Providing Free Items/Services to Referring Physicians

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adrienneCarey F. Kalmowitzleslie-rojas

By Adrienne Dresevic, Esq., Carey Kalmowitz, Esq., and Leslie Rojas, Esq. of The Health Law Partners, P.C. 

The US recently took the highly unusual step of filing an amicus brief (here) in a civil case involving Stark Law and AKS issues. The amicus brief provides insight into the government’s position on free items or services provided to physicians and whether this constitutes remuneration under the Stark Law and AKS. Although this case involves laboratory supplies and services (specifically, free point-of-care testing cups [POCT cups] provided to physicians), the government’s Stark Law and AKS arguments have implications for all providers, including radiology.

For example, some radiology providers offer physicians the free use of electronic interfaces to submit orders for, and receive results of, radiology services. The OIG previously opined that free access to such an interface did not constitute prohibited remuneration under the AKS (under the facts of the specific case), because the interface access “would be integrally related to the [hospital’s] services, such that the free access would have no independent value to the physicians apart from the services the [hospital] provides.” (See OIG Advisory Op. 12-20.) However, in the Millennium case, the government highlights one type of item/service (POCT cups) that does have an independent value to the physicians. Radiology providers should apply the same principles to any items/services they offer to physicians.

 

Ameritox v. Millennium: Background

The Millennium case involves claims of unfair competition and tortious interference with business relationships. The plaintiff argues that the defendant, Millennium Laboratories, Inc., provided POCT cups to physicians in violation of the Stark Law and AKS.  POCT cups are specimen collection cups with immunoassay testing strips embedded in the cup. This allows physicians to promptly screen the urine of patients who may be taking illegal drugs or who are prescribing drugs that are subject to abuse or diversion. Apparently, Millennium began entering into “cup agreements” with physicians under which Millennium agreed to provide POCT cups to physicians free of charge if the physicians agreed: (i) not to bill any insurer for the urine testing service; and (ii) to return each test cup to Millennium for lab testing of the urine specimen.

 

Stark Law

One issue in the Millennium case is whether the provision of free POCT cups to physicians falls within the Stark Law’s “laboratory supplies” exception to the definition of remuneration. This exception carves out of the definition of remuneration: “[t]he provision of items, devices, or supplies that are used solely to (i) collect, transport, process or store specimens for the entity providing the item, device, or supply, or (ii) order or communicate the result of tests or procedures for such entity.” The government took the position that the POCT cups do not fall within this carve-out because, unlike ordinary specimen cups, POCT cups include immunoassay test strips that provide a valuable diagnostic tool for physicians, which is wholly independent from functions necessary for Millennium’s purposes.

The carve-out requires that the supplies be used solely for transportation, collection, processing or storage purposes. Further, the government argued that the test strips do not process the specimen for Millennium, nor do they communicate the preliminary results for Millennium. Rather, the test strips are used for the physician’s own purposes and benefit. Additionally, the government quickly dismissed Millennium’s argument that the provision of free POCT cups cannot constitute remuneration because the physicians agreed not to bill for them. A physician agreeing not to bill for a free item or service has no bearing on whether the item or service constitutes remuneration. For example, non-billable gifts, such as cash, constitute remuneration. Essentially, as the government explained best in its amicus brief, the provision of free POCT cups “is no different from taping a five dollar bill to the inside of an ordinary specimen cup.”

 

Anti-Kickback Statute

On the AKS issue, the government relied on basically the same arguments. First, the government points to a number of OIG advisory opinions in support of its argument that to be “integrally related” to the offering provider’s services the free items or services must be capable of being used only as part of the underlying service – without having any independent value outside of the underlying service. The government argued that the free POCT cups fail this test because they confer significant benefits on physicians that extend beyond, and are unrelated to, Millennium’s laboratory testing services.

The government provided a number of examples of items or services that have no independent value apart from the underlying services, such as: (i) free computer interfaces used only to transmit laboratory test results (OIG Advisory Op. 12-20); and (ii) when a provider of imaging services obtains pre-authorizations from insurers for the requestor’s own services (OIG Advisory Op. 10-20).

Second, the government once again targeted Millennium’s assertion that the free POCT cups do not constitute remuneration – this time under the AKS – if the physicians do not bill for them. The government argued that whenever a provider “offers or gives to a source of referrals anything of value not paid for at fair market value, the inference may be made that the thing of value is offered to induce the referral of business.” It’s the government’s position that the fact that the physician does not bill for the item or service does not negate this inference.

 

Conclusion

In summary, if an entity provides a physician with a free item or service that enables the physician to do something that would otherwise cost money for the physician to do (eg, purchasing test strips in order to perform point-of-care testing), then the entity relieves the physician of that cost burden, which constitutes remuneration. Unless it meets a carve-out to the definition of remuneration, it is prohibited. It is clear that one cannot attempt to structure a particular set of facts to meet an otherwise permissible exception to the definition of remuneration, but then include other items or services of independent value and still hope to meet the exception.

The positions taken by the government are readily applicable to non-laboratory issues, including issues in the radiology world. Radiology providers should closely scrutinize any free items or services offered to referring physicians to ensure that they do not fit within the definition of remuneration under the Stark Law and do not violate the AKS.


Adrienne Dresevic, Esq. graduated Magna Cum Laude from Wayne State University Law School. Practicing healthcare law, she concentrates in Stark and fraud/abuse, representing various diagnostic imaging providers, e.g., IDTFs, mobile leasing entities, and radiology and multi-specialty group practices.

Carey F. Kalmowitz, Esq. graduated from NYU Law School. Practicing healthcare law, he concentrates on corporate and financial aspects, eg, structuring physician group practice transactions; diagnostic imaging and ancillary services, IDTFs, provider acquisitions, CON, compliance, and Stark and fraud/abuse.

Leslie Rojas, Esq. graduated from Wayne State University Law School and is licensed to practice law in Michigan and Illinois. Practicing healthcare law, she concentrates on fraud/abuse issues, compliance with federal and state healthcare regulations, health information privacy and technology issues, and transactional and corporate aspects of healthcare.

The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at www.thehlp.com.


For more regulatory news, visit www.ahraonline.org/news.

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