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OIG Opines Physician Joint Ventures Could Violate Anti-Kickback Statute

February 20, 2024

The Department of Health and Human Services Office of Inspector General (OIG) recently issued Advisory Opinions 23-05 and 23-06 determining that two proposed physician joint ventures could run afoul of the federal Anti-Kickback Statute. The OIG explained in detail why the proposed physician joint ventures may not qualify for safe harbor protection. In addition, they opined that proceeding with the proposed joint ventures could lead to False Claims Act violations.

Safe-Harbor Protections and the Anti-Kickback Statute

The federal Anti-Kickback Statute makes it a crime to knowingly and willfully give, receive, ask for, or offer anything of value to encourage or in exchange for referring someone for a service covered by a Federal health care program such as Medicare. This law also applies to situations where something of value is offered to influence the buying, leasing, ordering, arranging, or recommending of any product or service covered by a Federal health care program.

The U.S. Department of Health and Human Services has identified numerous “safe harbor” protections.  Safe harbors are various payment and business practices that, although they potentially implicate the federal Anti-Kickback Statute, are not treated as offenses under the statute.  The full list of safe harbors can be viewed at http://42 C.F.R. §§ 1001.952(a)-(kk).

What are OIG Advisory Opinions?

The Health Insurance Portability and Accountability Act of 1996 (HIPAA), requires OIG to give advice on how the federal Anti-Kickback Statute and certain other rules apply to different proposed arrangements. It does this by issuing  Advisory Opinions.

Some examples of the types of things OIG weighs-in on are:

  1. What counts as a prohibited payment under the federal Anti-Kickback Statute.
  2. Whether a particular arrangement meets the criteria set by the law or regulations (known as safe harbors) for activities that are okay and don’t involve prohibited payments.
  3. What counts as encouraging the reduction or limitation of services to people in the Medicare or Medicaid programs.
  4. Whether a certain activity or plan could lead to sanctions under specific sections of the law.

Although the aim is to give useful advice, these opinions are binding and can only be relied upon by the people who requested them. The OIG publishes an edited version of each opinion on its website for information, but these opinions don’t legally bind or apply to anyone else.

Proposed Joint Venture No. 1: IntraOperative Neuromonitoring Services

Advisory Opinion 23-05 involves intraoperative neuromonitoring services (IONM).  IONM is a way to observe a patient’s brain and nervous system during certain surgeries that could put those systems at risk. There are two main parts to IONM: the technical component and the professional component.  A neurophysiologist present in the operating room performs the technical component. The neurophysiologist sets up the IONM equipment and makes sure everything is working as it should while the surgery is happening.  On the professional side, a neurologist plays a key role, but they’re not physically in the room. Instead, they’re in a different location, often remote, keeping a close eye on the test results and waveforms produced by the IONM equipment. They do this in real time, using a dedicated internet connection to monitor what’s happening during the surgery.

The person requesting the Advisory Opinion (“Requestor”) partners with different hospitals and surgical centers through an agreement for IONM services. Requestor uses their own neurophysiologists for the technical side of monitoring during surgeries and hires neurologists, either directly or through another group they work with, for the professional side.

In the scenario presented to the OIG, Requestor would create a new company, “Newco,” to handle these services. A group of surgeons would own the new company, but they wouldn’t be very involved in running it. Instead, they’d rely on the Requestor for important services. The surgeons would make money from Newco, which could cause legal issues under the Anti-Kickback Statute.

Despite the Requestor’s intention to adopt the arrangement for competitive reasons, the OIG expressed concerns about patient steering, unfair competition, and the potential for increased costs to federal health care programs.  As such, the OIG opined the proposed arrangement could violate the Anti-Kickback Statute.

We conclude that, based on the facts certified by Requestor, safe harbor protection would not be available to all of the Proposed Arrangement’s streams of remuneration. For example, the opportunity for Newco to generate a profit—through the difference between the fees paid by Newco to each of Requestor and Practice under the services agreements and the reimbursement Newco would receive for such services—would not be protected by any safe harbor.


Proposed Joint Venture No. 2: Anatomic Pathology Laboratories

Advisory Opinion 23-06  was issued in response to an arrangement proposed by a pathology laboratory (“Requestor”) with Physician Laboratories and Non-Physician Laboratories.  Commercial insurance companies pay Requestor for pathology services in two parts: technical and professional. The technical part involves preparing the specimen physically, like making a glass slide for a pathologist to check. The professional part is about the pathologist analyzing the slide and reporting the findings to the doctor who requested the test. The Requestor confirmed that a majority of the pathology tests they do come from doctors who order these tests to help diagnose and treat patients.

In the proposed plan, the Requestor would make formal agreements with both Physician Laboratories and Non-Physician Laboratories. These agreements would state that the Requestor has to buy the technical part of pathology services from these labs for certain tests related to the body’s structure. The labs would handle the technical side of the tests, and then the Requestor would do the professional part, analyzing the results. The Requestor would bill commercial insurance companies for both the technical and professional parts, and in return, pay the labs a fair fee for the technical work they did. The idea is that the Requestor wants to buy the technical part from these labs, do the professional part themselves, and charge insurance companies for both.

Although Requestor asserted that the proposed arrangement entails fair market value compensation, OIG raised concerns regarding potential violations of the federal Anti-Kickback Statute. The OIG further highlighted the risk of remuneration influencing referrals and the absence of safe harbor protection.  The OIG then opined the proposed arrangement could violate the Anti-Kickback Statute.

The Proposed Arrangement would not be protected by the safe harbor for personal services and management contracts and outcomes-based payment arrangements. In particular, Requestor was unable to certify that the aggregate services contracted for would not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services.



Both scenarios highlight common themes and challenges in the proposed arrangements.

  1. Lack of Safe Harbor Protection. In both cases, the arrangements may not qualify for safe harbor protection, raising questions about the legality of certain remuneration streams.
  2. Indirect Financial Incentives. The arrangements create financial incentives that could indirectly influence referrals, potentially compromising the objectivity of medical decision-making.
  3. Carve-out of federal health care program business. The carve-out of federal health care program business may not absolve the arrangements from anti-kickback concerns, as regulators express reservations about such practices.

The proposed arrangements in anatomic pathology and IONM services underscore the complex landscape of healthcare partnerships. Despite efforts to navigate within legal boundaries, concerns persist regarding potential violations of the anti-kickback statute. As the healthcare industry continues to evolve, stakeholders must remain vigilant in assessing compliance risks and seeking legal guidance to navigate the intricate web of regulations.

We Assist Whistleblowers Expose Fraud 

The Whistleblower Law Collaborative LLC, based in Boston, devotes its practice entirely to representing clients nationwide in bringing actions under the federal and state False Claims Acts and other whistleblower programs. Among the firm’s many successes is the government’s $18.25 million settlement with Athenahealth for violations of the Anti-Kickback Statute, among other allegations.  If you are aware of healthcare fraud, we urge you to contact us for a free, confidential, consultation.