This opinion regards a proposed restructuring of financial relationships, which includes the forgiveness of debt, between a health system and a nearby clinic.

The full text of Advisory Opinion 22-17, including a statement of the facts considered by the OIG, can be accessed here: https://oig.hhs.gov/compliance/advisory-opinions/22-17/ .

OIG determines that it will not impose administrative sanctions on the Requestors in connection with the Arrangement.

The Agreement proposes (the following is a high level summary of the proposed Agreement):

• Health System will forgive – in full -- the outstanding amount owed (principal and accrued interest) by the Clinic on the Note through a donation in that amount to the Clinic (“Note Donation”). The Note Donation would include all amounts owed under the Lease and the Management Services Agreement (“MSA”) that are reflected on the balance of the Note.
• Requestors would enter into new agreements to address the Clinic’s use of the premises, furniture, fixtures and equipment covered by the Lease (“New Lease”) and a revised scope of administrative and medical services to be provided by the Health System to the Clinic.
• The New Lease would permit the Clinic to use the premises, furniture, fixtures and equipment covered by the Lease, free of charge.
• The New MSA would require the Clinic to pay the Health System fair market value for the services the Health System provides to the Clinic under the New MSA.

It is our view that OIG’s conclusion is based upon the existence of all the factors in the Arrangement. We expect that a different conclusion may be reached by OIG if one or more of those factors did not exist.

The following summarizes OIG’s legal analysis:

The Proposed Arrangement implicates the Federal Anti-Kickback Statute (“AKS”) because it involves remuneration from the Health System to the Clinic that could induce the Clinic to make referrals to the Health System. Specifically, the Note Donation would alleviate a significant financial debt owed by the Clinic to the Health System, and the terms of the New Lease would provide for free use of the premises (including its furniture, fixtures, and equipment) that the Clinic currently uses as one of its primary locations. The Proposed Arrangement does not qualify for protection under the Federally Qualified Health Center (“FQHC”) Safe Harbor because the Safe Harbor only applies to FQHCs, not FQHC Look-Alikes, which is what the Clinic is.

OIG concludes that the Proposed Arrangement poses a sufficiently low risk of fraud and abuse under the Federal AKS:

1. The Proposed Arrangement is structured and operated in a manner that aligns with all the requirements of the FQHC Safe Harbor, except that the Clinic is not a FQHC and does not receive grant funds under Section 330 of Public Health Services Act (“PHSA”). When that is assessed in combination with other factors (below), the Proposed Arrangement mitigates the risk of fraud and abuse.
2. Although the Clinic does not receive Section 330 funding, HRSA has designated the Clinic as an FQHC Look-Alike, and by virtue of that designation, HRSA conducts regular oversight of the Clinic’s operations and finances. The grants the Clinic received previously had similar oversight and reporting obligations like Section 330 funds. OIG determines that the risk of fraud and abuse from the Health System’s support of the Clinic under the Proposed Arrangement is reduced by:
   1. the oversight associated with HRSA’s designation of the Clinic as an FQHC Look-Alike;
   2. the government oversight associated with the Federal grant funds that the Clinic receives; and
   3. the Clinic’s certification that it will continue to apply for additional Federal grant funds, including Section 330 grant funds.
3. The Proposed Arrangement has attributes that reduce the risk that it would result in inappropriate patient steering from the Clinic to the Health System. OIG cites: neither Requestor is under any obligation to make referrals to the other Requestor; the Clinic can enter into agreements with other providers or suppliers; Clinic would employ a reasonable methodology to determine with individuals or entities to select and would document its determination when using other providers or suppliers; and one of the Health System’s stated aims for the Clinic is to reduce overutilization of the emergency departments at the Health System’s hospitals.
4. The Proposed Arrangement’s remuneration is a continuation of the Health System’s longstanding support of the Clinic as part of their shared mission, which is cited in the Advisory Opinion.

Note:
OIG Advisory Opinions are very fact specific and by their terms are limited to the facts presented, to the specific Requestors, and are subject to specific limitations set out in the Advisory Opinions.
The above is a high level summary and consultation with counsel is recommended for a fuller review and discussion of the Advisory Opinion.