The US Department of Health and Human Services Office of Inspector General (OIG) recently issued Advisory Opinion No. 26-02, concluding that a proposed arrangement under which an urgent care management entity would operate an affiliated clinical laboratory would not generate prohibited remuneration under the federal Anti-Kickback Statute.
While favorable to the requestor, the Opinion arrives amid continued enforcement activity by the OIG and the US Department of Justice targeting laboratory and ancillary service arrangements, including cases involving payments routed through management services organizations (MSOs) or other contractual relationships alleged to disguise referral-based remuneration.
The Opinion therefore serves less as an approval of a novel model than as a clear statement of the safeguards regulators expect when management entities offer ancillary service lines capable of generating downstream referrals.
Main Takeaways for Healthcare Organizations
For integrated healthcare platforms, management entities, investor-based provider organizations, and clinical laboratories, the Opinion reinforces several practical principles:
- Financial separation remains critical – ancillary revenue cannot flow, directly or indirectly, to referral sources unless carefully structured for compliance with applicable fraud and abuse laws
- Operational neutrality matters – clinical workflows and technology should not steer referrals
- Commercial arrangements must be substantively legitimate, not merely contractually compliant
- AKS risk mitigation does not eliminate Stark Law exposure, particularly in MSO-supported structures
Overview of the Proposed Arrangement
The requestor is a management entity affiliated with four urgent care centers that it supports through requestor-owned management companies and an affiliated professional corporation structured to comply with corporate practice of medicine restrictions. The requestor proposed establishing a separately owned clinical laboratory that would provide testing services for patients treated at the affiliated urgent care centers.
The OIG’s favorable determination relied on several relevant facts demonstrating the absence of referral-based financial incentives, particularly:
- The laboratory would operate offsite from the urgent care locations
- Individuals positioned to refer testing would not own or operate the laboratory
- The laboratory would bill payors (including federal healthcare programs) directly
- Providers would retain the ability to order testing from multiple laboratories through the electronic health record (EHR) system without preference toward the affiliated laboratory
- Patients would receive written disclosure and retain freedom of laboratory choice
Most importantly, the requestor certified that no remuneration¬—direct or indirect—would flow between the laboratory and urgent care centers or their providers, and provider compensation would not vary based on laboratory utilization.
Based on these facts, the OIG concluded that the arrangement would not involve remuneration intended to induce referrals and therefore would not trigger AKS sanctions.
Key Enforcement Signals from the Opinion
Economic Reality Drives AKS Analysis
The Opinion reinforces the OIG’s consistent position that AKS risk depends on financial substance rather than organizational form. Shared management relationships or aligned ownership structures may be permissible only where ancillary revenues are insulated from referral decision-making.
Explicit Warning Regarding Sham Arrangements
Despite issuing a favorable opinion, the OIG cautioned that it continues to encounter abusive laboratory arrangements involving management companies that funnel remuneration to referral sources through purportedly legitimate relationships. Examples cited include sham investment opportunities, consulting or services agreements lacking bona fide purpose, and provision of free personnel or equipment tied to referrals.
This discussion aligns with recent DOJ False Claims Act enforcement trends targeting arrangements that appear structured in a commercially reasonable manner but effectively compensate providers for referrals.
Press releases issued by DOJ’s Civil Division and US Attorney’s Offices—including enforcement actions arising from the Eastern District of Texas and other jurisdictions—describe allegations that laboratory revenue was distributed to referring providers through MSOs, marketing arrangements, or ownership interests that allegedly lacked independent commercial purpose and instead functioned to induce referrals of federally reimbursable testing services.
These enforcement actions have proceeded through both civil FCA resolutions and criminal AKS prosecutions involving intermediary entities used to channel payments characterized as consulting fees, advisory compensation, or investment distributions, while parallel settlements with individual physicians demonstrate DOJ’s continued willingness to pursue referral sources alongside organizational actors. DOJ enforcement has reinforced that the agency will scrutinize arrangements where economic reality suggests indirect referral rewards, regardless of contractual form.
Increased Focus on Operational and Technology Design
The favorable Opinion also relied on operational safeguards demonstrating neutrality in clinical decision-making. The laboratory would not station personnel at urgent care sites, and the EHR functionality permitted unbiased laboratory selection among multiple providers. The Opinion reflects growing regulatory attention to whether staffing models, workflow integration, or technology design indirectly influence referral behavior.
AKS Clearance Does Not Resolve Stark Law Risk
Consistent with its scope of authority, the OIG expresses no opinion regarding application of the physician self-referral law (commonly referred to as the Stark Law) to the arrangement.
Accordingly, MSO and platform arrangements involving affiliated ancillary services may remain subject to independent Stark Law scrutiny, including requirements relating to fair market value compensation, commercial reasonableness, and prohibitions on compensation tied to volume or value of referrals.
Compliance Considerations Going Forward
The Opinion highlights practical considerations for organizations expanding vertically integrated service offerings, including:
- Avoid direct or indirect remuneration tied to referrals
- Maintain clear operational separation between referral sources and ancillary entities
- Ensure management and service agreements reflect bona fide, documented services
- Preserve provider and patient choice through neutral operational design
- Evaluate arrangements across both AKS and Stark Law frameworks
Looking Ahead
While advisory opinions are binding only on the requesting party, the Opinion provides meaningful insight into how the OIG may continue to evaluate modern MSO-driven healthcare structures. The Opinion confirms that affiliated laboratory models can be structured to mitigate AKS risk while simultaneously reinforcing regulators’ continued focus on arrangements that may disguise referral-based remuneration.
As healthcare organizations continue to pursue integration strategies and ancillary service expansion, regulators are likely to examine not only contractual structure but also the economic and operational realities underlying referral relationships.
How We Can Help
Morgan Lewis advises healthcare organizations, management companies, laboratories, and investors on structuring compliant ancillary service arrangements, evaluating MSO models, and mitigating healthcare fraud and abuse risks affecting integrated healthcare platforms. We are ready to assist with any transactional, regulatory, and compliance needs.