Advisory Opinion Muddies the Waters on Preauthorization

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After reviewing a proposed arrangement pursuant to which a company would handle the processing and submission of insurance preauthorizations for various imaging services for the benefit of multiple imaging centers, the HHS OIG concluded that it would not penalize the arrangement, even though it did not qualify under any safe harbor of the federal anti-kickback statute.

“The opinion will probably provide limited utility to the imaging industry because it does not address those arrangements among imaging centers and referring physicians that are becoming increasingly prevalent in the industry.”

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Josh Kaye, Esq

At first glance, the favorable opinion seems to provide a welcome reprieve for an imaging industry that has faced significant reimbursement cuts and ongoing health care regulation over recent years. The opinion, however, is likely to have limited value because it fails to provide the needed clarity to those radiology groups and imaging centers that are trying to comply with the anti-kickback law, but face the practical business issue of obtaining insurance preauthorization when a referring physician’s office refuses (or otherwise fails) to do so.

Background

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Jerry Sokol, Esq

In Advisory Opinion 08-12, posted September 26, 2008, the OIG reviewed a proposed arrangement pursuant to which a newly formed company (Newco) would handle the processing and submission of insurance preauthorizations and other purely administrative functions on behalf of multiple imaging centers. In exchange for such services, each imaging center would pay Newco a per-service fee for each preauthorization that it handled. The fee would be consistent with fair market value and would be due from the imaging center to Newco, regardless of whether the insurance company approved the imaging study. Most of the preauthorizations would involve commercial payors, though some claims could involve a federal health care program payor.

The OIG commented that the proposed arrangement would not qualify under the anti-kickback law’s safe harbor for personal services and management contracts because the fee structure to be paid by the centers to Newco would vary based on the number of services performed by Newco, as opposed to being fixed in the aggregate. Notwithstanding, the OIG determined that the proposed arrangement would not violate the anti-kickback law. The OIG’s analysis relied primarily on four factors.

Key Factors

First, Newco and its affiliates are not, and would not be, health care providers, practitioners, or suppliers, and are not, and would not otherwise be, affiliated with the health care industry, except as a provider of the administrative services under the proposed arrangement.

Second, Newco is not, and would not be, in a position to receive, steer, or influence referrals of items or services covered under a federal health care program.

Third, the proposed arrangement is distinguishable from those arrangements involving the marketing or promotion of an item or service. Newco’s services are purely administrative and did not promote any specific item or service. Each of the centers would be responsible with providing Newco with the patient information required for Newco to submit the preauthorizations. The centers would be Newco’s only source of patient information. If Newco required additional patient information, it would obtain such information from the center. Newco would not be in contact with any private or public health care beneficiaries or referring physicians in the performance of the preauthorization services. Accordingly, Newco’s services could not generate any federal health care business.

Fourth, the proposed arrangement is distinguishable from those potentially problem-causing arrangements where certain services are provided by, or on behalf of, an imaging company or imaging equipment manufacturer to an existing or potential referral source.

It is significant that the OIG cautioned that if a center or another third party (such as a manufacturer) paid Newco to provide the services for, or on behalf of, a referral source (such as a physician), and thus relieved the referral source of the cost of processing and submitting preauthorizations, then such center or other third party could be providing prohibited remuneration to the referral source, in violation of the anti-kickback law.

Lessons Learned

Advisory Opinion 08-12 seems to be favorable to the imaging industry, as it permits a third party to perform