Medicare Compliance & Reimbursement

If your expansion plans have led you to create a new business that subcontracts out most of its operations, you could soon be under fire from government fraud watchdogs. The HHS Office of Inspector General is once again warning health care providers and suppliers of the kickback risks inherent in certain kinds of joint venture arrangements. In an April 23 special advisory bulletin on contractual joint ventures, the OIG says potentially illegal business deals are "proliferating" in the health care industry. It's not the first time the watchdog agency has raised concerns on this issue. Back in 1989, the OIG released a special fraud alert on the perils of joint ventures. But in the new bulletin, the agency has a particular kind of deal in mind. The bulletin zeroes in on JVs in which a health care provider ("the owner") in one line of business expands into a related area by contracting with an existing provider ("the manager/supplier") in that field to serve the owner's existing patient population. Warning: JVs with durable medical equipment suppliers are under particular scrutiny. The OIG bulletin cites, as examples of troublesome deals, arrangements between a hospital and a DME supplier, a DME supplier and a mail order pharmacy, and a nephrology practice and a home dialysis supply company. 5 Red Flags For Joint Venture Deals The OIG maintains that tainted JVs typically have a number of common features:
the owner expands into a line of business that's dependent on referrals from the owner's existing business;
the owner contracts out virtually all of the operations of the new business, rather than committing its own resources;
the manager/supplier is already established in the owner's new line of business - and thus would be a competitor if the owner were investing its own resources;
the owner and the manager/supplier share in the economic benefit of the new business; and
payments to both the manager/supplier and the owner vary based on the owner's referrals to the new business. To see the bulletin, go to http://oig.hhs.gov/fraud/docs/alertsandbulletins/042303SABJointVentures.pdf. Lesson Learned: Health care joint ventures are once again emerging as a fraud enforcement hot button.