On July 1, 2025, the Office of Inspector General (“OIG”), in Advisory Opinion 25-08, considered a proposed arrangement by a medical device company (“Requestor”) that supplies “bill-only” surgical items, which are devices selected in real-time for specific procedures. The Requestor sought to pay a third-party vendor to access its Bill-Only Portal, a software platform the vendor’s client hospitals and ambulatory surgical centers use to manage purchases. The vendor charges $395 annually per representative, totaling $1.2 million in annual fees from the Requestor for use of the portal. Some provider clients require the portal as a condition of doing business, creating a tension between business development and legal business practices.
OIG’s Analysis
The OIG determined the arrangement would constitute prohibited remuneration under the Federal Anti-Kickback Statute if undertaken with the requested intent. The OIG’s key concerns are summarized as follows:
- Redundancy: The vendor’s Bill-Only Portal was duplicative and operationally unnecessary in addition to the Requestor’s existing billing software. Given that the Requestor already has an established accounts receivable process and teams to manage invoicing and payment, the vendor portal offered no unique or essential functionality for the Requestor.
- Lack of Commercial Reasonableness: The Requestor could not certify that the fee was necessary or reasonable to conduct business. The Bill-Only Portal did not provide any appreciable benefit to the Requestor, and its use was driven solely by the need to maintain access to provider clients who required it. This undermined the legitimacy of the expense and raised concerns about whether the payments were an inducement or an actual business necessity.
- Inappropriate Steering: The proposed arrangement risked steering clients toward the Requestor inappropriately. By agreeing to pay the vendor’s annual fees, the Requestor would have preferential access to providers who may have otherwise chosen competitors of the Requestor that were unwilling or unable to pay the vendor’s fee. This “pay-to-play” relationship creates a competitive imbalance, leading the OIG to believe that the fee could serve as an indirect inducement for purchases reimbursable by federal health care programs.
- No Safe Harbor Protection: The requested arrangement failed to meet the criteria under the personal services and management contracts safe harbor. Specifically, the Requestor could not demonstrate that the services contracts were reasonably necessary to accomplish a legitimate business purpose.
Practical Takeaways
Manufacturers and suppliers should actively avoid arrangements that could be construed as indirect incentives for referrals or purchases, or “pay-to-play” arrangements. Where possible, arrangements should be structured to meet an applicable safe harbor, with support to demonstrate that the arrangement is reasonably necessary to accomplish the commercially reasonable business purpose of the services.
If you have any questions or would like additional information, please contact:
- Erin Drummy at 317-977-1414 or edrummy@hallrender.com; or
- Your primary Hall Render contact.
Special thanks to Summer Associate Nick Baker for his assistance in the preparation of this article.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
