Golf Fundraisers Unlikely to Raise Fraud and Abuse Concerns

April 24, 2002

Do annual fundraising golf outings violate the anti-kickback rule? The Office of the Inspector General (“OIG”) has provided some timely advice to this question. While such events have the potential to generate prohibited payments, they generally pose minimal risk of abuse and are unlikely to be challenged if certain precautions are in place.

Most hospitals or other nonprofit healthcare providers hold annual golf fundraisers. Typically, these events are attended by vendors, suppliers, board members, consultants, bankers, medical staff members, healthcare insurers, and others having a relationship with the event's sponsor.

Certainly, these events (just like any transaction involving a referral source) can give rise to anti-kickback rule concerns. If, for example, a vendor, supplier, physician, or ancillary service provider intended to induce or perpetuate referrals by supporting a hospital golf event (purchasing a foursome, sponsoring a tee, contributing gifts, underwriting a portion of the event, or otherwise), the anti-kickback rule would be implicated. Similarly, significant fraud and abuse issues are raised if a hospital demands participation in the event as a condition to maintaining or establishing a business relationship with the hospital. While acknowledging this potential for abuse, the OIG declined to cast a black cloud over these events. In so doing, the OIG properly recognized them for what they are: fundraisers intended to benefit the sponsor's charitable purposes without coercion or ulterior motives. In reaching this conclusion based on the facts presented, the OIG relied on a few key factors:

The golf event had a bona fide charitable purpose (i.e., it was intended to raise funds in support of a charitable mission, and it was not a subterfuge by which the involved health center intended to receive payments for referrals).
Support for the event was broad based (i.e., participation was not limited to those receiving referrals from the health center).
The health center did not establish or maintain business relationships based on who participated in the golf event.

It is also noteworthy that OIG made favorable mention of the fact that the golf event in question was run by a golf committee consisting primarily of individuals having no employment or business relationship with the health center.

Also, it is not uncommon for hospitals to be involved in another type of golf event, one in which medical staff members and other "friends" of the hospital are invited to attend an event sponsored and paid for by the hospital in appreciation of their support of the hospital. Although the OIG did not address this type of golf event in the advisory opinion discussed above, it is clear that these events raise more complex fraud and abuse issues. Does this "thank you gift" from the hospital constitute illegal remuneration under the anti-kickback rule or give rise to an improper compensation arrangement under Stark? The answer is not clear. However, the Stark regulations published on January 4, 2001 (to be generally effective as of January 4, 2001) provide an apparent source of relief. HCFA incorporated a new exception into these regulations which allows hospitals to provide physicians with non-monetary compensation having a total value of not more than $300 per year. Any hospital looking to reward physicians or other referral sources through such a golf event would be wise to conform with the criteria of this exception.

As your golf fundraiser draws near or plans begin for next year, hopefully you can rest assured that, if properly motivated and executed, this event will not give rise to penalties under the various fraud and abuse rules.

For more information, please contact mstadler@cohenlaw.com.