OIG opinion puts spotlight on referral management software

WASHINGTON – A recent Office of Inspector General (OIG) advisory opinion found that a home health provider's use of referral management software could violate the federal Anti-Kickback Statute. It has home medical equipment (HME) providers reviewing their own contracts, says health care attorney Jeff Baird.

"We have received many phone calls from DME suppliers asking about these contracts," said Baird, chairman of the Health Care Group at the Amarillo, Texas-based Brown & Fortunato.

The OIG's analysis

The opinion examined an arrangement in which providers pay to access referral management software that allows them to receive and accept electronic referrals from hospitals.

According to the OIG, providers that subscribe to the software gain a significant advantage because they can receive and respond to referrals electronically, while providers that do not subscribe must rely on phone calls or other methods, potentially causing delays and limiting their ability to compete for referrals.

"The arrangement implicates the federal Anti-Kickback Statute because requestor is paying remuneration to the vendor in return for the vendor, through the software, arranging for the furnishing of home health services for which payment may be made by a federal health care program," the OIG states. "The arrangement does not qualify for protection under the safe harbor for referral services. It fails to satisfy several of the safe harbor's requirements, including the requirement that referral fees be assessed uniformly against all participants."

The OIG concluded that the arrangement presents risks of inappropriate steering, unfair competition and overutilization because providers paying subscription fees could receive referrals based on their participation in the platform rather than the quality of care they provide.

Baird's analysis

Baird recommends that providers using referral management software have a health care attorney review their contracts to determine whether they may qualify for protection under a regulatory safe harbor.

Although the OIG found that the arrangement did not qualify for the referral services safe harbor, Baird believes some contracts may qualify for protection under the personal services and management contracts safe harbor. Requirements for that safe harbor include:

• A written agreement signed by the parties with a term of at least one year
• A compensation methodology established in advance
• Compensation that reflects the fair market value of the services provided
• Compensation that does not take into account the volume or value of anticipated referrals

Baird said a contract that charges a fixed monthly fee reflecting fair market value, without variation based on referral volume, has a stronger argument for fitting within this safe harbor. If compensation is tied to individual orders, however, the analysis becomes more difficult.

"It's something to be careful about," he said.

The scope of the opinion

While the advisory opinion technically applies only to the requestor and the specific facts presented, Baird said providers should still pay close attention to the OIG's reasoning.

"Whoever reads the opinion can use it as guidance for what they should or shouldn't do," he said. "It's telling us what the OIG thinks about these types of arrangements."

Baird also believes the requestor structured its submission in a way that made a negative opinion more likely.

"It's pretty obvious to me they wanted a negative opinion," he said. "If I wanted a positive opinion, I would have focused on the personal services safe harbor."

Parachute Health’s position

Following the opinion's release, Parachute Health contacted customers to explain why it believes the advisory opinion does not apply to its business model.

Parachute says its fees are charged for use of its e-prescribing and AI-powered intake technology, not for referrals or preferential access to orders. The company also says clinicians can route orders to any DME provider, regardless of whether that provider subscribes to the platform.

Additionally, Parachute says providers do not pay for referrals, patients or preferential access to orders, and subscription fees are established in advance and do not vary based on reimbursement, payer mix or order value.

"We've built Parachute to help patients receive care faster, give clinicians time back in their day and simplify the ordering process for everyone involved," David Gelbard, founder and CEO wrote to customers. "We are proud to have always designed our platform with compliance as a top priority."

Parachute also said its model is similar to technology platforms that have been used in the pharmacy industry for decades.