Given the increasingly complex (and expensive) nature of medical devices and equipment, it is natural that providers may which to pool resources in the purchase and utilization of medical equipment and devices. While such arrangements may be beneficial to patients and reduce over-all expenditures and waste of valuable resources, such arrangements must be carefully scrutinized to ensure that the arrangement complies with federal regulations.

Even where less expensive, everyday items, such as computers which may link into a hospital’s electronic medical record keeping system are offered to physicians, regulations specifically detail what must be done to ensure compliance. At the heart of the matter is the concern that lease arrangements may be a disguised “in-kind” kickback in which the provider of the equipment seeks to capture a stream of referrals by providing below market cost equipment.

In fact, some of the more common medical devices are the subject of specific regulations, such as the sharing of Advanced Imaging Equipment.

The anti-kickback statute makes it a criminal offense knowingly and willfully to offer, pay, solicit or receive any remuneration to induce referrals of items or services reimbursable by any Federal health care program. See 42 U.S.C. § 1320a-7b(b). Where remuneration is paid purposefully to induce referrals of items or services paid for 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, in cash or in-kind, directly or indirectly, covertly or overtly.

The statute has been interpreted to cover any arrangement where one purpose of the remuneration is 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, 476 U.S. 988 (1985). Violations of the statute constitute 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. The OIG may also initiate administrative proceedings to exclude persons from the Federal and State health care programs or to impose civil monetary penalties for fraud, kickbacks, and other prohibited activities under 42 U.S.C. §§ 1320a-7(b)(7), 1320a-7a(a)(7).(1) Penalties are up to $11,000 per claim for payment submitted.

The OIG has previously stated its view that a gift to an existing or potential referral source that has independent value to such source implicates the anti-kickback statute and may be unlawful if the donor of the gift has the requisite intent to induce Federal health care program referrals. For example, in the preamble to the 1991 safe harbor regulations, we stated that giving a physician who is a referral source a free computer that has independent value to the physician may violate the statute. See 56 Fed. Reg. 35978 (July 1991); see also, e.g., OIG Special Fraud Alert, 56 Fed. Reg. 65377 (Oct. 1994) (explaining that the anti-kickback statute is implicated where a clinical laboratory provides a phlebotomist to a physician to perform tasks normally the responsibility of the physician's office staff).

A number of statutory and regulatory "safe harbors" protect certain arrangements that might otherwise technically violate the anti-kickback statute from prosecution. See 42 U.S.C. § 1320a-7b(b)(3); 42 C.F.R. § 1001.952. The safe harbor potentially applicable to the Sublease is the equipment rental safe harbor at 42 C.F.R. § 1001.952(c).

Martin Merritt maintains a database of all federal regulations relating to equipment lease arrangements, and carefully monitors all federal cases on this important issue. Martin Merritt is available for consultation with providers as to compliance with federal fraud and abuse laws as they pertain to Equipment Leases.