OIG Says Medical Device Company's Proposal to Pay for Exclusion Screening for Customers May Violate the Anti-Kickback Statute

On June 20, 2025, the Department of Health and Human Services’ Office of Inspector General (“OIG”) issued an unfavorable advisory opinion - OIG Advisory Opinion 25-04 (“AO 25-04”).

AO 25-04 discusses a proposal by a medical device company (the “Requestor”) to cover the costs for its customers—hospitals, health systems, and ambulatory surgery centers—to have a third-party company screen and monitor the Requestor for exclusion from federal healthcare programs. The OIG concluded that the proposed arrangement would potentially generate prohibited remuneration under the federal Anti-Kickback Statute (“AKS”).

According to the advisory opinion, some of the Requestor’s customers were either requesting or requiring, as a condition of doing business, that the Requestor pay a third-party company (the “Company”) to screen and monitor them for exclusion from federal healthcare programs. Under the proposed arrangement, the Company would charge the Requestor (and not its customers) an annual subscription fee for each customer receiving these screening and monitoring reports. The Requestor estimated this would amount to approximately $450,000 in annual fees, paid directly to the Company. The Requestor would not be a party to any agreements between its customers and the Company.

In reviewing the proposed arrangement in AO 25-04, the OIG determined that the Requestor's proposed payment of the exclusion screening fees on behalf of its customers would implicate the AKS because the Requestor would be paying for the costs associated with a service—exclusion screening and monitoring—that its customers would otherwise incur. This payment constitutes remuneration to those customers. The OIG explained that by relieving customers of this financial burden, the proposed arrangement could induce them to purchase items or services from the Requestor that are reimbursable by a federal healthcare program. According to the OIG, the proposed arrangement “presents anti-competitive risks and risks of inappropriate steering.” Specifically, the OIG noted concern that paying the fees on a per-customer basis could improperly sway customers toward the Requestor, especially over competitors unwilling or unable to offer similar payments. In support of the unfavorable decision, the advisory opinion notes the OIG's “longstanding and continuing concerns” about the provision of free items or services by individuals and entities, including device manufacturers, to referral sources.

While the OIG noted that a different fact pattern or structure to the arrangement might have resulted in a favorable opinion, here, with these facts – including the per-customer fee structure, the OIG cited its concern about the potential for the Company to act as a "gatekeeper" of referrals. Because customers have conditioned their business on the Requestor's payment of the Company’s fees for exclusion screening and monitoring, the OIG noted the risk that the Requestor would pay the fees to gain access to those referrals.

We typically see hospitals and health systems as the entities performing the exclusion screening of potential vendors before entering into a contract with a vendor. In the proposed arrangement in AO 25-04, the script is flipped, with customers (i.e., hospitals, health systems, and ASCs) requiring that the medical device company from which they’re proposing to purchase items engage a third party to screen and monitor the medical device company for potential exclusion and submit reports to those customers regarding the results of such screening and monitoring.

While the OIG concedes in a footnote to AO 25-04 that there is no statutory or regulatory requirement to perform exclusion screening, the OIG’s position is that screening employees and contractors each month best minimizes potential overpayment and civil monetary penalty (“CMP”) liability.  Historically, the OIG has cautioned against relying on a third party to determine whether an individual or entity is excluded and warned that a healthcare provider may still be responsible for overpayments and CMPs relating to items or services that have been ordered, prescribed, or furnished by excluded individuals or entities. However, the OIG also noted in the 2013 Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs that a healthcare provider may be able to “reduce or eliminate its CMP liability” in such situations if the healthcare provider “is able to demonstrate that it reasonably relied on the [other entity] to perform a check of the [OIG’s List of Excluded Individuals and Entities (“LEIE”)] and “exercised due diligence in ensuring that the [other entity] was meeting its contractual obligation.” One can only assume that it was the fact that customers were conditioning business on the medical device company paying the Company on a per-customer basis to do the exclusion screening and monitoring that tipped the scale to an unfavorable opinion here.

This advisory opinion serves as a reminder that any arrangement where a provider or supplier pays for services or costs that would otherwise be the responsibility of a referral source requires scrutiny under the AKS. If one purpose of the payment is to induce referrals or purchases of items and services reimbursable by federal healthcare programs, the arrangement may violate the AKS.