Negative Advisory Opinion No. 21-18
While we do not often comment on Advisory Opinions of the OIG under the Anti-kickback statute, a recent negative opinion is noteworthy because (1) the facts described were so obviously violative; and (2) while trumped up in new clothing, they represent a throw-back to joint ventures the OIG first rejected and wrote a Special Fraud Alert about in 1994!! In Advisory Opinion No. 21-18, the OIG considered an arrangement where a contract therapy services company, already providing services to long term care facilities owned by LTCco, would enter into a joint venture with an entity owned by LTCco to provide the same therapy services to the company's affiliated facilities. The valuation of LTCco's investment would turn in part on the expected business to be provided by the LTC facilities. LTCco would not be involved in the company's operations; and the joint venture would do what the partner therapy company was already doing. What rock were these people living under? This, as the OIG noted, is a classic prohibited contractual joint venture. Since it is possible to withdraw an advisory opinion request if it looks like the answer will not be favorable, one can only conclude that someone wanted the negative opinion. Without any background, it might well have been the therapy company itself who didn't want to share profits with their primary source of business. Back in the early 80s, there were many proposed joint ventures between hospitals and either DME companies or home health agencies to which they would refer. Almost all were illegitimate. So was the proposed arrangement here. For those who might want to see what a negative advisory opinion looks like, this one's facts are so obvious it's a good one to start with!