Imagine there are two hospitals (or two physician groups). One is highly specialized and has developed a telemedicine program for treating stroke patients; the other is a community hospital or physician practice that would like to take part in this telemedicine program but does not want to pay for the technology needed to virtually connect with the program’s specialists. Can the telemedicine provider buy this technology for the receiving hospital or physician group, or rent it out at a deep discount, without violating the law?

This turns out to be a hard question. Under federal law, it is a criminal offense to knowingly and willfully pay another provider as an inducement or reward for referrals of items or services provided under federal health care programs, such as Medicare or Medicaid. This is known as the Anti-Kickback Statute, and the penalties for violating it can be severe (see here and here). There are exceptions to the Anti-Kickback Statute (referred to as safe harbors), but none of these are likely to apply in this context.

Determining whether an arrangement violates the Anti-Kickback Statute is largely a question of intent. In reviewing payment arrangements among providers, government enforcers are primarily interested in whether one of both of the parties intended for the payment to serve as an inducement or reward for referrals. These determinations are based on a review of the facts and circumstances surrounding the payment or payments.

In September, 2011 the Department of Health and Human Services Office of Inspector General (“OIG”) concluded in an Advisory Opinion that one such arrangement involving payments by a telemedicine provider to a participating provider would not violate the Anti-Kickback Statute. Although like all OIG advisory opinions, this opinion is fact specific and only speaks to the legality of the specific payment arrangement that it addresses, the opinion shows how the OIG may analyze similar type arrangements under the Anti-Kickback Statute.

The Advisory Opinion examined whether a health system with a strong reputation for neuroscience care could cover certain program expenses (including the technology expense) that a community hospital would have to incur in order to participate in the health system’s telemedicine program for stroke patients. In the Advisory Opinion, the OIG noted the following facts and circumstances as supportive of its determination that this specific arrangement would not be an illegal kickback:

The participating hospital would not be under any pressure to refer patients to the health system as a condition for participating in the telemedicine program, and would not be providing its physicians additional compensation for their involvement in the telemedicine program;

  • The health system anticipated that its stroke telemedicine program would result in a reduction in the number of transfers of simple stroke cases that it would receive;
  • Physicians at hospitals participating in the telemedicine program would not be restricted from referring stroke patients to facilities other than the health system;
  • The selection of participating hospitals would be driven by access-to-care considerations and not the participating hospital’s ability to generate referrals or other business for the health system;
  • The telemedicine program would be promoting best practices by assisting hospitals in providing treatment for stroke patients immediately upon their arrival in the emergency room;
  • Each party would be responsible for the costs associated with its own marketing activities; and
  • The arrangement would unlikely to result in increased costs to Medicare or Medicaid, in part because the consultations provided by the health system would not be billable to Medicare, and also because the telemedicine program would likely reduce transfers of stroke patients to the health system.

Although the Advisory Opinion is based on a particular set of facts and circumstances, it provides insight on how government enforcers are likely to view similar type arrangements and shows that legal pathways do exist for providing financial assistance to entities that would like to participate in a telemedicine program. Nonetheless, telemedicine program operators looking to offer such financial assistance should proceed cautiously and with an eye toward the Anti-Kickback Statute, for there is an element of risk here that unfortunately cannot be avoided.