Judge insists on explicit kickback connections

March 27, 1991

The Office of the Inspector General of the Department of Healthand Human Services took it on the chin this month from an administrativelaw judge who disagreed with the office's enforcement of the Medicare/Medicaidantifraud and abuse law. Judge Steven

The Office of the Inspector General of the Department of Healthand Human Services took it on the chin this month from an administrativelaw judge who disagreed with the office's enforcement of the Medicare/Medicaidantifraud and abuse law.

Judge Steven Kessel ruled against the OIG this month in a casethat involved banning a clinical laboratory from performing Medicareservices on the grounds that the lab was inappropriately compensatingphysician investors in the lab for patient referrals.

The judge ruled that for a violation of the antifraud and abuselaw to occur, joint ventures must explicitly agree to make kickbackpayments to physicians for their referrals. The conclusions inthis case would apply to all businesses providing medical services,including freestanding imaging centers, according to the OIG.

Although the decision is seen as a setback for the OIG, theoffice played down the ruling.

"The first thing to realize is that this is an administrativejudge's decision, not a Supreme Court ruling," said JudyHoltz, OIG spokesperson. Administrative law judges review onlyinternal matters, in this case the legality of actions taken bythe DHHS.

Five of the 10 counts in the case involving a California laboratorywere upheld, said Thomas S. Crane, the attorney who representedthe OIG in the proceedings. The OIG has filed an appeal on partsof the ruling, Crane said.

If the DHHS safe harbor regulations outlining appropriate referringphysician investments are enacted, those rules are likely to takeprecedence over the judge's decision regarding imaging centers,he said.

In the meantime, the OIG continues to pursue its antifraudand abuse investigations according to the way it interprets thelaw.

"On that basis, as well as our belief that the rulingwill be overturned, we are disregarding Judge Kessel's decision,"Crane said.