OIG gives advice on loan closets

Friday, May 31, 2002

WASHINGTON - The OIG has finally given providers some nuts-and-bolts guidance on how to set up a loan closet without triggering the anti-kickback statute.

"This has been one of those issues that has never gone away, and this should alleviate a lot of fears out there," said Asela Cuervo, AAHomecare's senior v.p. of government relations.

In mid-April, the OIG issued an advisory opinion to a medical equipment provider who desired to place portable-oxygen systems on-site at certain local hospitals, clinics and physician offices for patients returning home. In requesting the ruling, the unidentified provider certified that he would not pay referral sources rent for the use of "consignment closets" and that the referral sources would receive no payment for referrals. Additionally, to protect freedom of choice, the DME agreed to provide each referral source with a list of local DME suppliers and encourage the sources to give the list to patients.

The DME's "underlying motivation is for the convenience of the patient and to facilitate discharge," said attorney Tom Antone, who requested the opinion.

The OIG's advisory stated that since no money would change hands the "arrangement does not implicate the anti-kickback statute…(and) the proposed arrangement would not constitute grounds for the OIG to impose administrative sanctions."

"This is the first time we have had the government saying that depending on all of the facts and circumstances, it may be possible, with reasonable safety, to place equipment in a referral source for a patient to take home," said Antone.

The anti-kickback statute makes it a criminal offense to knowingly and willing pay a referral source for referrals. But because the statute's so broadly written, it's sometimes difficult to determine if legitimate business practices are allowed.

This particular opinion applies to only one DME but "if another company sets up an identical arrangement it should have a high level of comfort that the arrangement would not be subject to prosecution," said Cara Bachenheimer, a healthcare attorney with Epstein Becker & Green in Alexandria, Va.

The arrangement can also apply to other products, attorneys say.

According to healthcare attorney Jeff Baird of Brown & Fortunato in Armarillo, Texas, providers can safely set up a loan closet if they follow three guiding principles:

4They don't pay the referral source rent for the loan closet space.

4Referral sources cannot make money off a loan closet arrangement. A hospital, for example, can't let a patient use a wheelchair prior to discharge when the facility should be furnishing its own chair.

4The DME informs the doctor in writing or verbally that patient choice must be maintained.

"If you adhere to these three things, you are going to be OK," Baird said. HME