What’s a kickback? Don’t assume you know

Medical College of Georgia hospital learns lesson the hard way: Beware of vendors bearing gifts

Compared to some government regulations, like HCFA’s Byzantine Stark II self-referral regs, the Anti-Kickback Statute seems easy enough to understand. But don’t be fooled. A recent case in Georgia, (not to mention some delicately worded advisory opinions recently released by the Office of the Inspector General) makes it clear that the government’s idea of a kickback may differ sharply from your own.

The Medical College of Georgia in Augusta, a teaching hospital, didn’t suspect anything was amiss when a vendor transmitting monitoring data from cardiac patients’ homes to the hospital’s cardiology unit offered a proposal. Instead of having the data transmitted to the vendor and then relaying it to the hospital, the company said it would be more efficient if it could install a computer and fax machine in the hospital that would directly receive the information. The hospital had only to sign an agreement pledging that the equipment would not be used for other than its intended purpose.

The hospital was shocked when it received a letter from a senior attorney in the Justice Department that accused the hospital of kickbacks, says Andrew Newton, associate legal advisor for the Medical College of Georgia. The letter asked the hospital to respond and to provide relevant documentation.

The irony was the hospital was not the real target of the investigation. It turned out that the vendor was under scrutiny by DOJ, which had subpoenaed the company’s customer records. Newton sent a letter in August explaining the situation and enclosing the agreement the hospital signed. He has yet to receive a response.

"I don’t think we did anything wrong," says Newton. Nonetheless, he says he would "shy away" from signing a similar agreement. Indeed, in hindsight the hospital probably could have used its own in-house equipment to accomplish the same tasks.

"I don’t think these vendors understand how much trouble they can get hospitals in," warns Jessy Huebner, compliance officer for Methodist Medical Center in Jacksonville, FL. Vendors offering freebies are much less common than they used to be, now that the government has providers running scared of kickbacks, Huebner adds.

But just last week, a vendor called him and offered to let the hospital temporarily use a piece of radiology equipment. The hospital could keep the equipment in what essentially would have been a freebie arrangement, as long as it said nice things about the devices to doctors. Huebner turned the deal down.

The key to avoiding a date with your local U.S. Attorney, say experts, is not merely to avoid kickbacks, but also to avoid any appearance of impropriety. That means paying or being paid fair market value for goods and services when you are dealing with potential sources of referrals, for example.

In any event, these vendor specials often don’t turn to be such bargains, warns Huebner. You might get free equipment from a vendor, only to find that there’s a steep price tag when you later order parts and supplies. He’s also wary of free educational seminars offered by vendors.