Arrangements between and among medical service providers and others in the health care industry are highly regulated, in particular due to governmental concerns about fraud and abuse. Health care providers, and those they do business with, therefore must be careful when entering into arrangements for the provision of services. This may be especially so when the services offered are free-of-charge or below-market value.

On August 30, the Department of Health and Human Services (HHS), Office of Inspector General (OIG), issued a favorable advisory opinion (No. 12-10), permitting a radiology group to provide pre-authorization services free of charge to physicians and patients under the federal Anti-Kickback Statute.

The opinion highlights that where a provider offers free or below-market-value services for services that are integral to his or its own services, and where there is a legitimate business reason for the provision of the services, there is a lower, albeit not absolute, risk of fraud and abuse.

Factual Background

The requestor of the opinion was a physician-owned radiology group. The requestor proposed offering to obtain pre-authorization services for radiology services provided by it. The OIG explained that some commercial insurance providers require pre-authorization prior to the provision of imaging services in order to control over-utilization. The OIG noted that Medicare generally does not require pre-authorization for imaging. However, some Medicare and Medicaid patients are also enrolled in health maintenance organizations that require such pre-authorizations. According to the requestor, the party responsible for obtaining the pre-authorizations varies among insurers and may be placed on either the patient, the radiology services provider, the patient’s primary care physician or the referring physician. Notwithstanding the fact that different parties may have the responsibility for obtaining the pre-authorization, it is the radiology services provider who stands to have its reimbursement for said services denied if not properly done.

When a patient’s insurer who was seeking services from the requestor has a pre-authorization requirement, under the proposed arrangement, the requestor would contact the insurer and provide any of the required medical documentation to support medical necessity. The requestor would obtain the required information from the referring physicians and/or the patients. According to the opinion, the requestor’s services would be free and available to all patients and referring physicians using the requestor’s services “without regard to any physician’s overall volume or value of expected or past referrals.” The only stated exception to this arrangement would be that the requestor would not perform the services where its own contract with an insurer prohibited it from providing the pre-authorization.

The requestor further certified to the OIG that no payments would be made to referring physicians under this proposed arrangement nor are there any ancillary agreements with referral sources (whether explicit or implicit) in connection with this arrangement.

Under the proposed arrangement, when contacting insurers, the requestor’s representatives would identify themselves as representatives of the requestor and would disclose the nature of this arrangement. The requestor would follow all insurers’ rules for submitting documents and would further provide each physician with a copy of all information it submits to the insurers pursuant to its pre-authorization services. The requestor further certified it would also make this information available to the HHS. The requestor would not guarantee or assure physicians or patients that pre-authorization would be approved. All federal and state privacy rules would be complied with in the carrying out of the pre-authorization services.

The opinion stated that the requestor further asserted that due to the high number of insurers and plans, where requirements may change from year to year, it would not be possible for it to monitor the various plans’ requirements.

OIG Legal Analysis

As is customary in all of its advisory opinions, the OIG began 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 such as Medicare or Medicaid. Penalties for the violation include up to a $25,000 fine for each offense and/or imprisonment of up to five years. The OIG may also initiate administrative proceedings for civil monetary penalties in certain cases.

The OIG reiterated its longstanding suspicions of arrangements that involve the provision of free or below-market cost of goods or services. The OIG also stated that the “OIG consistently has distinguished between a provider that offers free items and services that are integrally related to that provider’s services and those that are not.”

In accordance with this distinction, the OIG noted that while obtaining pre-authorizations has some potential independent value to the referring physicians, whether it benefits a particular referring physician will vary. Where a patient’s contract places the obligation on the referring physician to obtain the pre-authorization, the referring physician will be relieved of an express obligation. This would not be as much so where the obligation is placed on the provider of radiology services or there is no express designation of whose obligation it is to obtain the pre-authorization. As the OIG stated, “When a party in a position to benefit from referrals provides free administrative services to an existing or potential referral source, there is a risk that at least one purpose of providing the services is to influence referrals.”

The OIG ultimately concluded that the proposed arrangement presented a low level of risk and therefore it would not impose administrative sanctions under the Anti-Kickback Statute in connection with this arrangement. The OIG’s rationale was as follows.

The OIG acknowledged that while the arrangement could result in remuneration to the physicians who would otherwise have to utilize their own administrative resources to obtain the pre-authorization, the OIG found the likelihood of fraud and abuse under these circumstances to be low. The OIG stated that no particular physicians would be targeted, the requestor would be unlikely to know the physicians’ obligations as to pre-authorizations and given the great number of plans, a physician would be relieved of any obligations “by chance, not design.” The OIG also stated that the fact that the pre-authorization services were made available equally to all patients also reduced the risk of fraud and abuse.

The OIG also concluded that the arrangement had certain safeguards that further lowered the risk of fraud and abuse. These included that there are no payments or other ancillary agreement to or with referring physicians that would reward referrals; there would be no assurance made of approval of pre-authorizations and all federal and state privacy rules would be complied with in carrying out the services.

Another positive attribute cited by the OIG in this transaction was the transparency in which it would be carried out. For instance, the requestor’s representatives would identify themselves to insurers as representatives of requestors, describe the nature of the service and furthermore, each physician would be provided a copy of all information submitted to insurers to obtain pre-authorizations.

Lastly, the OIG emphasized that the requestor had a legitimate business reason for providing these services. Only the requestor’s payments for its services depended on proper pre-authorizations being obtained, regardless of which party a contract may place the responsibility on to obtain the authorizations. Thus, there is a legitimate and compelling reason for the requestor to provide the services, aside from inducing referrals.

An additional note was made in this opinion by the OIG that nothing in the opinion should be read to mean that imaging centers are required to offer or provide free pre-authorization services.

For all these reasons, the OIG concluded that while the arrangement could potentially generate prohibited remuneration under the federal Anti-Kickback Statute (if the requisite intent were present), it would not impose administrative sanction.

As in all of its advisory opinions, the OIG cautioned that its analysis was limited to only the statutory provisions cited within it. It makes no assurances that the arrangement is legal under any other laws or regulations, including the federal Stark Law. While the opinion may only be utilized and relied upon by the parties to whom it is issued, it does provide helpful guidance as to factors the OIG looks to for practitioners with clients looking to structure a similar arrangement. •

Vasilios J. Kalogredis is the president and founder of Kalogredis, Sansweet, Dearden and 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

Karilynn Bayus is an associate at the firm. Her practice involves litigation of health care-related matters. She may be reached at