HHS' office of inspector general, which is charged with enforcing the Medicare and Medicaid fraud and abuse laws, issued another warning last week to hospitals that are buying physician group practices to build their integrated delivery systems.
Speaking at a healthcare legal conference in Baltimore, D. McCarty Thornton, the office's chief counsel, cautioned hospitals against "puffing up" payments to physicians for their practices as remuneration for future patient referrals from the physicians' practices.
The anti-kickback provisions of the Medicare and Medicaid fraud and abuse laws bar any form of remuneration to induce patient referrals. The provisions are a major legal hurdle in the development of integrated delivery systems because hospitals must convince legal authorities that what they're paying physicians for their practices is based on fair market value of the practices.
Of primary interest to hospitals is a practice's future flow of business, Mr. Thornton said. "That's what hospitals may be interested in. You just can't pay for it. It's illegal to pay now for future referrals."
In a related development, Rep. Peter Hoagland (D-Neb.) has introduced legislation in Congress that would require HHS to issue advisory opinions to hospitals and other providers on whether their proposed business arrangements would violate the anti-kickback provisions.
The issuance of advisory opinions would be a first for HHS and its inspector general's office, which have long fended off providers' calls for such opinions, saying that they can't pass judgment on possibly criminal activities.
"The (inspector general's office)...should have the responsibility to tell providers whether what they're doing is OK," said Sandy Teplitzky, a healthcare attorney with Ober, Kaler, Grimes & Shriver in Baltimore. "Advisory opinions are needed in light of existing regulations and statutes, which leave many unanswered legal questions for providers."
Mr. Teplitzky spearheaded a coalition of provider and supplier groups that lobbied for the legislation. This week, the coalition, dubbed the Health Industry Initiative, will reveal its membership in a letter of support to Mr. Hoagland.
Under Mr. Hoagland's bill, HHS would be required to answer a number of questions that may be asked by providers, including what constitutes illegal remuneration and whether a proposed transaction falls within previously established legal "safe harbors."