a proposal to charge providers both a flat one-time “implementation fee” and a flat monthly fee to belong to the service.  Providers that did not pay the fee would still be listed on the service, but would not be able to electronically receive or respond to the hospitals’ referral requests on the system.  The non-paying providers would instead receive the information via facsimile, and would only be able to respond by telephone or return fax.  In its proposal to the OIG, the company acknowledged that this would disadvantage the non-paying providers, and might even eliminate the chance that the provider would receive the patient at all.

The OIG frowned on this proposal, finding that it implicated the Anti-Kickback statute because the company “would be soliciting and accepting, and Providers would be paying, remuneration in return for the [company’s] arranging for the furnishing of post-acute care services for which payment would be made by a Federal health care program.”  The OIG reasoned that this arrangement did not qualify for the Anti-Kickback Statute’s “safe harbor” provisions because it failed to satisfy the “requirement that referral fees be assessed uniformly against all participants and be based only on the cost of operating the referral service.”  The OIG found that the revenues that the company would collect would exceed the costs of operating the online system, thus removing it from the scope of the safe harbor.

The OIG went on to find that the proposed provider listing fee would create more than a minimal risk of a violation of the anti-kickback law.  The OIG reasoned that because the system would provide a significant competitive advantage to the providers that paid to belong to the service, and that could lead to the undesirable result that providers might get patients not because they offered superior care “but because they paid for the opportunity.”  Furthermore, the OIG concluded that providers that could not afford to pay for the system might be compelled to pay the fees in order to avoid missing out on the referrals altogether.  This could lead to pressure to recoup those costs and might create incentives to prolong stays or provide other unnecessary services “which could result in increased costs to the Federal health care programs.”

The OIG advisory opinion is available here.

This post was contributed by David Nardolillo.

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