Health Law Alert: OIG Warns That Arrangements Between CPAP Suppliers and Sleep Labs Pose F&A Risks


In Advisory Opinion 11-08, the OIG took an unfavorable view of both an existing and a proposed arrangement where the requestor, a durable medical equipment (DME) supplier of continuous positive airway pressure equipment and supplies (CPAP), would contract with sleep labs enrolled with Medicare as independent diagnostic testing facilities (IDTFs) to provide CPAP set-up and patient education services on behalf of the DME Supplier. In its July 14, 2011, ruling, the OIG expressed concern that payments to potential referral sources for such services could potentially generate prohibited remuneration under the federal antikickback statute.

Existing Arrangement

Pursuant to the existing arrangement, when a patient of a contracted IDTF selects the DME supplier to provide the CPAP, an IDTF staff member provides CPAP setup and patient education services to the patient on behalf of the DME supplier. Some of the IDTFs are owned by physicians in a position to prescribe CPAPs. Notably, the IDTF performs such services only for non-Federal Health Care Program (FHCP) beneficiaries. The DME supplier certified that the amounts paid to the IDTF are consistent with fair market value. The IDTF may cancel its contract at any time, but the DME supplier may terminate the contract only for breach or for cause.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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