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Summary of OIG Advisory Opinion 11-04 

Issued May 6, 2011, and posted May 13, 2011
Written by Joe Kahn; reviewed by Cathy Martin*

On May 6, 2011, the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued a favorable advisory opinion, 11-04, relating to an affiliation arrangement entered into between an Air Force medical group and a community hospital (Arrangement). In this opinion, OIG concluded that the Arrangement does not constitute grounds for the imposition of civil monetary penalties (CMPs), and that it would not impose administrative sanctions in connection with the Anti-Kickback Statute with respect to the Arrangement.

The Arrangement involves a Training Affiliation Agreement (Agreement) entered into between a public community hospital (Hospital) and a U.S. Air Force medical group (AFMG) that operates a medical center on a base located in close proximity to the Hospital. As a result of population shifts following Hurricane Katrina, AFMG determined that it did not have sufficient numbers of patients to sustain certain residency and training programs needed to maintain the quality of its physician staff. Separately, the Hospital determined that there was a shortage of certain physician specialists (for example, pediatric and obstetrics/gynecology physicians) in its community.

Under the Agreement, AFMG physicians practicing in certain identified and agreed-upon specialties will practice at the Hospital and treat Hospital patients, including Medicare/Medicaid beneficiaries, using Hospital facilities, equipment, and supplies. Although the AFMG physicians will remain full-time military personnel, they will be covered by the Hospital's malpractice insurance with respect to the services provided under the Agreement. The parties structured the Agreement to comply with Air Force regulations specifically applicable to the Arrangement. AFMG physicians will only participate in the Arrangement if the Hospital has an identified need for the physician's specialty services. The Hospital has certified that the costs associated with the Arrangement will be offset by the Hospital's avoidance of expenses otherwise associated with the recruitment of needed specialists to the Hospital's community. Neither AFMG nor the physicians will bill any patient or payor, including Medicare/Medicaid, for professional services rendered under the Arrangement. The Hospital, however, will bill the patient or appropriate payor for any technical fees applicable to the services provided.

After noting that the Arrangement implicates both the CMP provisions and the Anti-Kickback Statute, OIG found that the following factors served to mitigate the risk of fraud and abuse associated with the Arrangement:

Anti-Kickback Analysis

OIG found that the risk that the Arrangement is designed to induce referrals is low for the following reasons:

  1. The AFMG physicians do not bill for their services under the Arrangement;

  2. The Hospital rarely serves as a referral source for AFMG, and the instances where it does are primarily driven by the patient's status as a beneficiary of the military's healthcare programs;

  3. The Arrangement furthers a vital public interest by ensuring that AFMG physicians are well trained to provide quality healthcare;

  4. The Hospital provides the facilities regardless of the volume/value of AFMG physician referrals, no referrals are required by the physicians, and the referrals made are not tracked under the Arrangement; and

  5. The costs associated with the Hospital's provision of its facilities/equipment/staff are offset by the savings associated with the Hospital avoiding having to recruit new physicians to the area.

CMP Analysis

OIG found that the Arrangement would not improperly influence Federal healthcare program beneficiaries, and thereby implicate the CMP provisions, for the following reasons:

  1. The parties do not advertise that the AFMG physicians' services are free;

  2. The Hospital bills the patients for the technical fees, and no other free services are provided; and

  3. The Medicare/Medicaid patients seeking treatment at the Hospital do so with the expectation that they will have to pay their usual cost-sharing amounts, and unexpected relief from such payments are unlikely to serve as an inducement.

The Fraud and Abuse Practice Group Leadership would like to thank Advisory Opinions Task Force members Joseph Kahn, Esquire (Nexsen Pruet PLLC, Greensboro, NC), and Catherine A. Martin, Esquire (Adelman Sheff & Smith LLC, Annapolis, MD), for writing and reviewing this summary.

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