The Practice is required to pay the Company in three different components. First, the Practice must make a capital payment equal to a percentage of the initial cost of each asset that the Company purchases on the Practice's behalf for a period of six years. The Company will also receive a "fair market value payment" for the operating services it provides and at cost payments for any "operating services" for which it contracts. Finally, the Practice must pay the Company 20% of monthly net revenues for management services.
The OIG evaluated the proposed relationship under the Federal Antikickback Statute, which makes it a criminal offence to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce the referral of business covered by a federal health care program. The OIG points out that the Federal Antikickback Statute has been interpreted to cover any arrangement if even just one purpose of the remuneration was to induce referrals. The OIG first analyzed the Agreement in the context of the Personal Service and Management Contract Safe Harbor to the Federal Antikickback Statute. The Safe Harbors define relationships that are immune from prosecution under the Federal Antikickback Statute. The OIG concluded that the proposed arrangement does not qualify for safe harbor protection because the compensation is no in an aggregate amount fixed in advance, as required by the Safe Harbor. The OIG notes, however, that compliance with a Safe Harbor is not mandatory, and the fact that the arrangement does not fit within a Safe Harbor does not mean it is necessarily unlawful.
The OIG then analyzes the facts of the Arrangement. It notes the "[p]ercentage compensation arrangements for marketing services may implicate the Antikickback Statute." It found the arrangement problematic for several reasons, including that the arrangement "may include financial incentives to increase patient referrals." The OIG was particularly troubled by the percentage of not revenues payment, which would include revenues derived from managed care contracts arranged by the Company. The OIG found this to be "at least a potential technical violation of the Antikickback Statute." The OIG was also concerned about the requirement for in-network referrals. The OIG noted, however, that it has "insufficient information to ascertain the level of risk of fraud or abuse presented by the Proposed Arrangement." Thus, the OIG never reached a conclusion as to the degree of risk that the proposed arrangement presents under the Antikickback Statute.
The OIG also commented that the required referral arrangement within the network creates a risk of potential over-utilization and that it was able to determine that there would be any procedures implemented to control such utilization, running the risk that federal health care programs could be overutilized. Finally, the OIG was concerned that the Company would be incentivised to maximize the Practice's revenues because it is providing billing services to the Practice and being paid based on a percentage payment. Neither of these comments relate to the Federal Antikickback Statute. The OIG does not analyze these comments regarding what statutes or regulations, if any, these particular issues implicate. They appear to be merely gratuitous comments intended by the OIG to have a chilling effect on these types of arrangements.
The OIG concluded by stating the "[b]ased on the facts we have been presented, the Proposed Arrangement appears to contain no limitations, requirements, or controls that would minimize any fraud or abuse. Therefore, since we cannot be confident that there is no more than a minimal risk of fraud or abuse, we must conclude that the Proposed Arrangement may involve prohibited remuneration under the Antikickback Statute and this potentially be subject to sanction under the Antikickback Statute7". As with all of the OIG's advisory opinions interpreting the Federal Antikickback Statute, the OIG is prohibited from making any final determination as to whether the statute is violated because there is no way that it may determine the parties' intent, a necessary element to determining whether the Statute has been violated.
As with all advisory opinions, the reader must keep in mind that it has no application to, and cannot be relied upon by, any individual or entity other than the party that requested it and cannot serve as legal precedent for any other party.
The Opinion, along with the Florida Board of Medicine's decision in the Petition for Declaratory Statement of Magan L. Bakarania (which is still under appeal in the Florida courts), puts physicians and PPM companies operating on notice that their financial relationships carry at least a risk of violating Florida and federal prohibitions against payments in exchange for referrals. This is not a new concept, but these two advisory opinions represent the first official recognition of that risk. This type of notice makes it harder for parties to argue that they did not intend to violate the federal and state statutes prohibiting remuneration in exchange for referrals because their application was unclear to PPM arrangements. These advisory opinions help to provide some, at least informal, clarification with regard to how government enforcement agencies construe these statutes. Existing relationships should be reviewed in this light, and new relationships should be developed with these two opinions in mind.