TIPPER
Joined: 09 Jan 2003
Posts: 7
Posted: Thu Mar 27, 2003 11:53 am Post subject: OIG ADVISORY LETTER (DIALYSIS)
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[We redact certain identifying information and certain potentially privileged, confidential, or proprietary information associated with the individual or entity, unless otherwise approved by the requestors.]<
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>Issued: March 19, 2003<
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>Posted: March 26, 2003<
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>[names and addresses redacted]<
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>Re: OIG Advisory Opinion No. 03-7<
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>Dear [names redacted]:<
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>We are writing in response to your request for an advisory opinion regarding a proposed arrangement pursuant to which a renal dialysis facility will provide acute hemodialysis services to a hospital district?s inpatients, provide outpatient chronic hemodialysis services to some of the hospital district?s indigent patients, and purchase certain hemodialysis equipment from the hospital district (the ?Proposed Arrangement?). Specifically, you have inquired whether the Proposed Arrangement would constitute grounds for the imposition of sanctions under the exclusion authority at section 1128(b)(7) of the Social Security Act (the ?Act?) or the civil monetary penalty provision at section 1128A(a)(7) of the Act, as those sections relate to the commission of acts described in section 1128B(b) of the Act.<
>You have certified that all of the information provided in your request, including all supplementary letters, is true and correct and constitutes a complete description of the relevant facts and agreements among the parties.<
>In issuing this opinion, we have relied solely on the facts and information presented to us. We have not undertaken an independent investigation of such information. This opinion is limited to the facts presented. If material facts have not been disclosed or have been misrepresented, this opinion is without force and effect. 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 Office of Inspector General (?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.<
>This opinion may not be relied on by any persons other than [Entity A] and [Entity B], the requestors of this opinion (the ?Requestors?), and is further qualified as set out in Part IV below and in 42 C.F.R. Part 1008.<
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>1. FACTUAL BACKGROUND<
>[Entity A] (the ?Hospital District?) and [Entity B] (the ?Contractor?) propose to enter into a written agreement regarding the provision of hemodialysis services and the purchase of the Hospital District?s hemodialysis machines.<
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>A. The Parties<
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>The Hospital District, a political subdivision of the State of [state redacted], owns and operates a large health system in [county redacted] (the ?County?), including three hospitals. The Hospital District?s hospitals provide services to most of the indigent patients within the Hospital District?s service area. Prior to 1995, the Hospital District offered at its facilities both acute hemodialysis services (i.e., immediate or emergency dialysis services furnished on a temporary inpatient basis due to a rapid deterioration in kidney function) and chronic hemodialysis services (i.e., a regular course of dialysis administered on a routine basis ? usually several times per week on an outpatient basis).1 In 1995, the Hospital District?s governing body instructed the Hospital District to cease providing chronic hemodialysis services, in part because of funding problems resulting from an increase in the number of indigent patients and the severe shortage of hemodialysis nurses. However, the Hospital District continued to provide chronic hemodialysis services to established patients who were unable to obtain chronic services elsewhere and who met the Hospital District?s indigence requirements (the<
>1Hemodialysis services are only provided at two of the Hospital District?s three hospitals, and any hemodialysis services provided in connection with the Proposed Arrangement will be limited to those two hospitals.<
>?Grandfathered Patients?). Currently, the Hospital District provides chronic hemodialysis services to approximately nineteen Grandfathered Patients. Moreover, the Hospital District continues to provide acute hemodialysis services to all patients needing such services.<
>The Contractor is a Medicare-certified end stage renal dialysis (?ESRD?) provider that has several ESRD facilities. The Contractor has entered into contractual arrangements or agreements with other community Medicare-certified ESRD facilities (the ?Community ESRD Facilities?) that have agreed to assist the local community by providing some chronic hemodialysis services to indigent patients. Although a few of the Community ESRD Facilities are direct or indirect affiliates of the Contractor, most are independent, unrelated facilities.<
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>B. The Proposed Arrangement<
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>In light of the financial and staffing difficulties in providing even acute hemodialysis, the Hospital District issued a request for proposals (the ?RFP?) seeking to: (i) subcontract the delivery of acute hemodialysis services in its hospitals; (ii) arrange for the provision of chronic hemodialysis services within the Hospital District?s service area at no cost to the Hospital District; and (iii) sell the Hospital District?s ten hemodialysis machines at fair market value. The Hospital District received several responses to its RFP, including the Contractor?s response. The Hospital District awarded the contract to the Contractor, and the Proposed Arrangement sets forth the terms and conditions of that contract.2<
>Under the Proposed Arrangement, the Hospital District and the Contractor will enter into a one-year written agreement pursuant to which:3<
>? the Contractor will provide acute hemodialysis services at the Hospital District?s hospitals, and the Hospital District will pay the Contractor [amount redacted] per treatment. The Requestors have certified that the foregoing fee represents fair market value in an arms?-length transaction. The Hospital District will have the exclusive right to bill patients and their third-party payors for acute hemodialysis services provided by the Contractor under the Proposed Arrangement;<
>2The Hospital District has certified that it employed an open competitive bidding process consistent with the relevant government contracting laws and that it selected among bids based on price and other features contained in the bids.<
>3The one-year term of the agreement is renewable in separate one-year increments for up to a maximum of three years.<
>? the Contractor will purchase the Hospital District?s ten hemodialysis machines. The Requestors have certified that the purchase price represents fair market value in an arms?-length transaction;<
>? the Contractor will provide chronic hemodialysis services to any Grandfathered Patient without regard to the Grandfathered Patients? ability to pay. The Contractor will either provide services for such patients at its own facilities or arrange for services to be provided by the Community ESRD Facilities. Neither the Contractor nor the Community ESRD Facilities will bill the Hospital District or the Grandfathered Patients for chronic hemodialysis services provided to Grandfathered Patients; and<
>? the Contractor will accept all referrals from the Hospital District of other patients needing chronic hemodialysis services.4 The Contractor will either provide services for such patients at its own facilities or arrange for services to be provided by the Community ESRD Facilities. While it must provide, or arrange for the provision of, services initially, neither the Contractor nor the Community ESRD Facilities are required to provide continuing chronic services to any patients, other than the Grandfathered Patients. Moreover, the Hospital District is not required to refer any patients to the Contractor or the Community ESRD Facilities.<
>The Hospital District will cease providing chronic hemodialysis services to the Grandfathered Patients upon implementation of the Proposed Arrangement.<
>Under Medicare, ESRD services are usually covered as outpatient services, but may under certain circumstances be covered as inpatient services. Medicare reimbursement for facilities furnishing outpatient ESRD services to Medicare beneficiaries is based upon a prospective payment system
that establishes a composite rate of payment per dialysis session. There are two base composite rates: one for Medicare-certified, hospital-based ESRD facilities and a separate, lower one for independent, Medicare-certified facilities. Items and services related to the treatment of ESRD are covered under the composite rate, unless specifically excluded. The Contractor has certified that under the Proposed Arrangement utilization of items and services that are not included in the composite rate will be comparable to utilization of such items and services by its existing patients with similar medical circumstances.<
>4Notwithstanding, each patient needing chronic hemodialysis services, including each Grandfathered Patient, is free to use a provider other than the Contractor.<
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