HHS' inspector general's office issued a seven-page advisory bulletin cautioning hospitals and other providers against entering into certain joint venture arrangements in which they profit from making patient referrals. For example, a provider may create essentially a shell organization to market products or services, such as durable medical equipment, and contract with a would-be competitor to provide the products or services. Such arrangements are problematic when they serve the provider's existing patient base and call for little or no financial risk or other investment on the part of the provider, the bulletin said. "The owner's primary contribution to the venture is referrals," the bulletin said. "The practical effect of the arrangement, viewed in its entirety, is to provide the owner the opportunity to bill insurers and patients for business otherwise provided by the manager/supplier (joint venture partners)."
The office warned healthcare providers about such joint ventures in a 1989 fraud alert. Washington attorney Mac Thornton, former chief counsel to the inspector general, said the latest bulletin offers advice geared toward contractual joint ventures that have emerged in the past several years. Thornton said antikickback and self-referral laws halted a major proliferation of problematic joint ventures in the 1980s. "Now a new generation of joint ventures has arisen that the inspector general feels raise the same concerns," Thornton said. "This is a pretty strong warning shot about these types of contracts." Read the bulletin. -- by Mark Taylor