In recent years, the federal government has made the use of technology in medicine an increasing priority. The government has promoted its implementation through such things as bonus payments in the Medicare and Medicaid programs for the use of electronic prescribing and for the use of qualified electronic medical records. Under several of these federal programs, providers who do not begin using the technology are slated to be hit with “penalties” in the way of decreased Medicare reimbursements in upcoming years.

Part of the rationale for the government’s promotion of technology is its increased emphasis on the importance of clinical integration. The government has made clear that there should be more communication between and among health care providers. This is a theme that permeates the Patient Protection and Affordable Care Act (ACA), better known as the health care reform legislation.

One of the biggest hurdles providers face in implementing the new technologies is cost. Simply speaking, technology is not cheap. This is especially true for small providers (such as solo doctors) or providers in rural communities.

Further compounding this problem for providers are the hurdles of the fraud and abuse laws (such as the federal Anti-Kickback Statute and Stark Law). These laws can make it complicated for health care providers to share or help fund technology implementation without danger of running afoul of these laws.

On December 19, 2012, the Office of Inspector General (OIG) of the Department of Health and Human Services posted an advisory opinion (No. 12-20). It addressed the issue of shared use of an electronic interface between community physicians/practices and a hospital. Looking closely at the specific purpose for the interface and the mechanics of how the interface operated, the OIG approved the arrangement, finding that it would not “generate prohibited remuneration” and therefore the OIG would not impose administrative sanctions under its Anti-Kickback Statute authority. In particular, the OIG closely examined whether the provision of the free interface services was integral to the hospital’s business, or whether the use of the interface would have independent value to the participating physicians.

Although OIG advisory opinions are only usable by the opinion’s requestor, the opinion is helpful because it sheds insight as to the factors the OIG looks to in examining arrangements involving shared use of technology within a community. Given the increased pressure to add technologies in the health care field, and the burdens of the costs to providers, it is likely to be something that providers and their attorneys will be increasingly looking toward.

Factual Background

The requestor of the opinion was a hospital located in a health professional shortage area (HPSA). An HPSA is designated by the federal government as having a shortage of primary care or certain other fields of health care providers. An HPSA may be geographic (such as a county or service area), demographic (such as low income population) or institutional (such as a federally qualified health center). The requestor proposed providing free access to an electronic interface to physicians and physician groups in the community. According to the opinion, the interface is software that allows two separate systems to communicate. The sole purpose of the interface, as certified by the requestor, is to transmit orders and results. Under the arrangement, the physicians could use the interface to transmit orders for laboratory and diagnostic services to the hospital and to likewise receive results from the requested services. The hospital would provide support services to maintain the interface, including software upgrades. The participating physicians would be required to take care of all other aspects of their own electronic health records system, including all hardware and connectivity services, to provide them with the ability to communicate through the interface.

OIG Legal Analysis

As it does in all of its advisory opinions, the OIG began its analysis with an overview of the federal Anti-Kickback Statute. The federal Anti-Kickback Statute makes it a crime to “knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable” by a federal health care program (e.g., Medicare and Medicaid). Criminal liability may be imposed on both parties to the transaction. A violation of the Anti-Kickback Statute is a felony with penalties that include up to a $25,000 fine for each offense and/or imprisonment of up to five years. In certain situations, the OIG may also initiate administrative proceedings for civil monetary penalties in certain cases.

The OIG then turned to state what does not constitute an implication of the Anti-Kickback Statute — when “remuneration is not offered, paid, solicited or received.” The OIG stated, therefore, that its threshold question was “whether the free access to the interface and the related support services that the requestor would provide … would constitute remuneration to the participating physicians” under the act. The OIG ultimately concluded that they would not constitute remuneration.

In so concluding, the OIG cited to its own historical guidance. It noted that it has always been suspect of arrangements for the provision of free or below-market goods, as they may violate the Anti-Kickback Statute. However, the OIG then discussed that it has previously “distinguished between free items and services that are integrally related to the offering provider’s or supplier’s services and those that are not.” The OIG cited a previous example from the Federal Register of a free computer provided by a laboratory to a physician’s office. In this example, the computer would have no independent value to the physician if the computer could only be used to obtain test results from the laboratory. Conversely, if the computer could be used for other purposes it would have independent value and could constitute an illegal inducement.

In the proposed arrangement, the OIG noted that the interface would only by used by participating physicians to transmit orders to, and receive results from, hospital laboratory and diagnostic services. In this regard, the OIG concluded that the offered services were integrally related to the hospital’s services and that the access to the interface would have no independent value to the participating physicians. The OIG found this situation to be analogous to the above-noted example of the provision of a computer by a laboratory to a medical practice for the sole purpose of receiving results. Therefore, the OIG determined that the arrangement would not implicate the federal Anti-Kickback Statute.

Because the arrangement would not generate prohibited remuneration under the act, the OIG would not impose administrative sanctions.

As is standard for all of its advisory opinions, the OIG cautioned that its analysis was limited to the proposed arrangement and it offers no opinion on ancillary or related arrangements. It further included standard limitations, such as that the opinion is limited to only the statutory provisions specifically cited within it. The OIG makes no assurances that the arrangement is legal under any other laws or regulations, including the federal Stark Law. Further, the opinion may only be relied on by the requestor.

While the opinion may only be relied upon by the parties to whom it is issued, as noted above, it does provide insight to practitioners as to factors the OIG examines in arrangements that may involve the provision of free or below-market-value technology. •

Vasilios J. Kalogredis is the president and founder of Kalogredis Sansweet Dearden & Burke, a health care law firm, and Professional Practice Consulting Inc., a health care consulting firm, in Wayne, Pa. He can be contacted at 800-688-8314 or at BKalogredis@KSDBhealthlaw.com.

Karilynn Bayus is an associate at the firm. Her practice involves litigation of health care-related matters. Bayus graduated from Temple University’s Beasley School of Law in 2006. She may be reached at KBayus@KSDBhealthlaw.com.