AMARILLO, TX – Assume that (i) ABC Medical Equipment, Inc. provides services and products (collectively referred to as “services”) to patients in custodial care facilities, (ii) some facility patients are covered by an insurance plan that either ABC is not in-network with or that pays unsustainably low rates to in-network suppliers, (iii) the facilities want ABC to service facility patients because the responsibility to do so will fall back on the facilities if ABC is not in the picture, and (iv) ABC and the facilities are interested in finding a solution that enables ABC to service patients in the facilities.

Two methods to accomplish ABC’s and the facilities’ goal are:

• ABC will charge the facility a fee associated with each patient who ABC services and is covered by a plan that does not fairly compensate ABC; or
• ABC will enter into an agreement with the facility pursuant to which the facility pays ABC for services provided by ABC to the facility that are in addition to the functions required by ABC to furnish and bill for services provided to patients.

The risk is low that the above alternatives will violate the federal anti-kickback statute (AKS).

The AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of a patient to a provider for the furnishing of, or arranging for the furnishing of, any item or service reimbursable under a federal health care program (“FHCP”).

In other words, a violation of the AKS occurs where (i) Party A is a source of FHCP patient referrals, or otherwise arranges for business covered by FHCPs, to Party B and (ii) Party B pays or otherwise provides something of value to Party A to reward Party A for the FHCP patients. Normally, this means the remuneration and the generation of FHCP business run in opposite directions.

Assume that each of the following statements is true:

• The facilities act as a referral source to ABC.
• ABC does not act as a referral source to, or otherwise generate business for, the facilities.
• The facilities will pay money to ABC.
• ABC will not pay money to the facilities but may furnish services to the facilities.

Based on the above statements, (i) the referrals of business covered by a FHCP and (ii) the financial compensation, are running in the same direction—from the facilities to ABC. Therefore, the risk of a government enforcement agency taking the position that either party to the arrangement is paying the other to induce or reward FHCP business is minimal.

But if ABC is conducting activities that benefit the facilities and that go beyond what is necessary for ABC to furnish and bill for the services provided to patients, it is conceivable that an enforcement agency could take the position that ABC provides these services to induce referrals from the facilities. For this reason, it is advisable that ABC enter into a written agreement under which the facilities pay ABC fair market value compensation for those services.

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. Mr. 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].