OIG advisories get mixed reviews

In recent months, the Department of Health and Human Services’ Office of Inspector General (OIG) has issued an increasing number of advisory opinions. The most recent advisory, issued Aug. 20, concluded that a state-chartered hospital authority, which owns and operates a large teaching hospital, can make substantial charitable contributions to an endowment fund affiliated with the university without violating the anti-kickback statute.

Donna Clark, a health care attorney with Vinson and Elkins in Houston, says it is the first opinion to recognize the unique nature of academic medical centers and the various components included in these organizations.

"This is one of the first opinions that recognizes that these are unique situations and recognizes the validity of exchanges of payments that are made to further research and education," she asserts. Clark says the opinion itself acknowledges the complexity of the relationships that exist between the various components of an academic medical center and some of the difficulties in attempting to fit those arrangements into traditional arrangements.

The hospital in question had once been part of the university, which operated the medical school, and the contributions were designed to support and promote education and research at the university’s school of medicine through developing a clinical cardiology services program. The state legislature had given the hospital a separate charter as a hospital authority. However, that charter included a requirement for the hospital to continue to support the medical school in its research and education activities. Clark says that made it relatively easy for the OIG to bless the arrangement.

In addition to those factors, the arrangement included very strict language in the physician contracts, notes Mark Langdon, an attorney with Arent Fox in Washington, DC. "Like most advisory opinions, it is limited to the facts that were presented but it does let academic medical institutions know that properly structured donation arrangements can pass muster," he says. "If academic medical centers want to structure transactions, they can certainly look to this as guidance."

In a separate advisory opinion released Aug. 7, the OIG approved one discount arrangement and disapproved another offered by a vendor to end-stage renal dialysis providers. "Although the outcome is consistent with the OIG’s overall conservative approach on advisory opinions, the quality of the analysis contained in the advisory opinion falls well short of the OIG’s usual standards, and raises more questions than it answers in this complex area," argues Charles Oppenheim, a partner with Foley and Lardner in Los Angeles.

In this case, the vendor proposed two different discounts. One was a uniform discount based on the purchaser’s aggregate annual purchases of any and all dialysis equipment and supplies sold by the vendor. The other was a discount based on total annual purchases of certain designated items sold by the vendor if the purchaser buys a minimum quantity of certain items.

The OIG concluded that the first discount is outside of the safe harbor, but concluded it is unlikely to present significant risk of program abuse. The agency concluded the second arrangement also is outside of the safe harbor, but disapproved it because it potentially presents more than minimal risk of program abuse.

Several health care attorneys criticized OIG in this instance. "A careful reading of the advisory opinion suggests that OIG should have concluded the first arrangement is in the safe harbor and the second presents little, if any, risk of program abuse," says Oppenheim.