The Office of the Inspector General (OIG) recently issued a favorable advisory opinion (Advisory Opinion) to a nonprofit health system (System) and a nonprofit psychiatric hospital (Center) regarding a proposal whereby the System would lease nonclinician employees and provide operational and management services to the Center in exchange for a fee equal to the System’s fully loaded costs (Arrangement). The OIG concluded that, while the Arrangement has the potential to generate prohibited remuneration under the anti-kickback statute (AKS), the OIG would not impose administrative sanctions or civil monetary penalties (CMPs) on the System or Center because the Arrangement presents only a minimal risk of fraud and abuse.

The System is a nonprofit health system that owns multiple hospitals and health care providers. The System and a nonprofit foundation are the sole members of the Center, which itself is part of the System’s integrated health network. The Center is reimbursed under the Medicare inpatient psychiatric facility prospective payment system. The Center and some of the System’s providers file cost reports with the Centers for Medicare & Medicaid Services (CMS). The Center and the System are possible sources of referral to each other. Currently, the System leases nonclinician employees and provides some operational and management services to the Center in exchange for an amount equal to the System’s fully loaded costs plus a 2 percent administrative fee. The System’s fully loaded costs include salaries, benefits, and overhead expenses.