OIG frowns on pay-to-play arrangement

Monday, May 30, 2011

WASHINGTON - HME providers may want to think twice about paying a fee to electronically receive and respond to referral requests from hospitals, say industry attorneys.

An unnamed company that provides online referral services requested the Office of Inspector General's opinion on a proposed arrangement whereby it would charge post-acute providers an implementation fee and a monthly fee to electronically receive and respond to referral requests. In an advisory opinion posted May 20, the OIG stated such an arrangement "could potentially generate prohibited renumeration under the anti-kickback statute."

"I have long thought these arrangements were problematic," said Elizabeth Hogue, a private practice healthcare attorney in Burtonville, Md. "My advice to clients is to stop."

The problem with such an arrangement: Paying providers would have "a significant competitive advantage" over non-paying providers, according to the OIG. Here's why: Under the arrangement, non-paying providers would still be listed in the system, but they wouldn't be able to electronically receive and respond to referral requests. They would have to go through the more timely process of being notified of referrals by fax and, if they wished to respond, having to call or fax the hospital.

Because hospitals often discharge patients to providers on a first-come, first-served basis, paying providers who receive and respond to referrals electronically would be more likely to get referrals.

"It's important to make referrals easier and more efficient, so the OIG doesn't want to discourage that concept," said Neil Caesar, president of the Health Law Center in Greenville, S.C. "But the clear idea here is that the people downstream from the hospital can't pay for the privilege of being more visible to the hospital."

While providers may be wise to tread softly, the OIG's opinion isn't exactly clear-cut, says Jeff Baird, a healthcare attorney at Brown & Fortunato in Amarillo, Texas. The proposed arrangement comes fairly close to complying with a Safe Harbor provision that protects arrangements if compensation does not take into account the projected volume or value of business generated between parties, he said.

"It appears that the compensation set out in the arrangement is fixed one year in advance," Baird said. "In other words, provider A will pay the same regardless of whether it receives zero referrals or a million referrals. This takes away any incentive on the referral service's part to funnel referrals to a particular provider. This, in my mind, is what causes the arrangement not to be offensive or abusive." 

Still, industry attorneys expect that, while hospitals and the companies that provide online referral services will "dance for awhile over this," eventually, the OIG's opinion will be the kiss of death of such arrangements.

"The way I see it, these companies can continue to sell their products, but the hospital needs to bear all of the cost of the system," Hogue said.