Contributed by Lee Kim, Esq.

412.594.3915

 

A vendor of web-based services to help physicians achieve faster reimbursement from payors, reduce error rates, improve collection rates, improve patient compliance and satisfaction, and more efficiently manage clinical and billing information requested an advisory opinion from the Department of Health and Human Services Office of Inspector General ("OIG").  The OIG issued the advisory opinion on November 30, 2011 (No. 11-18).

Specifically, the vendor inquired whether its online service that would facilitate the exchange of information between healthcare practitioners, providers, and suppliers (the "Proposed Arrangement") would constitute grounds for the imposition of sanctions under exclusion authority at section 1128(b)(7) of the Social Security Act, the civil monetary penalty provision at section 1128A(a)(7) of the Social Security Act, as those sections relate to the commission of acts described in section 1128(b) of the Social Security Act, namely, the Federal Anti-Kickback Statute.  The anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program.  This statute is violated where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program.  It ascribes criminal liability to parties on both sides of an impermissible "kickback" transaction.  "Remuneration" in the context of the anti-kickback statute includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.  The courts have interpreted the statute to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals.  However, the Department of Health and Human Services has promulgated safe harbor regulations that defines practices which are not subject to the anti-kickback statute due to such practices being unlikely to result in fraud or abuse.

The OIG concluded that although the Proposed Arrangement could potentially generate prohibited remuneration under the anti-kickback statute and that the safe harbors would not apply, the OIG would not impose administrative sections on the vendor under the statutes as referenced above.  While the nature of the Proposed Arrangement is described in more detail below, in brief, Ordering Health Professionals would use the Coordination Service to exchange information with Health Professionals to which referrals can be made.  If the Health Professionals are Trading Partners, then the vendor would perform value-added services associated with transmitting the information.  The vendor would receive payment from either the Ordering Health Professionals or the Trading Partners for transmitting the information and from the Trading Partners for any value-added services provided.  Additionally, Ordering Health Professionals who purchase the Coordination Service Package would receive a discount on their monthly EHR Service subscription fees.  Under the Proposed Arrangement, Transmission Fees paid by Ordering Health Professionals for referrals to Non-Trading Partners would be capped at the total dollar amount of the discount. 

Because the Proposed Arrangement’s fee structure could constitute indirect remuneration from the Trading Partners to the Ordering Health Professionals to induce referrals, the OIG concluded that the anti-kickback statute is implicated.

By way of background, the vendor primarily offers the following services: the Billing Service (for automating and managing billing-related functions for physician practices and assisting clients with non-billing related back-office operations), the EHR Service which automates and manages medical record-related functions for physician practices, and the Messaging Service which automates practice communications with patients.  Its typical customer is a physician or physician group that either uses the Billing Service alone or both the Billing Service and the EHR Service, with or without the Messaging Service.  The vendor generates most of its revenues by charging a monthly subscription fee in the form of either a percentage of collections or a flat monthly fee.  In addition, under the Proposed Arrangement, the vendor would offer the Coordination Service as a new service which is intended to facilitate the exchange of information between health care providers, practitioners, and suppliers and to help them keep track of patients receiving services from other Health Professionals.  Only the Health Professionals who purchase the EHR Service can use the Coordination Service to transmit patient information to other Health Professionals in connection with a referral.

Under the Proposed Arrangement, Ordering Health Professionals (primarily physicians) would use the Coordination Service to access an electronic database (the "Network") to identify Health Professionals to which they would like to make a referral.  There would be no cost to Health Professionals to be included in the Network.

The vendor would offer Health Professionals that are interested in receiving referrals through the Coordination Service the opportunity to enter into "Trading Partner Agreements" with the vendor.  There would be no cost to Health Professionals to become Trading Partners; however, the vendor would charge the Trading Partners for services it provides to them.

Health Professionals would not be required to become Trading Partners to receive referrals using the Coordination Service; however, Health Professionals that are not Trading Partners ("Non-Trading Partners") would not be able to customize their Network profiles in the same manner as Trading Partners and would not be able to receive Formatted Orders.

Under the Proposed Arrangement, the vendor would continue to charge Ordering Health Professionals a monthly subscription fee for the EHR Service component of the Coordination Service Package, but that fee would be discounted.  Additionally, the vendor would charge three types of transaction-based fees for referrals made and received using the Coordination Service: (i) a base fee for transmitting the referral (the "Transmission Fee"), (ii) a fee for the work performed by the vendor to record and maintain the Trading Partner’s preferences, attach clinical documentation in accordance with those preferences, and facilitate the appointment scheduling with the Trading Partner, and provide "report builder" functionality (the "Functionality Fee"), and (iii) a fee for the work performed by the vendor to verify benefit eligibility and obtain referral authorization (the "Service Fee").

The vendor would charge the Transmission Fee each time an Ordering Health Professional makes a referral using the Coordination Service, but the party responsible for paying this fee would vary depending on whether the receiving Health Professional is a Trading Partner or a Non-Trading Partner.  The Trading Partner would pay the Transmission Fee.  However, Trading Partners that are clients of the vendor would pay slightly lower fees than non-client Trading Partners.  For Non-Trading Partners, the Ordering Health Professional would pay the Transmission Fee which would be the same as the amount that would be charged to a non-client Trading Partner.

The Functionality Fee would be assessed each time an Ordering Health Professional uses the Coordination Service to make a referral to a Trading Partner.  The Service Fee would be assessed each time it is applicable, namely, each time a benefits verification or referral authorization service is required.  The amount of the Functionality Fee would be Fixed and the Service Fee would vary depending upon the level of effort required to provide the related services. 

Based upon the facts presented concerning the Proposed Transaction, as stated above, the OIG determined that the anti-kickback statute was implicated due to the fee structure.  The OIG also determined that the safe harbor provisions for referral services did not apply.  The type of referral service in the Proposed Arrangement is very different from the referral service as contemplated by the safe harbor.  The anti-kickback statute’s safe harbor contemplates a referral service that helps beneficiaries make their initial contact with the health care system before a relationship of trust is established with a particular health care provider or supplier.  In contrast, the Coordination Service facilitates referrals through the transmission of information and the actual referrals are made by Health Professionals.  However, the OIG concluded that the anti-kickback statute is not violated because the Proposed Arrangement adequately reduces the risk that the remuneration provided therein could be an improper payment for referrals or for arranging referrals of Federal health care program business for the following reasons:

  • The vendor would offer a comprehensive Network within which all Health Professionals could participate and from which an Ordering Health Professional could select a receiving Health Professional.  No payment is required simply to be in the Network, although participants must pay the vendor to obtain certain value-added services.
  • The Transmission Fee, the Functionality Fee, and the Service would, both individually and in the aggregate, reflect the fair market value of the actual services the vendor would provide to the Health Professionals.  The vendor’s services would provide value that is unrelated to inducing referrals and the fees charged for services provided by the vendor would not vary based on the value of the items or services that a receiving Health Professional might ultimately provide to Federal health care program beneficiaries.
  • The use of a "per-click" transaction-based pricing model is reasonable.  The vendor would assess the Transmission Fee each time an Ordering Health Professional makes a referral to receiving Health Professional using the Coordination Service, regardless of whether the patient follows through and actually receives items or services from the receiving Health Professional.  The Functionality and Service Fees would be charged only to Trading Partners and would reflect the work the vendor must perform.  The vendor would charge the Functionality Fee and, as applicable, the Service Fee, each time an Ordering Health Professional makes a referral to the Trading Partner using the Coordination Service, regardless of whether the patient follows through and actually receives items or services from the Trading Partner.
  • The fee structure in the Proposed Arrangement would be unlikely to influence an Ordering Health Professional’s referral decisions in a material way.  Discounts on monthly EHR Service subscription fees, standing alone, would not induce an Ordering Health Professional to refer to any particular person or entity.  The amount of the Transmission Fee is low (less than or equal to $1.00) and this fee would be unlikely to sway an Ordering Health Professional’s judgment regarding which Health Professional to refer to.  Additionally, the amount of the Transmission Fees that could be charged, in the aggregate, to an Ordering Health Professional could be capped at the difference between the Ordering Health Professional’s undiscounted monthly EHR Service fee and the discounted monthly fee charged for the EHR Service (as a component of the Coordination Service Package) such that the Ordering Health Professionals would never pay more for the Coordination Service Package than they would have paid for the EHR Service alone.
  • The Coordination Service is intended to facilitate the exchange of information between Health Professionals and not to limit the pool of Health Professionals to which an Ordering Health Professional may refer.  Neither freedom of choice nor provider freedom of choice would be compromised under the Proposed Arrangement.
  • A Trading Partner’s payment of the Transmission, Functionality, and Service Fees to the vendor would not provide the Trading Partner with enhanced access to a referral stream vis-a-vis Non-Trading Partners.  The Non-Trading Partners would not be disadvantaged with respect to, nor precluded from, the opportunity to receive and respond to referrals made through the Coordination Service

In view of the foregoing, the OIG concluded that even though the Proposed Arrangement may generate prohibited remuneration under the anti-kickback statute (if the requisite intent to induce or reward referrals of Federal health care program business were present), the OIG would not impose administrative sanctions under sections 1128(b)(7) or 1128A(a)(7) of the Social Security Act in connection with the Proposed Arrangement.  Therefore, the OIG would not subject the vendor to administrative sanctions in connection with the anti-kickback statute for the Proposed Arrangement.

Link to original OIG Advisory Opinion (No. 11-18):

http://oig.hhs.gov/fraud/docs/advisoryopinions/2011/AdvOpn11-18.pdf