• Three Recent OIG Opinions Provide Guidance on Permissible Payments for Marketing Activity in Sleep Center Arrangements
  • February 8, 2011
  • Law Firm: Drinker Biddle Reath LLP - Philadelphia Office
  • Per-test marketing fees paid by hospitals to sleep centers have recently come under fire from the Office of Inspector General of the U.S. Department of Health and Human Services (OIG) in a set of three recent advisory opinions on arrangements between hospitals and sleep-testing providers. The OIG approved a fixed fee arrangement for a sleep center to provide marketing services on behalf of a hospital in one opinion, but condemned a separate deal in which a per-test fee covered both marketing services and all other services of the sleep center. In the third case, the OIG approved a per-test fee for sleep center services which excluded marketing.

    OIG Advisory Opinions 10-23, 10-24 and 10-14 described essentially the same arrangement: a sleep-testing provider furnished equipment, technology, supplies and staff necessary to operate a hospital's sleep center; the hospital provided the space, utilities, housekeeping, communications, pharmacy and other support services for the sleep center. In two cases (Opinions 10-23 and 10-24), the sleep-testing provider also furnished marketing and education services for the sleep center. The sleep center in Opinion 10-23 provided a part-time marketing manager who, among other things, would visit the offices of potential physician referrals sources and educate the physicians and their staff about the hospital's sleep-testing services and the test ordering process. In Opinion 10-24, the sleep center provided the same marketing services on a full-time basis. Both arrangements contained various safeguards, including: the sleep-testing provider's compensation was represented to be fair market value; no physician ownership in the sleep-testing provider; and no ancillary services were provided by the sleep-testing provider. The sleep-testing provider in Opinion 10-14 did not provide any marketing or external education services for the hospital.

    The OIG approved a separate fixed fee for marketing services in Opinion 10-24, which also involved two other distinct fixed fees (one for equipment and one for staff and other services and supplies). In Opinion 10-23, however, the OIG disapproved an all-inclusive per-test fee the hospital paid to the sleep-testing provider to cover all services, including marketing, equipment, staff and others. Despite the safeguards, the OIG declared that the hospital's payment of an all-inclusive per-test fee could result in the OIG imposing sanctions under the OIG's exclusionary authority at Section 1128(b)(7) of the Social Security Act, or the civil monetary penalty provision at Section 1128(a)(7) of the SSA, as relating to prohibited acts under the federal Anti-Kickback Statute.

    The OIG stated in Opinion 10-23 "[m]arketing fees paid on the basis of successful orders for items or services are inherently subject to abuse because they are linked to business generated by the marketer. Because the Requestor receives a fee each time its marketing efforts are successful, the Requestor's financial incentive to arrange for or recommend the Hospital's sleep testing facility is heightened." The OIG did not find the same risk in Opinion 10-24, noting that the separate fee for marketing in that arrangement would be set in advance and therefore would not vary based on the value and volume of referrals. The OIG stated, "even though the Requestor would be in a position to influence the generation of 'under arrangements' business, the provision of full-time services combined with the aggregate, set in advance, fair market value fee structure of the Proposed Arrangement (including the fees for the equipment rental, as-needed services and supplies, and marketing), which does not vary based on the value or volume of referrals or tests performed, would mitigate against any undue or additional incentive to generate unnecessary or an increased volume of sleep tests."

    Although it has a long-standing dislike for per-click fees generally, in Opinion 10-14 the OIG opined that a per-test fee for an arrangement similar to the other two would be permissible because the sleep-testing provider did not provide marketing or educational services that would create an incentive for the sleep-testing provider to refer to the sleep center. In approving the per-test fee, the OIG stated "the per-test fee takes into account only items and services provided by Requestor that are necessary to perform sleep testing services for patients admitted to the Hospital and does not include amounts attributable to ancillary services and supplies that Requestor does not provide under the Arrangement (such as marketing or DME) or other items or services not integral to furnishing sleep studies."