Discounts and the Anti-Kickback Statute: Mobile X-Ray Company Survives Challenge
A mobile X-ray company has survived a whistleblower suit based on a discounting arrangement with a skilled nursing facility (SNF) (U.S. ex. rel. McDonough v. Symphony Diagnostic Services.). The U.S. District Court for the Southern District of Ohio, Eastern Division, on Aug. 12, 2014, granted the defendants’ motion for summary judgment and denied the relator’s […]
A mobile X-ray company has survived a whistleblower suit based on a discounting arrangement with a skilled nursing facility (SNF) (U.S. ex. rel. McDonough v. Symphony Diagnostic Services.). The U.S. District Court for the Southern District of Ohio, Eastern Division, on Aug. 12, 2014, granted the defendants’ motion for summary judgment and denied the relator’s motion for partial summary judgment, saying that the relator was unable to establish a sufficient factual basis to support his “chain of inferences.” In a recent LinkedIn posting, Robert Mazer, a health care payment, compliance, and regulatory attorney with Ober|Kaler in Baltimore, discussed the case, noting that it addresses such questions as when is a discount too low, what is fair market value, and what measures are built into the cost of services. For instance, it is a common belief that a laboratory, or any other provider such as the mobile X-ray company involved in this case, should not discount below its costs to provide a service. What is not addressed in previous documents and pertinent advisory opinions issued by federal agencies is what costs should be used—“fully loaded costs” or some other expression of costs. This case involved a whistleblower’s allegation that the mobile X-ray provider was swapping deep discounts on the Part A services it provided to SNF patients in exchange for the referral of the Part B services that the mobile X-ray company could bill directly to the Medicare program and be reimbursed at the fee schedule amounts. The Part A services are billed directly to the SNF, which then billed them to the Medicare program under the consolidated payment provision; the SNF is then reimbursed in a bundled payment. The relator argued that the mobile X-ray company had violated the anti-kickback statute (AKS) because it did not use “fully loaded costs” when determining if its pricing was above its cost to provide services. The X-ray company argued that it was providing the Part A services at a rate it had negotiated in a competitive market and it therefore represented the fair market value for Part A services. This is a very brief description of a case that has been ongoing since the original complaint was filed in February 2008. There are 191 individual documents in the docket file for this case and testimony of experts about calculating costs and defining what are fully loaded costs. In this case, the court disregarded previous advisory opinions and other opinions and documents and focused on the issue of proving the basic elements of intent as it applies to the AKS. According to the court documents, in order to prove a violation of the AKS, the relator must show that remuneration was offered or paid in order to induce referrals of government-funded business, and this must be done knowingly and willfully. The court states that the relator was unable to provide any direct evidence such as e-mails, memos, comments, or other evidence of a bribe or kickback that would prove the defendants acted knowingly and willfully. The court ruled in favor of the defendants and dismissed the case. If one takes the time to review some of the more detailed documents and court records of testimony in this case, it can be very instructive and enlightening. It shows that the court can be very unpredictable in its view of concepts we take for granted. Takeaway: It is very important that a laboratory be careful what documents and memos it creates when making discounting and contractual arrangements with referral sources.