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OIG Issues Unfavorable Advisory Opinion On Proposed Relationship Between a Psychiatry Group and an Anesthesia Group

On November 12, 2013, the Office of Inspector General (the “OIG”) released an unfavorable Advisory Opinion in response to an anesthesiology practice’s (the “Requestor”) inquiry. Specifically, the OIG found that a psychiatry group’s (the “Psychiatry Group”) proposal to pay the Requestor a per-diem rate for anesthesia services while keeping any difference from the amount billed and collected could potentially violate the Anti-Kickback Statute (“AKS”) by allowing the Psychiatry Group to keep such difference in return for referrals to the Requestor.

Background and Analysis
The Requestor was the exclusive provider of anesthesia services to the “Hospital” between 1993 and 2010. In December of 2010, the Psychiatry Group, co-owned by a physician who was board certified in both psychiatry and anesthesia, relocated to the Hospital. During renegotiations of the Requestor’s exclusivity contract in 2011, the Hospital insisted that the contract include a carve-out of anesthesia services for electroconvulsive therapy (“ECT”) procedures, which would be provided by the Psychiatric Group’s co-owner when those procedures were provided by the Psychiatric Group. In 2012, the Hospital expanded the carve-out to include all ECT provided at the Hospital and added a requirement that the Requestor enter “good faith negotiations” with the Psychiatric Group to provide the ECT anesthesia services if the Psychiatric Practice and/or the Hospital determined that a second provider was required (“Additional Anesthesiologist Provision”).

After the 2012 contract went into effect, the Psychiatric Group determined that a second provider was required and submitted a proposal under the Additional Anesthesiologist Provision whereby a Requestor physician would furnish ECT anesthesia services on a part-time basis. The Requestor physician would be required to reassign its billing rights for the ECT services to the Psychiatric Group who would, in turn, bill and collect for such services. The Psychiatric Group would pay a per diem rate to the Requestor and retain the difference between the per diem and the amount collected. Because the aggregate compensation over the course of the agreement was not set in advance and, at least according to the Requestor, was not fair market value (“FMV”), the proposed agreement did not satisfy the Personal Services Safe Harbor to the AKS. Furthermore, the OIG explained that “the safe harbor protects only those payments made by a principal (here, the Psychiatry Group) to an agent (here, Requestor); no safe harbor would protect the remuneration Requestor would provide to the Psychiatry Group.”

The OIG determined that there was more than a minimal risk that the proposal would generate unlawful remuneration for the Psychiatric Group. Specifically, the difference between the per diem rate paid to Requestor and the amount billed and collected for the services could serve as a fee for referring the services to the Requestor.

While the OIG does not otherwise discuss or offer its opinion on the relationships between the Hospital and either of the physician practices at issue, Footnote 5 seems to allude to the possibility that the Hospital’s inclusion of the Additional Anesthesiologist Provision in the 2012 agreement may itself be suspect. Specifically, the OIG seemed concerned that:

i) the Hospital used the provision as a way of compensating the Psychiatry Group for its continued referral of ECT procedures;
ii) the Hospital used its leverage over the referrals to the Requestor as a way of securing the provision; and/or
iii) Requestor agreed to the Additional Anesthesiologist Provision in exchange for the exclusivity arrangement.
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Non-anesthesia provider groups seeking to offer the services of an anesthesia provider or anesthesia group should seek the advice of their health care legal counsel to ensure that the relationships are structured in compliance with applicable fraud and abuse laws and to minimize legal risk.

For more information regarding this and related issues, please contact Adrienne Dresevic, Esq., or Carey Kalmowitz, Esq. at (248) 996-8510, (212) 734-2128 or visit the HLP website.

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