The Office of Inspector General (OIG) recently addressed a creative solution to a mounting problem for imaging centers and hospitals. In recent years, private payors have increased the administrative burden on imaging centers by requiring pre-authorization for a growing number of diagnostic tests. This requires additional phone calls and paperwork as well as close communication among referring physicians, patients, payors, and imaging providers. Imaging providers bear the risk for any mistakes or miscommunications because their payments are likely to be denied if pre-authorization rules are not followed precisely.

The OIG recently blessed an arrangement under which a hospital would provide free pre-authorization services for diagnostic imaging covered by commercial insurance. In Advisory Opinion 10-13, the OIG acknowledged its long-standing position that hospitals and those in a position to receive referrals should take extreme caution when providing free or below fair market value services to referral sources. The OIG has consistently identified significant anti-kickback risk when hospitals relieve physicians of financial obligations they would otherwise have to incur and where the "free" item or service has independent value to the physician. This concept is critical in determining whether any particular arrangement involves "remuneration" between parties that may violate the anti-kickback law.

However, the mere presence of remuneration in a relationship is not enough to violate the anti-kickback law - the government also needs to prove that the remuneration was provided with the intent to induce referrals. Advisory Opinion 10-13 provides an example of a relationship where remuneration may exist, but where the OIG finds a low risk under the anti-kickback law because the program demonstrates a strong commercial purpose behind the arrangement and safeguards that dilute any referral-based motivation.

Remuneration. In Advisory Opinion 10-13, the OIG pointed out that free pre-authorization services may be considered remuneration, no matter who is required to perform pre-authorization under the payor agreement. If the agreement requires the physician to perform pre-authorization, then the program would be remuneration because the hospital would be relieving the physician of an express financial obligation. Even if the payor agreement did not place an express financial obligation on the physician, the hospital's program could still constitute remuneration if the physician realized significant savings by not having to dedicate staff to this task.

Intent. The OIG concluded that the arrangement presented low risk of violation of the anti-kickback law, even in cases where the hospital was relieving the physician of a financial obligation, because the program was structured to apply to all physicians and all payors. Essentially, the OIG concluded that breadth of the program along with the safeguards listed below diluted the connection between referrals and remuneration such that the OIG could conclude that the program posed low risk.

Risk Mitigation. The program elements that reduced the risk in this case were: (1) the pre-authorization services would not target any physicians or payors, with the result that the hospital would not know whether it was relieving the physician of financial obligations imposed by payor contracts and if it did, then it would be by accident and not by design; (2) the pre-authorization services would be made available on an equal basis to all patients and physicians with the result that the hospital would not be able to reward referrals; (3) the program did not contemplate any payments to physicians; (4) there were no ancillary agreements with referring physicians; (5) the hospital would make no guarantees regarding pre-authorization approval; and (6) the hospital would operate transparently by identifying itself to insurers and explaining the nature of the program.

The OIG also emphasized that the hospital has a legitimate business interest in ensuring that pre-authorization is obtained because its own payments are at stake. The OIG stated that this strong business rationale lowers the risk that the arrangement is a "stalking horse" for illicit payments to referral sources.

This advisory opinion applies a practical approach to a mounting problem for imaging providers and includes some helpful guidance as to the OIG's evolving thinking about remuneration and intent.

The advisory opinion (in PDF format) can be downloaded by clicking here.