Providers who participate in the Federal health care programs know all too well the requirement (and burden) of having to screen vendors, among others, against the U.S. Department of Health and Human Services, Office of Inspector General’s (OIG) List of Excluded Individuals and Entities (LEIE). OIG recently rejected a medical device company’s (Company) novel proposal to pay a third-party (Screener) to perform exclusion screenings of the Company for the Company’s customers. OIG’s unfavorable Advisory Opinion (25-04) determined that this proposed arrangement (Arrangement) implicates the Federal Anti-Kickback Statute and raises concerns about inappropriate steering and anti-competitiveness.
The Company sells products and services, some of which are reimbursed by Federal health care programs, to hospitals, health systems, and ambulatory surgery centers (collectively, Customers). Prior to purchasing the Company’s products or services, Customers typically perform (or would be expected to perform) an initial screening and subsequent monitoring to ensure that the Company is not excluded from participating in Federal health care programs and to comply with certain other legal requirements.
Under the Arrangement, the Company proposes to hire and pay Screener on an ongoing basis to screen and monitor the Company for Federal health care program exclusions. Screener would charge the Company an annual subscription fee (Fee) for each individual Customer who receives a copy of the Company’s screening and monitoring results. Screener’s estimated cost to perform these services is $450,000, which the Company would pay annually. The Company certified that it would not be party to any agreement between Screener and Customers.
OIG found that the Company’s payment of the Fee implicates the Anti-Kickback Statute and that no safe harbor applies to the Arrangement because:
- Customers would otherwise incur the financial costs associated with screening and monitoring activities that the Company is proposing to pay;
- The Company’s payment of the Fee is valuable and could induce Customers to purchase items or services from the Company, some of which may be reimbursable by Federal health care programs;
- The Company’s payment of the fee could inappropriately steer Customers to the Company, especially if the Company’s competitors were unable or unwilling to pay the Fee; and
- Screener could serve as a gatekeeper of referrals between Customers and the Company, particularly if Customers condition their business on Company’s payment of the Fee (which the Company would pay to access those referrals).
OIG also reiterated its long-standing concerns about the provision of free items or services by individuals and entities, including device manufacturers, to referral sources. Notably, OIG recognized that while there are “a myriad of ways to structure business arrangements to allocate responsibilities” that could result in a favorable advisory opinion, such facts were not present here.
A copy of the complete unfavorable opinion can be found here.
Should you have any questions regarding the above or would like guidance evaluating potential arrangements for compliance with the Anti-Kickback Statute, please contact the author, the Garfunkel Wild attorney with whom you regularly work, or contact us at [email protected].