In an advisory opinion, attorneys with HHS say a company could be breaking the law if it sealed a deal to provide medical supplies and equipment to a state-run nursing home at below-cost prices as part of a contract that would also make the company the exclusive supplier for the home's Medicare-funded supplies.
Inspector general warns of risk in supplier arrangement
The adverse advisory from HHS’ inspector general’s office said the anonymous supplier could use its power to provide cut-rate prices to the nursing home to induce more referrals of Medicare-funded products to m ake up any loss on the overall contract. The parties might even be tempted under the arrangement to increase profits through “overutilization or abusive billing practices,” the HHS opinion says.
The government lawyers concluded the proposed arrangement created a “substantial risk” that the nursing home itself was soliciting improper discounts.
The supplier alternately proposed setting up a separate corporation to supply the Medicare-funded supplies, but HHS said that arrangement carried the same risks as the original because “superficial appearances” like separate but commonly owned companies don’t mitigate the underlying risk.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.