Tag: AKS

A June 23, 2022, advisory opinion from the Department of Health and Human Services Office of Inspector General (OIG) calls into question whether educational programs for physicians and other healthcare professionals offered by healthcare providers can be subsidized by pharmaceutical and medical device companies. Healthcare providers that previously accepted outside financial assistance to support their educational offerings will need to examine OIG’s latest guidance in this area and adjust their educational and marketing programs accordingly.

The OIG and the Department of Justice have joint responsibility for enforcing the federal Anti-Kickback Statute (AKS). The AKS makes it a crime to knowingly and willfully, directly or indirectly, offer anything of value or pay any remuneration to any individual in exchange for a referral for an item or service that will be paid for by a federal healthcare program (the most prominent such programs being Medicare and Medicaid). The AKS also makes it a crime to be on the receiving end of any such compensation. While the government must prove that the purpose of the compensation is to induce or reward referrals, several federal courts have made that exercise easier by holding the intent requirement satisfied if the government can prove that even one purpose of a financial arrangement is to induce or reward a referral.

A single AKS conviction carries a maximum fine of $100,000 and/or imprisonment of up to ten years and will lead to exclusion from participation in federal healthcare programs. Administratively, the OIG can also act to impose substantial civil monetary penalties and has its own Medicare and Medicaid exclusion authority. In the corporate context, the settlement of AKS allegations can also mean entering into an onerous corporate integrity agreement with the government.

The OIG has a longstanding and well-documented concern with the free or below fair market value provision of services or items to a referral source. Both the pharmaceutical and medical device industries have major trade associations that publish voluntary codes of ethics that, once adopted by a member, provide guidelines by which to structure common financial arrangements with healthcare professionals and other referral sources. While these codes of ethics do not have the force of law, the OIG has indicated that compliance with the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals (PhRMA Code) would reduce the risk of fraud and abuse and would demonstrate a company’s good faith efforts at compliance.

Both the PhRMA Code and the Advanced Medical Technology Association’s Code of Ethics (AdvaMed Code) allow companies to support educational programs. However, they impose several conditions intended to ensure that the sponsored programs are truly educational in nature and not merely infomercials for their members’ products. Interestingly, the AdvaMed Code allows medical device companies to support educational programs offered by entities like hospitals and physician practices, not just independent education providers like professional organizations. Similarly, the PhRMA Code does not say that only independent educational programs can be supported.

The educational programs at issue in OIG Advisory Opinion 22-14 were offered to optometrists by a physician practice specializing in ophthalmology. These programs were to provide instruction on new technology and drug treatment protocols in connection with ophthalmic surgery patients. It is common for an optometrist to refer candidates for surgery to an ophthalmologist and for an ophthalmologist to refer to an optometrist for post-surgery follow-up care.

OIG Adv. Op. 22-14 considered four different arrangements:

• Arrangement A was the only one that earned the OIG seal of approval. Attendees were to be charged an appropriate registration fee, which would have been roughly enough to cover the practice’s costs in offering the program. No outside financial support would be provided.
• In Arrangement B, program attendees would not pay any registration fee, and the practice would bear all the costs of the program. There would be no industry sponsors (e.g., drug and device companies).
• The practice would still not charge a registration fee in Arrangement C, and all of the program’s outside funding would come from industry sponsors.
• Under Arrangement D, attendees would be charged a registration fee, and the practice would solicit and accept funding from industry sponsors.

Given the OIG’s abhorrence of providing free goods or services to existing or potential referral sources, the outcome in connection with proposed Arrangements B and C is not surprising. Among the most important assets of an ophthalmology practice are its relationships with the referring optometrists in its community. It is, therefore, unsurprising that the OIG would conclude that education programs provided by ophthalmologists that are free to potentially referring optometrists pose more than a minimal risk of fraud and abuse.

What was more interesting was the OIG’s position on industry support of continuing education programs in connection with proposed Arrangements C and D. It is not unusual for industry to, for example, provide funds that an education provider could use to cover the cost of a modest meal provided at an event offered by a hospital or health system. OIG Adv. Op. 22-14 suggests that such industry support may still be appropriate if the educational program is offered by a third-party education provider like a medical society, but that financial support provided to a program sponsored by a healthcare provider is not. This appears to be the case even in examples of limited industry support because the optometrist attendees in Arrangement D were to pay a registration fee (though the opinion does not indicate whether the registration fee is at fair market value). The OIG’s position is inconsistent with the PhRMA and AdvaMed Codes, which will almost assuredly be revised in the coming months to reflect the contours of OIG Adv. Op. 22-14.

In light of OIG Adv. Op. 22-14, healthcare providers that offer education programs should review any industry sources of funding for these programs and determine whether a new education and marketing funding strategy should be pursued. Properly structured arrangements with third-party education providers might still allow both healthcare providers and pharmaceutical and medical device companies to achieve many of the same goals presented by education programs offered directly by healthcare providers while mitigating AKS risk.

Scott Simpson is counsel in Nixon Peabody’s Healthcare practice, where he advises clients on healthcare regulatory, transactional, and compliance matters.