OIG decides not to impose sanctions on manufacturer of medical equipment in financial arrangement – Health

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Department of Health and Human Services Office of the Inspector General (“OIG”)

Advisory Opinion 22-13

Posted: June 23, 2022

This notice relates to a manufacturer of durable medical equipment (“DME”)’s arrangements with two financial institutions to make zero-interest financing available to qualified customers of the manufacturer.

Read it full text of Advisory Opinion 22-13 including a statement of the facts reviewed by the OIG.

The OIG decides that it will not impose administrative sanctions on the applicant1 under the Arrangement.2

We are of the view that OIG’s conclusion is based on the existence of all the factors of the arrangement. We expect that a different conclusion could be drawn by the OIG if one or more factors did not exist.

Here is a summary of the OIG’s legal analysis:

Arrangement makes interest-free financing available to customers3 which, according to the OIG, constitutes remuneration under the federal AKS. The OIG concludes that the Arrangement presents a sufficiently low risk of fraud and abuse that no sanctions are applied.

  1. Customers do not receive a rebate or other price concession from the applicant (although obtaining zero-interest financing is a compensation and benefit to customers).
    • Customers pay applicant’s fee for equipment

    • The arrangement provides a method for customers to pay for DME over time, typically 12 payments over the course of a year.

    • In a seemingly small percentage of cases, the claimant can redeem the DME that has been in default.

  2. Lenders4 bear the financing risk.
    • Lenders make and collect loans, make independent credit decisions and are responsible for collecting payments.

    • In the event of customer default on loans, the lenders and the applicant use a three-tier system to deal with the default. Lenders assume the first and third tiers, while the applicant’s liability is capped at the second tier.

    • The OIG determines that the involvement of lenders reduces the risk associated with providers, suppliers, or manufacturers who may offer, subsidize, or cancel loans to secure future referrals.

  3. Lenders pay the applicant the balance of the customer’s purchase price less finance charges.
    • The OIG determines that the applicant’s receipt of less than the amount owed does not increase the risk of fraud and abuse under the Federal AKS.

    • The acceptability of the finance charge amount is not part of the advisory opinion, but does not appear to be of immediate concern to the OIG, as it is the result of arm’s length negotiations and the lenders are not service providers. health care or providers or in a position to refer the federal health care company to the plaintiff.

  4. The OIG determines that the arrangement creates low risk related to many other fraud and abuse issues that it typically reviews in arrangements under the federal AKS. The Advisory Opinion lists some of the areas normally identified as problematic, but not in this Opinion.

  5. The OIG determines that although the applicant bears partial liability in the event of customer default, lenders decide whether or not to provide zero-rate financing to customers, lenders have first and last level of responsibility for the amount by default
    • The applicant’s incentive to initiate interest-free financing is limited due to the applicant’s shared liability in the event of default and the risk of the lenders (and the applicant) extending the arrangement to customers who are unlikely to pay. their obligations.

    • The client has no reason to know whether the plaintiff funded part of the default through the loss pool.

OIG Advisory Opinions are highly fact-specific and, by their terms, are limited to the facts presented, specific claimants, and are subject to specific limitations set forth in the Advisory Opinions. The above is a high level summary and consultation with an attorney is recommended for a fuller review and discussion of the advisory opinion.


1 “Claimant” is a manufacturer of durable medical equipment (“DME”) that sells EMR to vendors.

2 “Arrangement” refers to Applicant’s contracts with two financial institutions to make interest-free financing available to Applicant’s qualified clients.

3 “Clients” are the Applicant’s DME supplier-customers. Customers distribute the applicant’s EMR, some of which are intended for beneficiaries under federal health care programs.

4 “Lenders are financial institutions that have a contract with the applicant to provide interest-free financing to qualified customers.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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