In our hypothetical a cardiologist with a large practice wishes to invest in a joint venture the hospital is starting with a local radiology group. He approaches the hospital administrator and expresses interest in investing in the joint venture and assures you he has sufficient referrals to keep the place running. He also wishes to be the paid medical director. Analysis and hypothetical response: Given the extensive oversight of health care from state, federal and accrediting bodies it is extremely important that all current and future transactions be thoroughly reviewed for compliance. As I am sure you are aware the failure to comply with certain federal regulations may expose you and the hospital to criminal penalties under section 1128B of the Social Security Act (42 U.S.C. 1320a-7b(b)), as well as potential expulsion from Medicare participation under Section 1128(b)(7) of the Act, 42 U.S.C. 1320a-7(b)(7)). In light of these new and existing business realities hospital management asked me to write to you regarding the recent conversation you had with the hospital.
Initially you spoke to the hospital about becoming an investor in one of the hospital’s proposed joint ventures with one of its existing radiology group partners. You offered some ideas and suggested that a recent OIG advisory opinion would be sufficient evidence of compliance with Stark (42 CFR §§ 411.350 et seq), anti-kickback regulations (section 1128B of the Social Security Act (42 U.S.C. 1320a-7b(b)), and potentially False Claim Act violations (31 USC §§ 3729-3732). The OIG does offer advisory opinions. However, advisory opinions ( 42 CFR Part 1008) are very limited and only offer guidance to those specific parties that requested the OIG opinion, only for the specific facts identified in the request for the advisory opinion, and only if the specific guidance of the advisory opinion is followed. Additionally, the advisory opinion does not offer protection against criminal penalties if the Department of Justice feels a criminal statute has been violated. Therefore, while your suggested advisory opinion may offer a starting point for a review of the transaction it is not the ending point and cannot be relied upon.
You also expressed interest in becoming an investor in a cardiology scanning center the hospital is planning on opening in joint venture with a radiology group. Your request must be examined under a number of previously mentioned federal regulations. The two most important are Stark, which prohibits self-referral arrangements, and Anti-kickback laws that prohibit both civilly and criminally the knowing and willful solicitation or receipt of any remuneration directly or indirectly, overtly or covertly, in cash or in kind.