Advisory Opinion 14-01: OIG Says No AKS Sanctions for Senior Communities that Compensate Referral Source

February 4, 2014 | By Lawrence J. Tabas

In its first Advisory Opinion of 2014, the Department of Health and Human Services Office of Inspector General (“OIG”) found that an arrangement between a placement agency (the “Placement Agency”) and certain senior residential communities (the “Communities”) does not violate the Anti-Kickback Statute (“AKS”).  Under the arrangement, the Communities pay the Placement Agency for referring new residents to the Communities where the residents may receive services paid for by Federal health care programs. The main issue addressed by the OIG is whether the Communities are improperly making payments to the Placement Agency in order to create Federal health care program business. The AKS generally prohibits the payment or acceptance of remuneration (broadly defined as anything of value) to induce or reward referrals of items or services reimbursable by a Federal health care program.

The Arrangement

Under the arrangement, the Communities pay a fee to the Placement Agency for every new senior who takes up residence at a Community as a result of the Placement Agency’s efforts. The fee calculation, which excludes any charges billed to Federal health care programs, is based on a percentage of the new resident’s charges for the initial month or two months of residence. Additionally, contracts existing between the Placement Agency and the Communities forbid the Placement Agency from knowingly referring residents who rely on Federal or state funding sources to pay amounts owed to the Communities. 


The OIG found that, in the absence of requisite intent, the arrangement does not generate prohibited remuneration under AKS, and it would not impose sanctions. The OIG stated that the following elements of the arrangement mitigate the risk of prohibited remuneration:

  • The placement fee calculation does not include any charges to Federal health care programs, rather it is based on the initial rent and services paid for by the new resident in the initial month to two months of residency.
  • The contracts between the Placement Agency and the Communities prohibit placement of residents who rely on state or Federal funding sources.
  • The Communities do not provide services reimbursed by Medicare.
  • The parent company of the Communities certified that its subsidiaries do not track resident referrals, nor do they limit the residents’ choice of health care providers.

Based on these factors, the OIG concluded the arrangement poses a minimal risk under the AKS.

The Health Law Gurus™ will continue to follow the release of OIG Advisory Opinions. We encourage you to share your experiences and thoughts about the AKS with us and our readers in the comments section below.

You can access a copy of the OIG Advisory Opinion 14-01 here.

About the Authors

Lawrence J. Tabas


Lawrence is the Chair for Obermayer’s Health Care Law Department and Election Law Practice Group. Lawrence’s Health Care Law legal experience includes the representation of Pennsylvania County governments in Behavioral Health Managed...

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