OIG’s Continuing Education Program Advisory Opinion: Due Diligence Considerations

The US Department of Health and Human Services Office of Inspector General released Advisory Opinion No. 22-14 on June 29, highlighting fraud and abuse considerations for provider-sponsored continuing education programs.

The Advisory Opinion evaluated continuing education (CE) programs sponsored by an ophthalmology practice that specializes in cataract and refractive surgery in coordination with local optometrists, many of whom have co-management relationships with the ophthalmology practice. This guidance should inform healthcare transaction due diligence of ophthalmology practices, as well as other physician practice specialties with sponsored CE programs for referral sources.

The offer of CE programs implicates the Federal anti-kickback statute (AKS) when the program sponsor gives something of value (e.g., access to the educational programming itself, free food and drink, waiver or subsidization of any registration fee) to healthcare provider attendees in a position to refer Federal health care program business to the program’s sponsor. The US Department of Health and Human Services Office of Inspector General (OIG) has long recognized that, while CE programs are a great resource for providers hoping to stay current on their craft, these training events may also, when the requisite intent is present, be utilized to provide prohibited remuneration to referral sources and steer patients and Federal health care program business in violation of the AKS.

In recent years, OIG and the Department of Justice have focused on fraud and abuse cases involving CE with a particular focus on speaker programs. Further, in 2020 OIG released a Special Fraud Alert on the risks associated with pharmaceutical and medical device company sponsored speaker programs.

Notably, OIG’s analysis in Advisory Opinion No. 22-14 confirms that the suspect characteristics identified in its Special Fraud Alert for pharmaceutical and medical device companies are also relevant in assessing CE and other speaker programs sponsored by other providers, including physician practices. In conducting due diligence of physician groups—particularly ophthalmology practices—this guidance emphasizes the need to carefully evaluate a target’s marketing and business development program to identify any provider-sponsored CE programs and to review these programs for potential fraud and abuse concerns.

BACKGROUND ON OIG ADVISORY OPINION NO. 22-14

In Advisory Opinion No. 22-14, OIG specifically assessed four CE programs proposed by an ophthalmology practice specializing in cataract and refractive surgical procedures (Requestor), for which roughly 50% of procedures are referred by local optometrists outside of the practice, with 30% of those patients returning to the referring optometrist for post-operative care that is co-managed with the Requestor’s ophthalmologist.

Under each of the proposals (Proposed Arrangements), the Requestor would offer two annual CE programs focused on new technologies and pharmacological treatment protocols applicable to ophthalmic surgery patients—a full-day CE program and a shorter evening CE program, in each case designed to meet state CE program requirements. Such CE programs would be advertised and made available to all optometrists in the Requestor’s service area (i.e., attendance would not be limited to those optometrists referring to the Requestor or agreeing to do so as a condition of attendance). The Requestor’s own providers, along with faculty members from professional schools, would serve as speakers for the CE programs. Outside speakers would be paid an honorarium plus expenses at fair market value (FMV), which amount would not take into account the volume or value of past or potential business generated for the Requestor or any industry sponsor.

Expenses for each of the Proposed Arrangements would be covered as follows:

• Proposed Arrangement A: Attendees would pay a FMV registration fee determined based on the number of registered attendees and estimated CE program expenses. Accordingly, any revenue shortfall or overage would be minimal. The Requestor would cover any shortfall directly and donate any excess revenue to a local charity that does not bill, or provide services payable by, Federal health care programs (Charity).
• Proposed Arrangement B: Attendees would not pay any registration fee, and the Requestor would cover all CE program costs directly (i.e., no outside funding).
• Proposed Arrangement C: Attendees would not pay any registration fee. The Requestor would cover CE program costs and solicit funding from industry sponsors (e.g., medical device and pharmaceutical companies) to cover some or all such amounts. The Requestor would cover any expense shortfall and donate any excess revenue to a Charity.
• Proposed Arrangement D: Attendees would pay a subsidized registration fee, which amount would be reduced based on Requestor-obtained funding from industry sponsors. The Requestor would cover any expense shortfall and donate any excess revenue to a Charity.

Based on the Requestor’s specific facts and circumstances, OIG concluded that it would not impose administrative sanctions on Proposed Arrangement A—notwithstanding that the CE program proposal would generate prohibited remuneration under the AKS if inappropriate intent was present—given it poses a “sufficiently low risk of fraud and abuse” under the AKS. OIG noted that Proposed Arrangement A would be particularly low risk because no suspect characteristics were present (see discussion below) and, additionally, any revenue shortfall or overage would be minimal. Essentially, given that the participants pay a FMV registration fee to attend the CE program, the associated risks of fraud and abuse were minimal.

On the other hand, OIG found that it would have grounds to impose sanctions under the AKS for each of Proposed Arrangements B, C, and D, if undertaken with inappropriate intent, given such arrangements would “present more than a minimal risk,” notwithstanding certain low risk CE program features (discussed below).

For Proposed Arrangements B and C, OIG focused on the fact that the CE programs would be free to provider attendees—with such participation either wholly funded by the Requestor (Proposed Arrangement B) or covered by both Requestor and industry sponsors (Proposed Arrangement C). Under these arrangements, OIG highlighted the “heightened risk this remuneration could induce the…attendees and external faculty to refer…patients, including Federal health care program beneficiaries, to Requestor, which could result in inappropriate patient steering.”

Likewise, for Proposed Arrangements B and C, OIG noted that there is also an increased risk that the Requestor, outside speakers, and provider attendees prescribe or order an industry sponsor’s products, which could result in patient steering and increased Federal health care program costs. OIG’s focus appears to be on the risk of improper referrals and inappropriate patient steering, and with the high bar OIG uses for issuing favorable advisory opinions with regard to particular scenarios, OIG could not get comfortable concluding that proposed Arrangements B, C, and D pose minimal risk.

Finally, for Proposed Arrangement D, OIG found that, if industry sponsors funded the Requestor’s CE programs, such medical device and pharmaceutical companies would be providing two types of remuneration to the Requestor—covering expenses that the Requestor would otherwise be responsible for in hosting the CE programs, and the Requestor’s ability to use excess funds for charitable donations to a Charity of its choosing. Accordingly, OIG could not conclude that Proposed Arrangement D “would pose a sufficiently low risk of fraud and abuse” under the AKS, regardless of various low risk factors present in the arrangement (as discussed below).

KEY TAKEAWAYS FOR HEALTHCARE TRANSACTION DUE DILIGENCE

In conducting due diligence of an ophthalmology practice (as well as other physician practices), the buyer should inquire about the target’s marketing and business development activities to identify any sponsored CE program activities (including directly hosted events or third-party funded programs). Once identified, these programs must be thoroughly reviewed to detect any behavior that could generate material AKS risk. If not appropriately structured, an ophthalmology practice’s sponsored CE program for local optometrists could be a “red flag” to a transaction requiring additional facts and circumstances analysis. Diligence of CE programs should include careful review of the following factors:

• Does the CE program offer actual educational value to attendees? Due diligence should include review of training materials (e.g., slide decks, webinars), and confirmation of the credentials of CE program speakers and that applicable state CE program credit was obtained for the program. Consistent with the Special Fraud Alert, OIG views provider-sponsored CE programs where little or no substantive information is actually presented as suspect. The Requestor’s proposed CE programs, however, did not exhibit such suspect characteristic, as the CE programs would focus on new technology and treatment protocols, be led by speakers with first-hand professional experience on such topics, and state CE credit would be approved for the training.
• Are CE program meals for attendees appropriate? The buyer should inquire about any CE program meals for provider attendees and whether alcohol was involved in the program session. Consistent with the Special Fraud Alert, OIG views CE program meals that exceed modest value or involve alcohol as suspect. The Requestor’s proposed CE programs, however, did not exhibit such suspect characteristic, as only modest food and drink would be served (e.g., bagels and coffee, pizza and soft drinks), and there would be no alcohol provided.
• Is the CE program venue conducive to educational programming? Due diligence should include review of the venue of any CE program. Consistent with the Special Fraud Alert, OIG views CE programs held at locations that are not conducive to the exchange of educational information as suspect. The Requestor’s proposed CE programs, however, did not exhibit such suspect characteristic, as the CE programs would be hosted in its own offices or other appropriately-sized conference space conducive to the training sessions—in either case within the Requestor’s geographic service area.
• How are provider speakers and attendees selected? In conducting due diligence, the CE program sponsor’s selection criteria for both provider speakers and attendees, including any policies and procedures, should be reviewed. Consistent with the Special Fraud Alert, OIG views the selection of provider speakers and attendees for CE programs based on past or expected revenue from referrals of such individuals as suspect. The Requestor’s proposed CE programs, however, did not exhibit such suspect characteristic, as the CE programs would be advertised and available to all local optometrists. Further, attendance would not be restricted to providers who have historically referred to the Requestor, or who agree to do so prospectively. Likewise, outside speakers would not be selected based on past or expected referrals of Federal health care program business.
• How are CE program speakers paid? Due diligence should inquire about speaker compensation (e.g., speaking fees, honoraria, gifts, travel expense reimbursement) and how such compensation was determined. The buyer should also request information on how the target confirmed that the speaker compensation was consistent with FMV. Consistent with the Special Fraud Alert, OIG views above-FMV payments to provider speakers or payment of speaker compensation that takes into account the volume or value of past or potential Federal health care program business generated by the provider as suspect. The Requestor’s proposed CE programs, however, did not exhibit such suspect characteristic, as the CE programs’ outside speakers would be paid an honorarium plus expenses at an FMV rate that would not take into account the volume or value of past or potential business generated for the Requestor (or an industry sponsor) by the speaker.

Parties looking to acquire or affiliate with physician practices, especially ophthalmology practices engaging in co-management relationships, should conduct fulsome healthcare regulatory due diligence on marketing and business development activities, including a review of any provider-sponsored CE programs. Relatedly, private equity sponsors with healthcare portfolio companies seeking to develop CE programs involving referral sources should also consider these factors in creating the CE programs, which will be subject to due diligence review upon the sponsor’s exit. Each CE program arrangement should be assessed carefully based on its particulars and any target policies and procedures on sponsorship of CE programs generally should also be reviewed in order to evaluate any potential fraud and abuse risks.

The AKS is a criminal statute that can also result in significant civil penalties and exclusion from participation in Federal health care programs. Accordingly, healthcare industry participants look to OIG’s interpretation of the AKS, including through its issuance of Advisory Opinions, to evaluate industry arrangements. While such guidance may only be relied on directly by the Requestor, Advisory Opinion No. 22-14 sheds light on the factors OIG would analyze in evaluating a given CE program arrangement.