On February 20, 2018 the Office of Inspector General (OIG) issued a favorable Advisory Opinion ("Opinion") indicating that an excluded individual can be employed to market emergency medication discounts obtained by a third party, for-profit Company ("Company") to Long-Term Care ("LTC") pharmacies that participate in Medicare, Medicaid, or any federal health care program. Although the Opinion cannot be relied upon by anyone other than the excluded person requesting the opinion, it provides valuable insight into how the OIG analyzes and interprets the prohibition against providing an item or service furnished during a period in which the person was excluded from the federal health care program under section 1128A(a)(1)(D) of the Social Security Act.

Before we get into the meat of the Opinion, let's set the legislative and regulatory scene. Individuals and businesses that have been convicted of offenses related to the federal health care programs or related to the delivery of health care items or services must be excluded from all Medicare, Medicaid, and other federal health care programs. Once excluded, the individual or entity is identified the OIG's List of Excluded Individuals/Entities (LEIE). These individuals and entities are prohibited from submitting, or causing to be submitted, claims to Medicare, Medicaid, or any other federal health care program for items or services furnished during the exclusion period. Violation of the prohibition may bring civil monetary penalties of $15,270 for each claimed item or service, in addition to treble assessments, and exclusion under the Civil Monetary Penalties Law. Additionally, if a provider (e.g., hospital, pharmacy, clinic, etc.) contracts with or employs these excluded individuals and businesses it can also be sanctioned.

The Facts

In this case, the requestor was excluded due to a criminal conviction for health care fraud. The proposed arrangement would work like this: Company would negotiate with local retail pharmacies to receive discounted rates for emergency medications and requestor would market this service to LTC pharmacies. Requestor would be paid a fixed salary plus a commission based on the number of LTC pharmacy accounts secured. Compensation would not be determined based on the volume, value, frequency, price or selection of any medications ordered by the LTC pharmacies and paid for by a federal health care program. Company would charge the LTC pharmacies the discounted rate plus a mark-up, which the OIG presumed included costs the Company incurred to negotiate the discounted rate, such as employee expenses, including the cost to employ the requestor. Importantly, the requestor explained that emergency medications refers to situations where the LTC pharmacies cannot meet patient needs, generally because patients need an emergency order filled. Therefore, the LTC pharmacies independently determine the volume, type, and frequency of any needed medications. In addition, the requestor and the Company would not prepare or submit claims for items or services provided in connection with the proposed arrangement that are paid for by any federal health care program.

The Finding

The OIG found that the emergency medications fit the definition of "items or services" and that if the reimbursement the LTC pharmacies received included the LTC pharmacies' acquisition cost, then the federal health care programs would be indirectly paying for the marketing services requestor provides to the Company. Thus, requestor would be indirectly furnishing an item or service for which a claim is submitted to a federal health care program. Accordingly, the proposed arrangement would effectively fall within the statutory prohibition against furnishing an item or service while excluded.

The Surprise

However, the OIG concluded it would not to impose sanctions on the requestor because the services were "so far removed" to "pose[] minimal risk to Federal health care programs and beneficiaries." The OIG does not further explain what makes the proposed arrangement "so far removed." However, it's clear that the OIG placed significant weight on: (1) the requestor's attenuation from the federal health care programs, including the fact that the that Company was not directly or indirectly owned or controlled by (e.g., as officers or managing employees) the requestor, any of requestor's immediate family members, or any of requestor's household members; (2) the requestor's lack of involvement in the claim preparation and/or submission process; and (3) the fact the proposed compensation model was decoupled from federal health care programs reimbursement and was not based on the volume or value of any sale.

The Takeaway

This advisory opinion is a positive result for the provider community. This "favorable" opinion likely sets the outer edge of what would be considered the indirect furnishing of an item or service by an excluded person. The advisory opinion is also a surprising development in both the subject matter addressed and the conclusion reached. Advisory opinions outside of the Federal Anti-Kickback landscape are rare. The OIG electing not to purse sanctions involving an excluded person where the conduct likely fit within the statutory prohibition is even more remarkable.

Providers and excluded persons should not breathe a sigh of relief just yet, despite this deviation from OIG's historical approach to the furnishing of items and services by an excluded person. Enforcement actions involving excluded persons still make up a large percentage of the OIG's enforcement portfolio and civil monetary penalty law settlements. In the first quarter of 2018, one-third of OIG affirmative case resolutions and approximately one-quarter of self-disclosure resolutions involved the employment of, or billing for, an excluded person.

The OIG will continues to focus enforcement efforts in this space. It is imperative that providers screen all potential employees for exclusions on the LEIE. Penalties for employing excluded individuals absent approval could be significant.