OIG issues favorable advisory opinion on telehealth marketplace MSO-PC arrangement

The Department of Health and Human Services, Office of Inspector General (OIG) recently issued a favorable advisory opinion under the federal Anti-Kickback Statute (AKS), wading into the world of not only telehealth but also professional corporations (PCs) and management services organizations (MSOs). While MSO-PC structures are the subject of much state regulatory attention at the moment, this advisory opinion shows that these arrangements can be carefully structured to comply with the AKS.

The requestors of this opinion include a PC that holds a large number of payor contracts for commercial, Medicare, and Medicaid plans and an MSO that provides non-clinical services to that PC (the Requestors), though notably, the Requestors do not employ clinical staff.

Certain independent telehealth platforms (Platforms) that appear to operate as telehealth marketplaces and that serve as MSOs managing telehealth providers (Platform PCs) believe that those Platform PCs have too few payor contracts, which is reducing the access of their patients in underserved and rural areas to telehealth services. To solve this problem, the Platforms want to refer certain patients to the Requestors. As proposed, the Requestors would bring the Platform PCs under their extensive payor contracts by leasing their healthcare professionals at an hourly rate based on provider type to provide telehealth services for the Requestors to the patients referred by the Platforms. The lease fee would be paid regardless of whether any third party reimburses the Requestors for telehealth services. At the same time, the Platforms would provide non-clinical, administrative services (eg, accounting, marketing, scheduling support, and information technology services for telehealth delivery) to the Requestors in exchange for a certain fee.

Notably, the administrative services fee was not discussed in any detail in the opinion, though the Requestors certified to the OIG that both the lease fee and the administrative fee were determined to be within fair market value by an independent third-party valuation company. In particular, it is not clear whether the management fee was a flat fee, a percentage of revenue or profit, or a cost-plus methodology, despite the fact that marketing services were included. The Requestors further certified to the OIG its compliance with the AKS safe harbor for “personal services and management contracts and outcomes-based payment arrangements,” including the methodology used to establish the service fees and the structure of the agreement among the parties.

The OIG found that the proposed arrangement would implicate the AKS because the Requestors would pay the service fees to the Platforms and would receive referrals for services reimbursable by federal healthcare programs. However, based on the Requestors’ certifications, the OIG concluded that the proposed arrangement would be protected by the safe harbor and would, therefore, not generate prohibited remuneration under the federal Anti-Kickback Statute (AKS).

While an advisory opinion can only be relied on by its requestors, this advisory opinion shows that an MSO-PC arrangement, including one across multiple MSO-PC platforms with referral relationships, can be structured to comply with the AKS. Key to compliance is careful legal review and guidance on transaction structure, particularly on the leasing and management services fees.

This advisory opinion only offers a targeted compliance assessment for the proposed arrangement under the AKS and only for the components presented to the OIG. The OIG notes the existence of other financial arrangements among the parties to this opinion that OIG was not asked to opine on. Likewise, given the limited scope of the opinion, the OIG would not opine on other key compliance and operational considerations for such arrangements, including whether the additional financial arrangements were structured in a compliant manner, medical and clinical licensure and practice rules, state telehealth laws, payor contracting and credentialing, and the various business and legal terms and conditions negotiated among the parties to the leasing and management agreements (among other ancillary agreements acknowledged but not reviewed by the OIG). Each of these components for the proposed arrangement present their own independent legal and operational risks that should be carefully addressed when designing and negotiating the structure and implementation of such an arrangement.

If you have any questions regarding appropriate structuring of clinical and administrative arrangements between professional and management entities, or between independent entities for purposes of payor contracting and credentialing, please contact any of the authors of this alert or any member of our Healthcare Regulatory practice group.