OIG Issues Additional Advisory Opinions on Managing Hospital Sleep Lab

Following upon the heels of September’s first-ever Advisory Opinion on sleep testing, the Office of Inspector General today issued the second and third installments of what appears to be the OIG’s Sleep Opinion Trilogy.

These new opinions generally follow the facts of the first opinion – a third party management company provides all of the equipment, technology, supplies, staff and marketing services as part of a local hospital’s performance of Medicare sleep tests “under arrangement.”

Under Opinion 10-23, the Management Company charges the hospital on a fair-market “per-test” or “per-click” basis. This all-in fee is payment for all of the services and equipment provided to the hospital by the manager, including sporadic marketing services.

Under Opinion 10-24, the Management Company charges the hospital a three-tiered, flat rate basis: (i) one fixed, annual fee for the use of the manager’s equipment, (ii) one fixed, annual fee for full-time marketing services, and (iii) one fixed, annual fee for other sleep testing services and supplies. All of these fees would be fair market value for the services and items provided, and none would take into account the value or volume of referrals or other business generated between the parties.

The OIG concluded that the first arrangement could potentially generate prohibited remuneration under the Anti-Kickback Statute and that the OIG could potentially impose administrative sanctions on the manager and hospital for operating under the arrangement.

The second arrangement, however, would pass muster, even though it too could potentially generate prohibited remuneration under the Anti-Kickback statute if the requisite intent to induce or reward referrals were present.

The difference is that the marketing services provided under the first arrangement were included in the “per-click” fee but the fees for the marketing services under the second arrangement were priced on a flat, annual basis. The OIG noted that marketing fees paid on the basis of successful orders for items or services are inherently subject to abuse. The more tests generated by the manager’s marketing efforts, the more fees the manager receives.

Note that like the original opinion, the OIG discussed the lack of “suspect characteristics” in these two new arrangements. “Suspect characteristics” would include physician or hospital ownership in the Management Company or the manager’s providing DME to the hospital, the hospital’s patients, or to persons who obtained their sleep test at the hospital lab.

For more information, please contact Daniel B. Brown, Esq. at (770) 804-6475 or Carey F. Kalmowtiz, Esq. at (248) 996-8510 or (212) 734-0128, or visit the Sleep Centers specialty page on the HLP website.