Another risk area focused on by the OIG under the Anti-Kickback Statute involves swapping arrangements. There are no safe harbors which permit or protect swapping arrangements. This particular area of the law can be confusing, complex and the determination of whether a business arrangement violates the prohibition on swapping arrangements can turn on subtle interpretations of business arrangements and the parties’ intent. Therefore, any arrangement which could potentially be viewed as “swapping” should be carefully analyzed by legal counsel experienced in health care fraud and abuse.
So, what is “swapping.” In general, this focuses on business arrangements in which nursing facilities purchase goods or services from vendors for their own use with residents. Goods or services paid for by Medicare Part A are one example. Under Medicare Part A laws, facilities provide goods and services to residents under Part A for a fixed sum of money (a per diem) paid by the Medicare program to the facility. Medicare reimbursement goes to the provider, not the vendor, and the facility is responsible for paying vendors for services and products purchased for Part A residents. The reimbursement received by the facility is fixed, regardless of the amount it actually costs a provider to supply those goods or services to residents. So, a facility benefits when it can keep these costs as low as possible while still providing quality goods and services consistent with federal law and the applicable standard of care.
This creates the potential then for vendors to offer providers discounted prices for goods and services reimbursed by Part A, in exchange for other goods and services reimbursed by other programs, such as Medicare Part B, for which the vendor can bill the federal government directly (as opposed to being paid by the facility). The primary thrust of the “no swapping” prohibition under the Anti-Kickback Statute is that in negotiating arrangements with suppliers and providers, facilities should be careful that there is no link, either direct or indirect or implicit or explicit, between discounts for goods and services the nursing facility pays the vendor for and the facility’s referral of business which the supplier/provider can bill directly to Medicare or another federal health care program.
The primary example of this, often cited by the OIG, is the nursing facility’s acceptance of a low price from a supplier/provider on an item or service covered by the nursing facility’s Part A per diem in exchange for the facility referring to the vendor other federal health care program business which the vendor is permitted to bill directly to the federal government, such as Part B business which is excluded from the consolidated billing requirements. This type of arrangement is considered “swapping,” violates the Anti-Kickback Statute, and is not covered by a safe harbor. Nursing facility arrangements with DME suppliers, clinical laboratories and ambulance providers have been identified by the OIG repeatedly as types of arrangements where the potential for and risk of illegal swapping is especially high, so these arrangements should be carefully scrutinized, both in terms of how facility – vendor contracts are crafted and how the actual business transactions that occur under such agreements are carried out.
Here are several guidelines the OIG has expressed in connection with discount arrangements that may involve illegal swapping:
- The size of a discount provided by a vendor to a nursing facility does not determine whether the arrangement involves illegal swapping;
- Instead, the OIG will determine if the discount is linked, directly or indirectly, to referrals of other federal health care program business;
- One indicator of a potentially-illegal swapping arrangement which the OIG may consider is whether a discount offered to a nursing facility by a supplier or provider is greater than prices offered to other customers who conduct similar volumes of business with that vendor but may not be in a position to refer federal health care program business which the vendor can bill directly to the federal government;
- Discounts offered in conjunction with exclusive provider agreements are also highly suspect as potentially illegal swapping arrangements; and
- Any other discount or pricing arrangement made in exchange for implicit or explicit agreements to refer other facility business potentially creates an inference of a swapping arrangement.
The OIG, in September 1999, published a letter to providers addressing illegal swapping arrangements between nursing facilities and clinical labs, which provides guidance on swapping arrangements in that context and in general. The warnings and concerns included by the OIG in that letter are still applicable under current law and providers should review them.