OIG: Proposed Arrangement Between Physician and IDTF Does Not Violate the Anti-Kickback Statute

On June 29, 2012, the OIG issued a favorable Advisory Opinion, No. 12-08, concerning a proposal for an independent diagnostic testing facility (the “IDTF”) to hire a physician (the “Physician”) to read and interpret sleep test studies when the Physician is closely related to the majority owners of the IDTF and is further employed by a company that also employs other potential referral sources (the “Proposed Arrangement”).

Although the Proposed Arrangement potentially implicates the Anti-Kickback Statute, the OIG concluded that it would not impose administrative sanctions in connection with the Proposed Arrangement.

Proposed Arrangement. Under the Proposed Arrangement, the IDTF would employ the Physician as a bona fide employee to perform reading and interpretation services for sleep tests performed by the IDTF. The Physician would not order any sleep tests to be performed by the IDTF, and would not be involved with any efforts to solicit patients for the IDTF. Pursuant to his employment agreement, the Physician would receive a fixed salary from the IDTF that would not vary based on the volume of sleep study tests the Physician interprets.

Although the Physician does not hold an ownership interest in the IDTF, his wife and father are the majority owners of the IDTF. The Physician’s wife and father are not in a position to refer patients to the IDTF.

In addition to his proposed relationship with the IDTF, the Physician is also employed by a clinic (the “Clinic”) where his practice involves pulmonary medicine and sleep medicine. The Physician does not have an ownership interest in the Clinic, and although the Clinic employs other physicians, none of the other physicians share space nor do they constitute a “group practice”. Through his employment with the Clinic, the Physician has access to sleep testing equipment and, therefore, none of the sleep tests that the Physician individually orders are referred to an independent diagnostic testing facility.

Anti-Kickback Analysis. First, the OIG relied on the IDTF’s certification that the Physician would be a bona fide employee, and stated that the determination as to whether an employee is a bona fide employee is outside the scope of the advisory opinion process. As a result of the Physician being a bona fide employee, the OIG concluded that the physician’s compensation would be protected under the Anti-Kickback Statute safe harbor for employee compensation.

Next, the OIG analyzed whether the IDTF’s owners are investors that are in a position to influence referrals to the IDTF and, if so, whether the investment interest qualifies for protection under the small entity safe harbor. Ultimately, the OIG concluded that although the Physician qualifies as an indirect owner (due to family ownership) that holds an investment interest greater than the applicable 40% safe harbor threshold, the Proposed Arrangement presents a low risk for fraud and abuse.

In reaching this conclusion, the OIG primarily relied on the fact that the Physician will not make any referrals to the IDTF or otherwise solicit business for the IDTF. Because the Physician’s own referrals would have been the most apparent way that the IDTF owners could have influenced referrals, the OIG concluded that this safeguard significantly reduced the risk of running afoul of the Anti-Kickback Statute. For this reason, among others, the OIG concluded that it would not subject the Proposed Arrangement to administrative sanctions under the Anti-Kickback Statute.

A full copy of the Advisory Opinion is available here – Advisory Opinion 12-08

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