Navigating OIG’s Advisory Opinion on Medical Device Billing Arrangements and Anti-Kickback Statute Risks

Read the Advisory Opinion here.

The OIG concluded that the arrangement would likely violate the federal Anti-Kickback Statute (AKS) and could expose parties who violated the AKS to significant sanctions.

Background and Parties Involved

The arrangement reviewed by the OIG involved:

• The “Requestor,” a medical device company that supplies “bill-only” surgical products reimbursable by federal health care programs to hospitals, health systems, and ambulatory surgery centers.
• The third-party vendor, which provides an electronic billing portal that advertises benefits and services to facilitate the health care providers’ acquisition of bill-only items.
• The medical device company’s customers, who use the vendor’s portal (the vendor’s provider clients) to pay for the medical device company’s products, may require, or have required, the medical device company to use the vendor’s portal as a condition of doing business with them.

Description of the Proposed Arrangement

Under the proposed arrangement:

• The medical device company would enter into an agreement with the third-party vendor and pay licensing fees for each of its field sales representatives to access the vendor’s bill-only portal in order to sell surgical products to the provider clients.
• The vendor’s bill-only portal duplicates the medical device company’s existing billing processes and does not provide benefits to the company. The only reason the medical device company would enter the arrangement is to retain or expand business with the provider clients that mandate use of the portal.
• The medical device company had sought from the vendor but did not receive specific information about the fees and fee structures that the vendor offered provider clients who elected to use the portal.
• The arrangement did not include any mechanisms to ensure that the medical device company’s licensing fees reflected fair market value for services the vendor was providing to the company.

OIG’s Legal Analysis and Conclusion

The OIG determined that the arrangement could generate prohibited remuneration to induce surgical product purchases under the AKS, because the medical device company’s payment of licensing fees and use of the vendor’s billing portal, for provider clients to purchase the requestor’s bill-only items, could result in cost savings to those provider clients.

The arrangement did not fit within any AKS safe harbor, particularly due to the lack of fair market value demonstration and the absence of a commercially reasonable business purpose for the medical device company’s use of a portal that duplicated its existing billing infrastructure.

The OIG also expressed concern about the arrangement’s anti-competitive risks and risks of inappropriate steering. Because at least some of the provider clients are apparently obtaining value (cost savings) by mandating the use of the vendor’s portal as a condition of doing business, the medical device company’s willingness to contract with the vendor and pay the portal licensing fees could inappropriately steer providers to the company over its competitors who have not entered into such a licensing arrangement with the vendor and agreed to use the portal.

Takeaways

• Remuneration Risk: Paying licensing fees for a third-party vendor billing service may be viewed as an inducement for medical device purchases or referrals.
• No Safe Harbor Protection: Arrangements lacking fair market value and a legitimate business purpose are unlikely to qualify for AKS safe harbor protection.
• Anti-Competitive and Steering Concerns: Facilitating providers’ cost savings by paying licensing fees to use a third-party billing portal can create anti-competitive steering impacts.
• Offensive Use of Advisory Opinions: Based on the opinion, it appears that the medical device company sought the OIG Advisory Opinion to address a commercial relationship it viewed as anticompetitive and in violation of federal law.

Thoughts for the Future

This Advisory Opinion underscores the OIG’s continued scrutiny of financial arrangements that may influence purchasing and referral decisions in the federal health care context. Industry stakeholders should:

• Carefully Evaluate Financial Arrangements: Scrutinize any arrangement that provides financial benefits to customers, ensuring a clear, commercially reasonable business purpose.
• Document Fair Market Value: Support the fair market value of any licensing fees paid.
• Monitor Regulatory Developments: Stay informed of OIG guidance and enforcement trends to ensure ongoing compliance with federal health care laws.

For further guidance on structuring compliant arrangements that avoid AKS risk, organizations should consult with their legal advisors.