United States: OIG Advisory Opinion 13-15 - Anesthesiologists: Chickens Or Eggs?

Last Updated: November 25 2013
Article by Robert M. Wolin

It is often said that advisory opinions are requested from the U.S. Office of Inspector General (OIG) when one wants a very safe deal blessed or when one wants to dissuade a competitor or counter-party from entering into or demanding a particular form of transaction. A recent high-profile example of the latter type of opinion request was seen in OIG Advisory Opinion No. 13-09 in which MedAssets asked the OIG for an advisory opinion on a business model very similar to the transactions proposed by Premier, Inc., a competing group purchasing organization.
Several anesthesia groups have sought advisory opinions in an effort to protect their revenues from being carved up in the operating room. The most recent advisory opinion was requested by an anesthesiology group that historically has had an exclusive arrangement to provide anesthesia services in a hospital. In 2011, the anesthesiologists were required by the hospital to exempt a recently recruited psychiatry group's owner anesthesiologist from their anesthesia exclusivity.

Things got worse in 2012. The anesthesiologist's 2012 agreement with the hospital included the following provision:

In the event [the psychiatry group] or the hospital determines that an additional anesthesiologist is needed to provide [psychiatry anesthesia services for ECT (electroconvulsive therapy) patients], [the anesthesiology group] shall negotiate in good faith with [the psychiatry group] ... to provide those services. If, after good faith negotiations, [the anesthesiology group] and [the psychiatry group] [do not reach] agreement for [the anesthesiology group] to provide anesthesia services to [the psychiatry group], then, so long as the last offer from [the psychiatry group] was at a fair market value rate, as reasonably determined by the hospital, [the psychiatry group] ... may contract with an additional anesthesiologist to provide anesthesia services for ECT, and the provision of anesthesia services by that additional anesthesiologist shall not constitute a violation of [the anesthesiology group's right to provide anesthesia services on an exclusive basis].

Shortly after the 2012 anesthesiology agreement was signed, remarkably, the psychiatry group needed an additional part-time anesthesiologist. In its request for the advisory opinion, the anesthesiologists asserted that the amount offered by the psychiatrists was below fair market value. Based upon this assertion, the OIG was unlikely to issue a favorable opinion.

Interestingly, however, the OIG went further and contended that per diem amounts the psychiatry group offered to the anesthesiologists would not qualify for protection under the personal services and management contract safe harbor for a number of reasons, including that the "aggregate compensation" to be paid over the term of the agreement was not set in advance. In this opinion and in prior opinions, the OIG has stated that the fact that a proposed arrangement would not fit in a safe harbor does not end the advisory opinion inquiry under the anti-kickback statute. Rather, the OIG indicated that it must examine the totality of the facts and circumstances to determine the extent of the risk posed by the proposed arrangement. In this case, it does not appear that the OIG seriously looked at the acceptability of a part-time group contractor under the anti-kickback statute. The engagement of a contractor on a part-time basis would be considered to be consistent with the anti-kickback statute, in most instances, provided that the arrangement was consistent with fair market value.

The OIG then stated that the safe harbor protects only those payments made by a principal (here, the psychiatry group) to an agent (the anesthesiology group); no safe harbor would protect the remuneration the anesthesiology group would provide to the psychiatry group. In the opinion, the OIG indicated that the remuneration from the anesthesiology group to the psychiatrists consisted of the right to receive a portion of the anesthesiology group's anesthesia services revenues, in return for the psychiatry group's referrals of ECT patients to the anesthesiology group for anesthesia services. This is similar to the position that the OIG took when an ambulatory surgery center proposed to provide anesthesiology services through a subsidiary, rather than through an independent contractor agreement with an anesthesiology group. See OIG Advisory Opinion 12-06, as reported in the June 21, 2012, issue of the Health Law Update.

The OIG, in its analysis, appears to use a first-in-time revenue ownership assumption, e.g., a which came first, the chicken or the egg decision model. Under the OIG's approach, whether a group or provider's decision to provide certain services through a contractual arrangement is considered a diversion of a portion of the contractor's revenue will depend upon who first had control of a patient service. If the psychiatry group contracted with a third party anesthesiologist, who had no relationship to the hospital or the patients to provide services, it is unlikely that that OIG would consider that arrangement problematic, as the anesthesiologist had no control over the psychiatry group's anesthesiology patient service.

On the other hand, based upon the facts in Advisory Opinions 13-15 and 12-06, the OIG believed that each of the anesthesiology groups controlled the provision of anesthesiology services to the patient groups and that the hospital and psychiatrists in this case, and the ASC in the case of Advisory Opinion 12-06, were interlopers in the anesthesiologists' revenue stream. In this case, the OIG believes that the psychiatrists became interlopers through the anesthesiologists' 2012 agreement with the hospital. Indeed, the OIG states that the 2012 agreement gave the psychiatrists the "ability to solicit" the fee-splitting remuneration for its ECT patient referrals to the anesthesiologists. However, before migrating their practice to the hospital, did the psychiatry group provide its own services? If so, would it matter that they did not wish to share their existing revenue with a third party group of anesthesiologists?

The OIG's analytical approach will become more problematic to apply as healthcare providers become more integrated. When expanding into ancillary lines of business, with an existing contractor, careful consideration should be given to the potential argument that the arrangement may permit a provider or physician group "to do indirectly what they cannot do directly; that is, to receive compensation, in the form of a portion of the [contractor's] revenues, in return for their referrals."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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