AMARILLO, TX – Assume that ABC Holdings, Inc. owns (i) 100% of XYZ Medical Equipment, Inc. and (ii) 100% of DEF Pharmacy, Inc. Assume that XYZ has W2 employee marketing reps who call on physicians, hospitals and other referral sources. Assume that DEF also has marketing reps who call on referral sources.

Assume that (i) XYZ marketing reps sometime generate business for DEF and (ii) DEF marketing reps sometime generate business for XYZ. Lastly, assume that ABC would like for (i) the XYZ marketing reps to be compensated for generating business for DEF and (ii) the DEF marketing reps to be compensated for generating business for XYZ.

The question is whether the arrangement will violate the federal anti-kickback statute (“AKS”), which states that a provider/supplier cannot give anything of value to a person or entity in exchange for referring/arranging for the referral of federal health care program (“FHCP”) patients…or in exchange for recommending the purchase of a product covered by an FHCP.

Because of the breadth of the AKS, the Office of Inspector General (“OIG”) has published a number of safe harbors. If an arrangement fits into a safe harbor, then the compensation paid pursuant to the arrangement does not constitute illegal remuneration under the AKS. If an arrangement does not fit into a safe harbor, it does not mean that the AKS is violated. Rather, it means that a comprehensive analysis of the arrangement needs to be conducted in light of the language of the statute, court decisions, and other published guidance.

One of the safe harbors is the “Employee Safe Harbor.” It states that if a person is a bona fide employee (full-time or part-time) of a provider/supplier, the compensation paid to the employee does not violate the AKS.

So now let’s talk about the scenario discussed above.

• If a marketing rep is a bona fide employee of XYZ and if XYZ is compensating the rep, one can argue that the arrangement fits into the Employee Safe Harbor. However, the compensation that XYZ pays to the marketing rep is not totally for generating business for XYZ, but also for generating business for DEF. And so the question is whether the Employee Safe Harbor is completely met.
• A credible argument can be made that if the following occurs, (i) the arrangement complies with the Employee Safe Harbor and, as such, (ii) the risk of a government enforcement action is low:
• The XYZ marketing rep is truly a bona fide employee of XYZ (e.g., XYZ exercises supervision and control over the rep).
• XYZ pays a base salary to the marketing rep plus discretionary bonuses based on a number of factors, including the following: (i) whether the rep complies with XYZ’s policies and procedures; (ii) whether the rep is a team player (e.g., he is not disruptive to his fellow employees); (iii) whether the rep receives positive feedback from referral sources he calls on; and (iv) the business generated by the rep for XYZ and DEF.
• The compensation paid by XYZ to the rep is, in part, influenced by the rep’s generation of business for DEF…but there is not a direct correlation between the rep’s generation of business for DEF and the compensation paid by XYZ to the rep.
• The same analysis holds true for a DEF marketing rep who generates some business for XYZ.
• In addition to the above, if XYZ and DEF choose to do so, the two companies can execute a Marketing Services Agreement (“MSA”) in which (i) XYZ pays fair market value (“FMV”) compensation (fixed annual fee or hourly) to DEF for the services rendered by DEF reps on behalf of XYZ and (ii) DEF pays FMV compensation (fixed annual fee or hourly) to XYZ for the services rendered by XYZ reps on behalf of DEF.

AAHOMECARE’S EDUCATIONAL WEBINAR

When it is Proper to Re-Start the 36 Month Oxygen Rental Period
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Lisa K. Smith, Esq., Brown & Fortunato
Tuesday, July 19, 2022

1:30-2:30 p.m. CENTRAL TIME
The importance of DME suppliers has come to the forefront during the pandemic. In short, DME suppliers (particularly oxygen equipment suppliers) are instrumental in keeping patients out of the hospital. This program focuses on those suppliers that provide oxygen concentrators … and in particular on when it is proper for the supplier to re-start the 36 month oxygen rental period. When a DME supplier provides an oxygen concentrator to a Medicare beneficiary, Medicare will pay the supplier for the first 36 months and then the supplier will be obligated to service the beneficiary’s oxygen needs, for very little compensation, for the next 24 months. The beneficiary’s continuous use of the concentrator may be interrupted by one of the following events: (i) the concentrator is lost, stolen, or damaged beyond repair; (ii) there is an extended break in need of greater than 60 days; (iii) the supplier sells its assets to another supplier; (iv) the supplier goes out of business; (v) the supplier files bankruptcy; or (vi) the beneficiary relocates outside the supplier’s service area. This program will discuss whether the 36 month rental period will start over when one of these interruptions occur.

Register for When it is Proper to Re-Start the 36 Month Oxygen Rental Period on Tuesday, July 19, 2022, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq., and Lisa K. Smith, Esq., of  Brown & Fortunato.

Members:  $99
Non-Members:  $129

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].