HHS-OIG Issues Unfavorable Advisory Opinion on Pay-to-Play Referral Software Platform Arrangement

Background: Home Health Agency's Referral Software Subscription Arrangement 

HHS-OIG recently released Advisory Opinion No. 26-15, an unfavorable opinion addressing a home health agency's subscription payments to a healthcare technology company for access to online referral management software.

The HHA operates agencies that provide skilled and unskilled in-home care services to adults and children, including Medicare and Medicaid beneficiaries. A significant portion of the HHA's patients are referred by hospitals following discharge. Medicare regulations require hospitals to provide discharging patients with a list of all available, Medicare-participating HHAs serving the patient's geographic area.

The obligation stems from 42 C.F.R. § 482.43(d)(1), which mandates that hospitals offer discharging patients a complete list of Medicare-participating HHAs in their area, a list HHAs must actively request to join. The HHA noted that hospital referrals to HHAs are frequently made on a first-come, first-served basis, making the speed of an HHA's response to a referral request a critical factor in securing patients. 

The vendor's platform allows subscribing HHAs to receive and accept hospital referral requests electronically and in real time, while non-subscribing HHAs must rely on fax, email, phone, or hand delivery, methods that the HHA described as creating delays that, in practice, effectively preclude non-subscribing HHAs from competing for referrals. The HHA pays a separate subscription fee to the vendor for each hospital from which it seeks to receive referrals. Subscription fees vary by geographic location and the number of jointly owned HHA locations, with volume discounts available to multi-location operators, and are not based solely on the vendor's cost to provide the service.

The vendor charges fees on both sides of the platform. Subscribing HHAs pay per-hospital subscription fees, and hospitals pay the vendor as well, with only fee-paying hospitals able to transmit referrals electronically through the software. Critically, non-subscribing HHAs remain visible on the hospital's list of available providers, but the practical effect of relying on fax, phone, or email to respond puts them at a decisive disadvantage in a first-come, first-served referral scheme. 

HHS-OIG Finds Referral Software Subscription Fees Violate the Anti-Kickback Statute Safe Harbor 

HHS-OIG concluded that the subscription payments constitute remuneration under the AKS because the HHA is paying the vendor in exchange for the vendor arranging through the software, the furnishing of home health services reimbursable by federal healthcare programs. 

The safe harbor for referral services shields payments between a referral service and its participants from AKS liability, but only when the fees meet several specific requirements, including that they:  

• Are assessed uniformly against all participants. 
• Are based only on the cost of operating the referral service. 
• Do not vary with the volume or value of federal healthcare program referrals.   

The arrangement failed multiple requirements. Subscription fees varied based on geography and the number of HHA locations, meaning similarly situated HHAs could pay different amounts and were not limited to the vendor's actual cost of operating the platform. HHS-OIG analyzed the arrangement under the referral services safe harbor at 42 C.F.R. § 1001.952(f) and concluded the arrangement failed to satisfy § 1001.952(f)(2), the provision requiring that fees be assessed uniformly and reflect only the cost of operating the service. 

Examining the totality of the circumstances, HHS-OIG identified the following principal risks: 

• Risk of inappropriate steering and unfair competition: Because hospital referrals are frequently awarded on a first-come, first-served basis, the ability to receive and respond to referrals electronically through the software provides a significant competitive advantage over HHAs that have not subscribed for referrals of federal healthcare program beneficiaries. HHS-OIG found that, in practice, the delays associated with non-electronic referral methods effectively eliminate non-subscribing HHAs from competing for referrals. This anti-competitive effect is compounded when an HHA cannot afford the subscription fee, meaning patients are directed to HHAs based on their willingness and ability to pay rather than on the quality of care they provide.
• Risk of overutilization: HHS-OIG noted that HHAs bearing subscription costs may face financial pressure to recoup those costs, which could incentivize billing for medically unnecessary services and drive up costs to federal healthcare programs. 

What Home Health Agencies and Health Care Technology Vendors Should Do Next 

This unfavorable opinion signals that HHS-OIG views pay-to-play referral management platforms as presenting meaningful AKS risk, particularly when the fees charged create a competitive disparity between paying and non-paying providers. Home health agencies and other providers that subscribe to software platforms facilitating hospital referrals should assess whether those arrangements satisfy the referral services safe harbor, specifically whether fees are uniform, cost-based, and not volume-sensitive.  

Given the complexity of the safe harbor analysis and the fact-specific nature of HHS-OIG's totality-of-the-circumstances review, healthcare providers and technology vendors that utilize referral-based software should work with experienced healthcare attorneys before entering into or continuing subscription arrangements that involve referral management software to assess whether such arrangements create illegal remuneration tied to volume or value of referrals of federal healthcare beneficiaries. 

In Case You Missed It 

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