Since the 1980s, regulators and lawmakers have raised concerns about financial relationships and potential kickbacks between ophthalmologists and optometrists.¹ With this history as a backdrop, some have been surprised that government scrutiny of co-management has not surfaced sooner. But three recently settled whistleblower suits demonstrate that scrutiny of co-management and other financial relationships between ophthalmologists and optometrists has intensified in recent years. These recent cases are as follows:

• In March 2023, a Rhode Island ophthalmologist agreed to pay (in his individual capacity) more than $1.1 million to resolve claims brought by whistleblowers in the federal court in the District of Rhode Island. The whistleblowers alleged that the ophthalmologist, through his practice and its parent company, submitted false claims to federal health-care programs for cataract surgeries and other services performed as a result of illegal kickback relationships with local optometrists.
• In March 2023, a Texas ophthalmology provider group agreed to pay more than $2.9 million to settle allegations that it offered and paid kickbacks to optometrists to induce referrals of patients who were cataract surgery candidates.
• In May 2023, a Tennessee specialty eye center, along with two ASCs, agreed to pay $17 million to settle a 2017 qui tam suit alleging that it entered problematic, blanket “co-management” arrangements with referring optometrists as well as provided unlawful financial benefits such as free continuing education programming, gifts and entertainment to optometrists in exchange for referring patients to the center for cataract surgery.

All three cases are premised on violations of the federal Anti-Kickback Statute (AKS) that broadly prohibits offering, paying, soliciting or receiving anything of value in exchange for referral of business payable by a federal health-care program (eg, Medicare, Medicaid or other government programs). A violation of the AKS is a felony that may be penalized by criminal fines, imprisonment and potential exclusion from doing business with the federal health-care programs.

Violations of the AKS also serve as the foundation for violations of the federal False Claims Act (FCA), a civil statute that imposes stiff monetary penalties on anyone who knowingly submits or causes the submission of false claims to the government (including claims for services that were the result of a prohibited kickback). In addition to actions brought by US regulators, the FCA also allows private citizens (referred to as relators or whistleblowers) to file suits on behalf of the government. To incentivize these lawsuits, citizens who successfully bring whistleblower actions may receive up to 30% of the government’s recovery.

The conduct involved in these cases shares many similarities, detailed below.

‘BLANKET’ CO-MANAGEMENT

All three lawsuits involved ophthalmology practices that allegedly maintained “blanket” co-management arrangements with local optometrists under which patients were automatically returned to the referring optometrist for postoperative care after cataract surgery. Return of postoperative care to the referring optometrist should not be routine or automatic — it must be determined on an individual basis, taking into account the patient’s preference and whether it is clinically appropriate. Routine transfer of patients back to the referring optometrists tends to suggest that the arrangement is not for the benefit of the patient but is, instead, designed to bolster lucrative referral relationships between ophthalmologists and optometrists.

In two of these cases, the provider groups’ promotional materials and communication to referring optometrists provided information that co-management decisions were not being made on a case-by-case basis. The Tennessee eye center promoted to its referring optometrists that it would guarantee that patients would go back to the optometrist after a surgery to preserve the optometrist’s opportunity to maintain these lines of revenue themselves. The Texas ophthalmology group also allegedly guaranteed the automatic return of all patients to the referring optometrist — even if against the patients’ wishes. Patients who objected allegedly were informed that the practice is “just a surgery center” and that all postoperative care must be performed by the referring optometrist.

INAPPROPRIATE CO-MANAGEMENT FEES

All three cases had another common component: Each involved cash payments from the ophthalmologists to referring optometrists under the guise of a co-management agreement. The Department of Justice press release announcing the settlement with the Texas provider group noted that fees paid to the optometrists in association with cataract surgery with premium IOLs and other lucrative upgrades were not tied to or commensurate with actual postoperative services provided. Whistleblowers were able to make the case that these payments incentivized the referring optometrists to refer patients to the paying ophthalmologists for surgery.

The suit against the Rhode Island ophthalmologist alleged that cash payments styled as “co-management fees” were paid by he and his practice to referring optometrists in amounts equal to 10% of the amount billed to payors for the cataract or LASIK surgery for which the patient had been referred. In the suit against the Texas group, too, prosecutors established that optometrists were paid fees that didn’t align with the fair market value for the services they were providing to patients and that the practice paid the optometrists additional compensation if the patient selected a premium IOL or other lucrative upgrades.

As these settlements demonstrate, arrangements in which a surgeon collects a single fee for any non-covered services and pays the referring doctor for their services can carry higher regulatory risk. To reduce risk for the surgeon, co-manager and surgery facility, each provider should maintain an independent relationship with the patient and establish their own fees for services based on fair market value for those services.

GIFTS

Two of the three cases also involved additional non-monetary perks and gifts provided to referring optometrists. The whistleblower and United States alleged that optometrists who referred patients to the Texas group for cataract surgery were sometimes provided with free continuing-education courses, expensive dinners and invitations to Texas Rangers games. Similarly, whistleblowers claimed that the Tennessee practice offered its local optometrists a variety of financial inducements to refer patients, such as free continuing education, free dinners with open bars, lunches for optometrists and their staff, golf outings and trips to other sporting events.

To make matters worse, according to allegations by whistleblowers, the Tennessee practice also closely monitored and tracked all referrals from optometrists and the collections attributed to referring optometrists, using that data to target optometrists to receive these perks based upon the volume and value of their referrals. The eye center allegedly discussed its special events in terms of the “return on investment” for each business development expense.

All remuneration — anything of value — provided to referring optometrists or any other potential referral sources must be carefully examined to ensure that it is not an unlawful kickback under state or federal law. The federal anti-kickback statute may permit certain arrangements with referral sources, including nominal gifts² and arrangements for legitimate services in exchange for fair market value compensation,³ but these defendants, claim the whistleblowers, offered pricey perks to referral sources under circumstances that strongly suggest the gifts were offered with the intent to induce referrals.

CE PROGRAMS

Finally, two of the three cases also involved allegations that the ophthalmology practices sponsored continuing-education programs for referring optometrists in a manner that did not comply with current guidance. These practices offered free continuing education to referring optometrists, allegedly to encourage those optometrists to continue referring patients.⁴

Ophthalmology practices considering whether to organize educational opportunities for local optometrists should ensure that:

• The educational programming is legitimate with real, educational content
• Invitations are not extended only to referral sources
• Each attendee is charged a fair market value for the program.

AN OUNCE OF PREVENTION …

As these three cases demonstrate, relationships between ophthalmologists and referring optometrists can bring regulatory scrutiny. It is critical that both providers involved should structure their arrangements to comply with best practices. OM

REFERENCES

1. Kickbacks in Cataract Surgery: Hearing Before the Special Subcommittee on Aging, 100 Cong. (1988); 64 Fed. Reg. 63518, 63548 (Nov. 19, 1999).
2. The Department of Health and Human Services Office of Inspector General (OIG) has suggested that gifts to referral sources of “nominal” value likely would not be challenged. OIG Compliance Guidance for Physicians, 65 Fed. Reg. 59434, 59441 (Oct. 5, 2000).
3. The personal services safe harbor under the federal Anti-Kickback Statute permits a person to pay a referral source for legitimate services on the condition that all of the elements of the safe harbor are met, including the requirement that the arrangement for services is set out in writing and signed by the parties, that the compensation paid is set in advance and consistent with fair market value in an arm’s length transaction, and the services do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purposes of the parties. 42 C.F.R. § 1001.952(d).
4. OIG Advisory Opinion 22-14. June 23, 2022. https://oig.hhs.gov/documents/advisory-opinions/1040/AO-22-14.pdf . Accessed August 2, 2023.

Allison Shuren, JD, co-chairs the Life Sciences and Healthcare Regulatory practice at Arnold & Porter in Washington, DC. She advises a wide range of health-care clients on regulatory, compliance, enforcement and legislative matters. She counsels on referral arrangements as well as sales and marketing programs and represents clients in government investigations and qui tam actions involving False Claims Act, Anti-Kickback Statute, Stark Law and health-care fraud allegations.

Loreli Wright, JD, MS, counsels clients at Arnold & Porter in Denver, on a broad range of regulatory and transactional matters in the health-care industry, primarily on regulatory matters related to the expansion and acquisition of provider entities. She advises health-care organizations, health-care professionals and private equity firms on regulatory issues, including licensure and certification of health-care facilities, corporate practice restrictions, Medicare and Medicaid program participation requirements, telemedicine, and federal and state health-care fraud, abuse and self-referral laws.