OIG slams subcontracting, marketing practices

Thursday, June 23, 2011

WASHINGTON - The Office of Inspector General (OIG) took a recent request for an advisory opinion as another opportunity to put HME providers on watch, industry attorneys say.

In the advisory opinion, posted June 21, the OIG touches on a number of its favorite sticking points with providers, including subcontracting and, for two long paragraphs, marketing.

"The tone of the whole opinion is, 'We don't like what you're doing,'" said Asela Cuervo, a Baltimore-based healthcare attorney.

A provider, whose name was redacted, requested the OIG's opinion on two arrangements: The first, an existing arrangement, involves the provider consigning CPAP devices to a sleep lab and paying the lab a per-patient fee based on fair market value for set up and education for non-Medicare patients; the second, a proposed arrangement, involves the provider paying the lab a flat monthly or annual fee for the same services for non-Medicare and Medicare patients.

The OIG takes issue with both arrangements. First, it believes they have the potential to create payment based on volume or value of past or expected referrals (the first arrangement) or payment above fair market value (the second arrangement).

Second, the OIG believes the arrangements may trigger the anti-kickback statute because the sleep lab's staff is in a position to influence patients to select the provider's products, regardless of whether it gives them a list of other providers to choose from.

"The fraud and abuse risks are compounded where a physician or other healthcare professional is involved in the marketing activity--a practice sometimes referred to as 'white coat' marketing," the OIG states. "White coat marketing is closely scrutinized under the statute because physicians and other healthcare professionals are in an exceptional position of public trust and thus may exert undue influence when recommending healthcare related items or services."

The OIG believes it doesn't matter whether the arrangement involves non-Medicare or Medicare patients, because one business can influence the other.

"The idea that deals for private patients supposedly don't raise federal issues because they don't involve federal patients is a frequent misconception," said Neil Caesar, president of the Greenville, S.C.-based Health Law Center.

The OIG's conclusion was predictable, leaving at least one industry attorney to question the motives of the provider who requested the opinion.

"The requestor in this case may have been seeking a negative opinion in the hope of dissuading its competitors from participating in arrangements like these," said Jeffrey Baird, chairman of the Health Care Group at Amarillo, Texas-based Brown & Fortunato. "It appears that the OIG was happy to oblige. The agency went further and used the occasion to deliver a harangue against 'aggressive marketing by DME suppliers.'"

Read the full advisory opinion. It's opinion 11-08.