>II. LEGAL ANALYSIS<
><
>A. Law<
><
>The anti-kickback statute makes it a criminal offense knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program. See section 1128B(b) of the Act. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a federal health care program, the anti-kickback statute is violated. By its terms, the statute ascribes criminal liability to parties on both sides of an impermissible ?kickback? transaction. For purposes of the anti-kickback statute, ?remuneration? includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.<
>The statute has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals. United States v. Kats, 871 F.2d 105 (9th Cir. 1989); United States v. Greber, 760 F.2d 68 (3d Cir.), cert. denied, 474 U.S. 988 (1985). Violation of the statute constitutes a felony punishable by a maximum fine of $25,000, imprisonment up to five years, or both. Conviction will also lead to automatic exclusion from federal health care programs, including Medicare and Medicaid. Where a party commits an act described in section 1128B(b) of the Act, the OIG may initiate administrative proceedings to impose civil monetary penalties on such party under section 1128A(a)(7) of the Act. The OIG may also initiate administrative proceedings to exclude such party from the federal health care programs under section 1128(b)(7) of the Act.<
>The Department of Health and Human Services has promulgated safe harbor regulations that define practices that are not subject to the anti-kickback statute because such practices would be unlikely to result in fraud or abuse. See 42 C.F.R. ? 1001.952. The safe harbors set forth specific conditions that, if met, assure entities involved of not being prosecuted or sanctioned for the arrangement qualifying for the safe harbor. However, safe harbor protection is afforded only to those arrangements that precisely meet all of the conditions set forth in the safe harbor. The safe harbor for personal services and management contracts, 42 C.F.R. ? 1001.952(d), is potentially applicable to the Proposed Arrangement. The personal services and management contracts safe harbor requires, in part, that the aggregate compensation paid over the term of the agreement must be set in advance and must not take into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under any federal health care program.<
><
>B. Analysis<
><
>The Requestors have certified that, under the Proposed Arrangement, the amounts that the Contractor will both receive for providing acute hemodialysis services and pay for the hemodialysis machines represent fair market value in arms?-length transactions.5 The transaction will be memorialized in a written agreement with a one-year term. However, the aggregate compensation for the acute hemodialysis services will not be fixed in advance and will fluctuate based on the volume of services provided. Fluctuating fee arrangements cannot qualify for protection under the personal services and management contracts safe harbor. Depending on the circumstances, such arrangements may increase the risk of abuse. However, given the nature of acute hemodialysis (i.e., acute emergency or inpatient dialysis) and the Requestors? fair-market-value certifications, we believe the risk of overutilization or increased costs to the federal programs in these circumstances is minimal.<
>Given this, our primary concern with the Proposed Arrangement is the Contractor?s agreement to provide free chronic hemodialysis services to the Hospital District?s Grandfathered Patients and other indigent patients. In other words, the Proposed Arrangement implicates the anti-kickback statute because the Hospital District could be referring federal health care program business to the Contractor in exchange for services to the indigent -- that is, services the Hospital District might otherwise have to fund.<
>With respect to the possible tying of referrals of indigent business to referrals of paying business (i.e., the acute hemodialysis business, as well as the potential referral of insured chronic business), we have repeatedly expressed our concerns with arrangements involving the provision of free or discounted goods or services by a vendor in exchange for the opportunity to provide services reimbursable by federal health care programs. Notwithstanding, a number of factors under the Proposed Arrangement mitigate the risk of fraud or abuse or otherwise merit consideration.<
>First, in the circumstances presented, the Proposed Arrangement appears unlikely to increase costs to federal health care program costs appreciably.6 The criteria for<
>5We are precluded by statute from opining on whether fair market value shall be or was paid for goods, services, or property. See 42 U.S.C. ? 1320a-7d(b)(3)(A). For purposes of this advisory opinion, we rely on the Requestors? certifications of fair market value. If the fees paid are not fair market value, this opinion is without force and effect.<
>6We express no opinion regarding the appropriate billing of any particular claims or the liability of any party under the False Claims Act or any other legal authorities for improper billing, claims submission, cost reporting, or related conduct.<
>qualifying for chronic hemodialysis are well established and generally sufficient to deter unnecessary services. Medicare reimbursement for chronic dialysis is set prospectively and includes all items and services, except for certain specifically excluded items and services. Accordingly, federal payment will be approximately the same amount per dialysis service, regardless of the Proposed Arrangement. Thus, there is little risk of additional costs to the Medicare program. We are concerned that utilization of other separately reimbursable items or services (i.e., items and services not included in the dialysis composite rate) are potentially subject to abuse. However, the Contractor has certified that utilization of other, non-composite rate items and services will be comparable to utilization of such items and services by its existing patients with similar medical circumstances.<
>Second, it is unclear whether, under these circumstances, the Hospital District will receive the putative remuneration, since it has no obligation to provide chronic hemodialysis services to the indigent or others. However, to the extent it did receive remuneration (i.e., the Hospital District?s avoided costs for the indigent and uninsured patients), such remuneration inures to the public, not private, benefit. One of the core evils addressed by kickback or
ibery statutes, whether involving public or private business, is the abuse of a position of trust, such as the ability to award contracts or business on behalf of a principal for personal financial gain. Here, the public receives the financial benefit of the arrangement.<
>Third, the Proposed Arrangement will not have an adverse impact on competition. The Hospital District employed an open competitive bidding process consistent with the relevant government contracting laws. The Proposed Arrangement is limited to a one-year period. Public policy favors open and legitimate price competition.7 <
>Fourth, the Hospital District?s ability to influence referrals of insured patients for chronic hemodialysis is unclear, since insurance typically gives patients the ability to choose from many different providers. Insured patients will usually choose the providers recommended by their physicians. Conversely, the Hospital District?s ability to influence referrals is likely to be greatest for indigent patients, since such patients have little choice.<
>Fifth, some free chronic hemodialysis services will be provided by Community ESRD Facilities that are not otherwise involved in the Proposed Arrangement. Thus, the free services to be provided to Grandfathered Patients and other indigent patients could be characterized as an effort by the local community of ESRD facilities to share<
>7The Hospital District has certified that it selected among bids based on price and other features contained in the bid responsibility for indigent care.<
>In light of these factors and absent any undisclosed aggravating factors (including, but not limited to, overutilization or inappropriate higher costs to the federal health care programs), the possible tying of referrals of indigent business to paying business in the Proposed Arrangement poses a minimal risk of federal health care program fraud or abuse.<
><
>III. CONCLUSION<
><
>Based on the facts certified in your request for an advisory opinion and supplemental submissions, we conclude that the Proposed Arrangement could potentially generate prohibited remuneration under the anti-kickback statute, if the requisite intent to induce or reward referrals of federal health care program business were present, but that the OIG would not impose administrative sanctions on [Entity A] or [Entity B] under sections 1128(b)(7) or 1128A(a)(7) of the Act (as those sections relate to the commission
of acts described in section 1128B(b) of the Act) in connection with the Proposed Arrangement, absent any undisclosed aggravating factors (including, but not limited to, overutilization or inappropriate higher costs to the federal health care programs). This opinion is limited to the Proposed Arrangement, and, therefore, we express no opinion about any ancillary agreements or arrangements disclosed or referenced in your request letter or supplemental submissions.<
><
>IV. LIMITATIONS<
><
>The limitations applicable to this opinion include the following:<
>C This advisory opinion is issued only to [Entity A] and [Entity B], the requestors of this opinion. This advisory opinion has no application to, and cannot be relied upon by, any other individual or entity.<
>C This advisory opinion may not be introduced into evidence in any matter involving an entity or individual that is not a requestor of this opinion.<
>C This advisory opinion is applicable only to the statutory provisions specifically noted above. No opinion is expressed or implied herein with respect to the application of any other federal, state, or local statute, rule, regulation, ordinance, or other law that may be applicable to the Proposed Arrangement, including, without limitation, the physician self-referral law, section 1877 of the Act.<
>C This advisory opinion will not bind or obligate any agency other than the U.S. Department of Health and Human Services.<
>C This advisory opinion is limited in scope to the specific arrangement described in this letter and has no applicability to other arrangements, even those which appear similar in nature or scope.<
>C No opinion is expressed herein regarding the liability of any party under the False Claims Act or other legal authorities for any improper billing, claims submission, cost reporting, or related conduct.<
>This opinion is also subject to any additional limitations set forth at 42 C.F.R. Part 1008.<
>The OIG will not proceed against the Requestors with respect to any action that is part of the Proposed Arrangement taken in good faith reliance upon this advisory opinion, as long as all of the material facts have been fully, completely, and accurately presented, and the Proposed Arrangement in practice comports with the information provided. The OIG reserves the right to reconsider the questions and issues raised in this advisory opinion and, where the public interest requires, to rescind, modify, or terminate this opinion. In the event that this advisory opinion is modified or terminated, the OIG will not proceed against the Requestors with respect to any action taken in good faith reliance upon this advisory opinion, where all of the relevant facts were fully, completely, and accurately presented and where such action was promptly discontinued upon notification of the modification or termination of this advisory opinion. An advisory opinion may be rescinded only if the relevant and material facts have not been fully, completely, and accurately disclosed to the OIG.<
><
>Sincerely,<
><
>/s/<
>Lewis Morris Chief Counsel to the Inspector General<
><
