April 2000

Health Care E-lert - OIG Considers Anti-Kickback Implications of Hospital Billing Consultant Arrangement, 04/14/00

4 min

In its first Advisory Opinion of the millennium, the U.S. Department of Health and Human Services Office of Inspector General ("OIG") determined that a consulting arrangement to identify instances in which hospitals overcharged and undercharged private payors would not result in sanctions under the Federal anti-kickback statute. However, the OIG cautioned that "the mere carve out" of Federal health care program billing would not necessarily protect such arrangements from anti-kickback scrutiny.

Under the arrangement at issue in the Advisory Opinion, hospitals paid a consulting firm a percentage of the amount that the hospitals recovered as a result of the firm's retrospective identification of undercharges to private payors for hospital labor and delivery, endoscopy, and surgical services. In addition to conducting such retrospective audits, the consulting firm held post-audit educational sessions with hospital nursing directors of the audited service areas, and provided follow-up services to monitor hospital improvement in billing practices. Charges for all patients 65 years of age or older, as well as charges where any Federal health care program was designated as a primary or secondary payor, were excluded from the audit.

As a threshold matter, the OIG recognized that the anti-kickback statute applies only to arrangements involving items or services for which payment may be made under a Federal health care program such as Medicare, Medicaid, or TRICARE (formerly CHAMPUS). The OIG concluded that the arrangement at issue presented minimal risk of having an adverse effect on Federal health care program billing or coding. However, this conclusion was not based solely upon the arrangement's exclusion of Federal health care program claims from the audit process. Rather, the OIG reasoned that because the arrangement involved wholly retrospective billing audits, it presented little opportunity for improper referrals under the anti-kickback statute.

The OIG remarked that consulting arrangements involving only private payor billings could nonetheless implicate the anti-kickback statute, if at least one of the parties to the arrangement intends billing practices with private payors to have a "spillover effect" on billing or coding practices for claims submitted to Federal health care programs. For example, the opinion cited an arrangement whereby a hospital pays a consultant based upon a percentage of collections from private payors to train a hospital's coders to characterize services in ways that may result in upcoding. The OIG noted that such an arrangement could implicate both the anti-kickback statute and the False Claims Act if either party intends such practices to carry over to claims submitted to a Federal health care program.

We note that even in the absence an intention for such a "carry over effect," the knowing submission of a false claim to a private health care benefit program constitutes a "federal health care offense" under the criminal provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce referrals for items or services reimbursable by any Federal health care program. Where remuneration is paid with the intent to induce referrals for items or services for which payment may be made by a Federal health care program, the anti-kickback statute is violated. By its terms, the statute ascribes criminal liability to parties on both sides of an impermissible "kickback" transaction. For purposes of the anti-kickback statute, "remuneration" includes the transfer of anything of value, in cash or in kind, directly or indirectly, overtly or covertly.

Violation of the statute constitutes a felony punishable by a maximum fine of $25,000, imprisonment up to five years, or both. Conviction will also lead to automatic exclusion from Federal health care programs, including Medicare and Medicaid. The OIG may initiate administrative proceedings to exclude persons from Federal and State health care programs or to impose civil monetary penalties for fraud, kickbacks, and other activities prohibited under Federal law.

The Advisory Opinion may be accessed in its entirety through the OIG's website at www.oig.dhhs.gov.

For more information, please contact Peter Parvis at 410.244.7644 or via e-mail.