The US Department of Health and Human Services Office of Inspector General released Advisory Opinion No. 22-14 on June 29, highlighting fraud and abuse considerations for provider-sponsored continuing education programs.
The Advisory Opinion evaluated continuing education (CE) programs sponsored by an ophthalmology practice that specializes in cataract and refractive surgery in coordination with local optometrists, many of whom have co-management relationships with the ophthalmology practice. This guidance should inform healthcare transaction due diligence of ophthalmology practices, as well as other physician practice specialties with sponsored CE programs for referral sources.
The offer of CE programs implicates the Federal anti-kickback statute (AKS) when the program sponsor gives something of value (e.g., access to the educational programming itself, free food and drink, waiver or subsidization of any registration fee) to healthcare provider attendees in a position to refer Federal health care program business to the program’s sponsor. The US Department of Health and Human Services Office of Inspector General (OIG) has long recognized that, while CE programs are a great resource for providers hoping to stay current on their craft, these training events may also, when the requisite intent is present, be utilized to provide prohibited remuneration to referral sources and steer patients and Federal health care program business in violation of the AKS.
In recent years, OIG and the Department of Justice have focused on fraud and abuse cases involving CE with a particular focus on speaker programs. Further, in 2020 OIG released a Special Fraud Alert on the risks associated with pharmaceutical and medical device company sponsored speaker programs.
Notably, OIG’s analysis in Advisory Opinion No. 22-14 confirms that the suspect characteristics identified in its Special Fraud Alert for pharmaceutical and medical device companies are also relevant in assessing CE and other speaker programs sponsored by other providers, including physician practices. In conducting due diligence of physician groups—particularly ophthalmology practices—this guidance emphasizes the need to carefully evaluate a target’s marketing and business development program to identify any provider-sponsored CE programs and to review these programs for potential fraud and abuse concerns.
In Advisory Opinion No. 22-14, OIG specifically assessed four CE programs proposed by an ophthalmology practice specializing in cataract and refractive surgical procedures (Requestor), for which roughly 50% of procedures are referred by local optometrists outside of the practice, with 30% of those patients returning to the referring optometrist for post-operative care that is co-managed with the Requestor’s ophthalmologist.
Under each of the proposals (Proposed Arrangements), the Requestor would offer two annual CE programs focused on new technologies and pharmacological treatment protocols applicable to ophthalmic surgery patients—a full-day CE program and a shorter evening CE program, in each case designed to meet state CE program requirements. Such CE programs would be advertised and made available to all optometrists in the Requestor’s service area (i.e., attendance would not be limited to those optometrists referring to the Requestor or agreeing to do so as a condition of attendance). The Requestor’s own providers, along with faculty members from professional schools, would serve as speakers for the CE programs. Outside speakers would be paid an honorarium plus expenses at fair market value (FMV), which amount would not take into account the volume or value of past or potential business generated for the Requestor or any industry sponsor.
Expenses for each of the Proposed Arrangements would be covered as follows:
Based on the Requestor’s specific facts and circumstances, OIG concluded that it would not impose administrative sanctions on Proposed Arrangement A—notwithstanding that the CE program proposal would generate prohibited remuneration under the AKS if inappropriate intent was present—given it poses a “sufficiently low risk of fraud and abuse” under the AKS. OIG noted that Proposed Arrangement A would be particularly low risk because no suspect characteristics were present (see discussion below) and, additionally, any revenue shortfall or overage would be minimal. Essentially, given that the participants pay a FMV registration fee to attend the CE program, the associated risks of fraud and abuse were minimal.
On the other hand, OIG found that it would have grounds to impose sanctions under the AKS for each of Proposed Arrangements B, C, and D, if undertaken with inappropriate intent, given such arrangements would “present more than a minimal risk,” notwithstanding certain low risk CE program features (discussed below).
For Proposed Arrangements B and C, OIG focused on the fact that the CE programs would be free to provider attendees—with such participation either wholly funded by the Requestor (Proposed Arrangement B) or covered by both Requestor and industry sponsors (Proposed Arrangement C). Under these arrangements, OIG highlighted the “heightened risk this remuneration could induce the…attendees and external faculty to refer…patients, including Federal health care program beneficiaries, to Requestor, which could result in inappropriate patient steering.”
Likewise, for Proposed Arrangements B and C, OIG noted that there is also an increased risk that the Requestor, outside speakers, and provider attendees prescribe or order an industry sponsor’s products, which could result in patient steering and increased Federal health care program costs. OIG’s focus appears to be on the risk of improper referrals and inappropriate patient steering, and with the high bar OIG uses for issuing favorable advisory opinions with regard to particular scenarios, OIG could not get comfortable concluding that proposed Arrangements B, C, and D pose minimal risk.
Finally, for Proposed Arrangement D, OIG found that, if industry sponsors funded the Requestor’s CE programs, such medical device and pharmaceutical companies would be providing two types of remuneration to the Requestor—covering expenses that the Requestor would otherwise be responsible for in hosting the CE programs, and the Requestor’s ability to use excess funds for charitable donations to a Charity of its choosing. Accordingly, OIG could not conclude that Proposed Arrangement D “would pose a sufficiently low risk of fraud and abuse” under the AKS, regardless of various low risk factors present in the arrangement (as discussed below).
In conducting due diligence of an ophthalmology practice (as well as other physician practices), the buyer should inquire about the target’s marketing and business development activities to identify any sponsored CE program activities (including directly hosted events or third-party funded programs). Once identified, these programs must be thoroughly reviewed to detect any behavior that could generate material AKS risk. If not appropriately structured, an ophthalmology practice’s sponsored CE program for local optometrists could be a “red flag” to a transaction requiring additional facts and circumstances analysis. Diligence of CE programs should include careful review of the following factors:
Parties looking to acquire or affiliate with physician practices, especially ophthalmology practices engaging in co-management relationships, should conduct fulsome healthcare regulatory due diligence on marketing and business development activities, including a review of any provider-sponsored CE programs. Relatedly, private equity sponsors with healthcare portfolio companies seeking to develop CE programs involving referral sources should also consider these factors in creating the CE programs, which will be subject to due diligence review upon the sponsor’s exit. Each CE program arrangement should be assessed carefully based on its particulars and any target policies and procedures on sponsorship of CE programs generally should also be reviewed in order to evaluate any potential fraud and abuse risks.
The AKS is a criminal statute that can also result in significant civil penalties and exclusion from participation in Federal health care programs. Accordingly, healthcare industry participants look to OIG’s interpretation of the AKS, including through its issuance of Advisory Opinions, to evaluate industry arrangements. While such guidance may only be relied on directly by the Requestor, Advisory Opinion No. 22-14 sheds light on the factors OIG would analyze in evaluating a given CE program arrangement.
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