The HHS Office of Inspector General ("OIG") has issued a Special Advisory Bulletin that identifies certain contractual joint ventures as suspect under the federal Anti-Kickback Law. The types of arrangements addressed in the Bulletin include those in which a health care provider in one line of business, such as a hospital, expands into a related health care business, such as the supply of durable medical equipment ("DME"), by contracting with an existing provider of the related business. The Bulletin identifies the following characteristics of particularly suspect arrangements: (1) the owner is expanding into a related business that is wholly dependent on patient referrals from the owner's existing business; (2) the owner neither operates the new business itself nor commits substantial financial, capital, or human resources to the business, contracting out substantially all the operations of the new business; (3) the party contracting with the owner is an established provider of the same services as the owner's new line of business (i.e., absent the contractual arrangement, the contracting entity would be a competitor); and (4) payments to the owner, which take the form of residual profit from the new business, are based on the owner's referrals to the new business. In addition to the hospital/DME supplier arrangement, the Bulletin offers, as examples of prohibited arrangements, situations in which nephrologists contract with an existing supplier of home dialysis supplies to provide home dialysis supplies on behalf of the nephrologists, and a DME company establishes a mail order pharmacy that is managed by an existing mail order pharmacy. The ventures listed in the Bulletin are not exhaustive, however, and any line of business operated by a health care provider that includes any of the characteristics set forth above should be examined for potential Anti-Kickback Law implications.
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