Two new HHS-OIG advisory opinions worth noting

An advisory opinion is only applicable to those requesting it; seek guidance under AKS or ensure safe harbors are met and a goal is to not induce referrals based on volume or value.

Although not applicable or binding on any other person or government, other than the those in the advisory opinion, which are redacted, issued by the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG), it serves as a roadmap or a warning for other industry participants. Interestingly, this process was established under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which was codified at 42 CFR Part 1008, with the latest Final Rule appearing in 73 Fed. Reg. 40982 (2008).

Simply stated, an OIG advisory opinion “is a legal opinion issued by OIG to one or more requesting parties about the application of the OIG's fraud and abuse authorities to the party’s existing or proposed business arrangement.” It applies to arrangements that may otherwise violate the Anti-Kickback Statute (AKS), which may carry civil and/or criminal penalties. The AKS often goes hand-in-hand with a False Claims Act case when illicit payments (aka kickbacks) are involved.

Between March and May of 2021, the OIG issues two notable advisory opinions, of which providers and other healthcare industry participants should be aware. The synopses are as follows:

Advisory Opinion No. 21-01 (Mar. 23, 2021)

The Requestor, a pharmaceutical manufacturer, inquired as to whether or not providing a free drug to certain patients to whom Requestor’s drug has been prescribed would violate the AKS, as well as the related civil monetary penalty provision prohibiting inducements to beneficiaries [of federal programs]. The drug at issues it usually only administered once and the patients to whom the free drug would be provided must meet the following criteria:US resident;

  1. US resident;
  2. a valid prescription from a Center physician, that is a facility certified by Requestor to meet certain drug safety requirements (“Center”);
  3. either have no health insurance or have received a denial; and
  4. meets pre-established income criteria.

The Requestor only provides the drug for FDA-approved indications and any patient that meets the criteria is eligible, regardless of whether or not the patient utilizes private insurance or Federal government programs, such as TRICARE or Medicaid. The Requestor did not anticipate nor had any Medicare beneficiary receive the free drug. While OIG indicated that normally the arrangement would violate the AKS, penalties would not be issued in the scenario provided, under the specific facts and circumstances. Some notable reasons that the arrangement would normally implicate the AKS are:

  1. the arrangement provides the Centers and the physicians “remuneration in the form of an opportunity to earn income or facility fees while administering the free Drug to Eligible Patients, without incurring any acquisition cost for the Drug,” which may in turn induce the physicians and Centers to recommend purchases of the drug when payable by a Federal healthcare program. A key factor in this situation which makes it distinguishable from other drugs is that it is a potentially curative treatment, which reduces the risk of seeding (i.e., induces for future referrals of a drug when it would be payable by a Federal healthcare program) because the patient usually only receives one dose.

Advisory Opinion No. 21-02 (April 26, 2021)

A Health System, a Manager (a nationwide developer and manager), and certain surgeons (five orthopedic surgeons and three neurosurgeons) requested an advisory opinion regarding their collective investment in an ambulatory surgery center (ASC). Again, the OIG indicated that while the proposed arrangement would normally implicate the AKS, no action would be taken against the Requestors for the following reasons:

  1. the Manager certified that it would not make or influence referrals, either directly or indirectly to the Physician Investors or the New ASC;
  2. no physician has or would have ownership in the Manager; and
  3. while the aggregate ownership by the physician investors would be 46 percent, each physician investor would determine the percentage ownership he or she holds in the ASC and neither the Health System, the Manager, nor the ASC would either dictate or participate in any investment decision made by a Physician Investor. (emphasis added).

Equally as critical was the certification that “[o]wnership in the New ASC was not offered, and would not be offered in the future, to any potential investor based on previous based on the previous or expected volume or value of referrals made by the potential investor.

The last sentence of Advisory Opinion No. 21-02 is critical. As I relayed in an earlier article, the U.S. Department of Justice has taken significant enforcement actions against health systems and physicians for preferential investment opportunities based on the volume or value of referrals.

In sum, it is important to remember that an advisory opinion is only applicable to those requesting it. While it provides a roadmap for healthcare industry participants, a change in one fact or circumstance could have rendered a different opinion. Therefore, it is imperative to either seek an advisory opinion if an arrangement is questionable under the AKS or make absolutely certain that the requisite safe harbors are met and that one purpose of the arrangement is not to induce referrals based on volume or value.

About the Author
Rachel V. Rose, JD, MBA, advises clients on compliance and transactions in healthcare, cybersecurity, corporate and securities law, while representing plaintiffs in False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website, www.rvrose.com.