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OIG Issues Advisory Opinion 11-11 Regarding Discounts

August 4, 2011 | Comments Off on OIG Issues Advisory Opinion 11-11 Regarding Discounts
Posted by Beth Christian

The HHS Office of Inspector General has published Advisory Opinion 11-11, which deals with a financial relationship between an entity furnishing supplies, equipment and other items to a skilled nursing facility.  In order to enhance its likelihood of becoming the successful bidder in response to the skilled nursing facility’s RFP, the medical supplier offered to furnish items not covered by Medicare below its costs, while billing the skilled nursing facility the full Medicare Part B rate for Medicare covered services.

The OIG found that the proposed arrangement could potentially violate the Federal anti-kickback statute. In evaluating whether an improper nexus exists between the rates offered for items and services and referrals of Federal business in a particular arrangement, the OIG stated that it would review whether the rate offered for non-covered supplies and equipment would not be considered commercially reasonable in the absence of other, non-discounted business. The OIG found that prices offered to a skilled nursing facility below the supplier’s total costs of providing the items and services “give rise to an inference that the supplier and the skilled nursing facility may be “swapping” the below-cost rates on business for which the skilled nursing facility bears the business risk” (i.e., items not covered by Medicare) in exchange for other profitable non-discounted Federal business (i.e., Medicare covered supplies and equipment), from which the supplier can recoup losses incurred on the below-cost business, potentially through overutilization or abusive billing practices.  The OIG concluded that the proposed arrangement “ poses a substantial risk of such improper “swapping” of business that may run afoul of the anti-kickback statute.”

This Advisory Opinion should be of particular interest to DME suppliers, medical transportation companies, and others that contract with and bill skilled nursing facilities for services rendered to Medicare-covered residents.


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