In OIG Advisory Opinion 25-09, the OIG analyzes whether a POE arrangement regarding remuneration to physicians with an ownership interest in the business (“Arrangement”) would constitute grounds for sanctions under the Federal Anti-kickback statute. OIG Advisory Opinion 25-09 at 1, https://oig.hhs.gov/compliance/advisory-opinions/25-09/. Here, the POE is a developer, manufacturer, and seller of medical devices relating to emergency stroke treatment (“Stroke Device POE”). Id. at 2. The Arrangement implicates the Federal Anti-kickback statute because physician-owners ownership interest in the Stroke Device POE could result in a profit distribution; and physician-owners may order or purchase stroke devices while being in a position to recommend such purchase to a health care entity, and such products can be reimbursable by Federal health care programs. Id. at 5.
The Office of the Inspector General (“OIG”) has had long standing concerns over physician-owned entities (“POE”) that derive revenue from selling, or arranging the sale of, medical devices ordered by their physician-owners for use in procedures the physician-owner performs at hospitals. Id. The OIG states certain POEs exhibit questionable features (like selecting investors in a position to generate substantial business for the entity) and engage in suspect behavior (conditioning referrals to hospitals on their purchase of the POEs device through coercion or promises), making such entities inherently suspect under the Federal Anti-kickback Statute, unless a safe harbor applies. Id.
Here, the OIG held the Arrangement did not generate prohibited remuneration under the Federal Anti-kickback statute because it was protected by the Small Entity Investment Safe Harbor (“Safe Harbor”). Id. at 7; see also 42 C.F.R. §1001.952(a)(2). The Safe Harbor compliance is voluntary, and will only apply to an arrangement if all the eight conditions are met. Id. at 4-5. Generally, the Safe Harbor conditions look at the terms on which the investment is being offered; what percent of the POE is owned by physicians; what percent of the POEs gross revenue comes from referrals or business otherwise generated by investors; and whether terms offered differ between passive investors or investors with a position to make or influence referrals. Id.
Applying the Safe Harbor, the OIG found all the conditions had been met. Most significant was the fact physician-owners of the Stroke Device POE only comprised 35 percent of the entity’s ownership and no other owners were in a position to make or influence referrals, or otherwise generate business for the entity. Id. at 6. Further, no profit distribution to any physician-owner had been made, and if it did make any such distribution or other payment to investors based on their ownership interest, the amount of the payment would be directly proportional to the amount of the capital investment of the investor. Id. at 7.
The OIG’s inquiry and analysis into POE arrangements are done on a case by case basis, as the analysis ultimately relies on facts specific to the POE at issue. Id. Business arrangements that cannot meet these conditions can raise fraud and abuses risks under the Federal Anti-kickback statute. Id. So, it is crucial before engaging in any arrangement that can implicate sanctions under the Federal Anti-kickback statute you analyze whether your arrangement meets conditions set under a safe harbor and for better certainty request an OIG advisory opinion.
