Wachler & Associates Health Law Blog

A manufacturer of cochlear implants (“Requestor”) inquired whether a Proposed Arrangement would violate the Anti-Kickback Statute and result in civil monetary penalties.  The Office of the Inspector General for the Department of Health and Human Services (OIG) concluded that the Proposed Arrangement presents more than a minimal risk of violation of the Anti-Kickback Statute.

Cochlear implants are devices, covered by the Medicare and Medicaid programs, which assist patients’ ability to hear.  The implants consist of both internal and external components.  The internal component of the device is surgically implanted and following the implantation an audiologist must program the external sound processor.  Patients may choose the cochlear implant device and this choice may be influenced by the patient’s audiologist or surgeon.  The Requestor warranties the external component and operates a toll-free telephone line for customer’s questions and concerns about their product.  However, since customers often contact the Clinics for assistance with their devices, Clinics will provide troubleshooting services (Services) pursuant to the Requestor’s established process.

The Proposed Arrangement would operate pursuant to a written agreement between the Requestor and the Clinics.  The Requestor would compensate the Clinics $37 per occurrence for the Services.  The compensated Services would include those provided the Requestor under the customer’s warranty.  The Requestor affirmed that the fee was consistent with the fair market value and that Clinics would be prohibited from billing third-party payors or patients for the services.  These services would not be marketed to the patients. 

The U.S. Department of Health and Human Services Office of Inspector General (OIG) recently issued two Advisory Opinions.  The first Advisory Opinion, AO 10-12, found that an arrangement between a grant program operated by a nonprofit, tax exempt charitable organization that provides grants to brain tumor patients who require financial assistance for the costs of drugs and/or devices would not result in civil monetary penalties (CMPs) even though the arrangement could cause prohibited remuneration under the Anti-Kickback Statute.

Although the funding for the grants comes from manufacturers of drugs and devices used to treat brain tumors and other conditions covered by the program, the OIG found sufficient safeguards in the system that mitigate the risk of improper influence.  First, the grant program will award assistance to beneficiaries based on objective criteria.  The assistance will not limit the patient’s ability to choose a provider, practitioner or supplier because the patient will have already made these choices prior to receiving the assistance.  In addition, no donor will exert control over the Foundation or affect the Foundation’s decision to award assistance.  Donors will not receive data that would allow it to determine the correlation between its donations and the use of its products or services.

In the second Advisory Opinion, AO 10-13, the OIG determined that it would not impose administrative sanctions for the provision of free insurance pre-authorization services because the arrangement included sufficient safeguards to reduce the risk that the free services would be inducements for referrals.  The proposed arrangement involved a hospital addressing requests from insurers for the pre-authorization of diagnostic imaging services before they are completed by the hospital.  The pre-authorization services would be provided by the hospital free of charge and without regard to the volume and/or value of any physician referrals.