In an October 6, 2006, letter posted to the OIG’s website, the OIG confirmed and clarified its stance on physician investments in joint ventures involving the medical device industry. The letter was issued in response to a direct request for OIG guidance concerning (1) the application of the OIG’s 1989 Special Fraud Alert on Joint Ventures to medical device and distribution entities; (2) clarification of relevant factors in an OIG analysis of a joint venture under the antikickback statute; and (3) publication of OIG guidance specific to physician investment in medical device manufacturing and distribution entities.

The OIG began by calling for close scrutiny of joint ventures involving physicians and medical device manufacturing and distribution entities, including group purchasing organizations, having voiced its concern over the strong potential that exists for improper inducements between the physician investors, the entities, device vendors, and device purchasers. The OIG then confirmed that its Special Fraud Alert on Joint Ventures, as well as its other guidance on physician investments, is current guidance and is not sector specific. As such, the principles set forth in that guidance apply to physician investment in medical device manufacturing and distribution entities.

Next, the OIG turned to the relevance of physician investor revenues to an antikickback analysis of a joint venture. To clarify that the amount of revenue generated by a physician investor is relevant in such an analysis, the OIG referred to the safe harbor for investments in small entities. Asserting that the safe harbor conditions are relevant to an analysis of physician and other joint ventures under the fraud and abuse laws, the OIG cited the safe harbor’s condition limiting protection to entities that derive no more than 40 percent of their gross revenues from investors. The OIG also referenced its Supplemental Compliance Guidance for Hospitals for further clarification of its point. Calling the compliance program guidance equally relevant to medical device manufacturers and distributors, the OIG pointed out that the compliance program guidance’s discussion of joint ventures notes that the fact that a substantial portion of a venture’s gross revenues is derived from participant-driven referrals is a potential indicator of a problematic joint venture.

The OIG concluded by addressing the requestor’s suggestion that the OIG publish additional guidance specific to medical device manufacturing and distribution entities. The OIG promised that, in contemplating future OIG guidance projects, it would consider the points raised by the requestor in its letter.