Credit line

OIG refuses to impose sanctions on health system line of credit

On September 6, 2022, the Office of Inspector General (OIG) issued Advisory Opinion 22-17 (Advisory Opinion), in which it declined to impose sanctions against a nonprofit regional health care system. lucrative 501(c)(3). which operates four hospitals (health system) and one clinic that provide services in geographic areas that have been designated as medically underserved areas and health professional shortage areas (together, the applicants). The health system had supported the establishment of the clinic, which is registered as a free clinic and designated as a Federal Qualified Health Center (FQHC) look-alike (clinic), (but is neither an FQHC nor does it receive funding in under section 330 of the Public Health Services Act). The arrangement involves the cancellation of a line of credit memo that the health system has entered into with the clinic. The OIG concluded that while the arrangement would constitute prohibited compensation under the federal anti-bribery statute (AKS) if the requisite intent were present, the arrangement and the safeguards in place did not warrant the imposition of penalties.


Since the clinic’s inception, the applicants “have collaborated on their common mission to achieve certain goals and objectives through the clinic, including: (i) expanding access to health care services for low-income residents , (ii) improve the overall health of patients served, and (iii) reduce financial, environmental, process, and cultural barriers to accessing quality health care services.In support of these shared goals, the health system has provided financial support to the clinic since its initial development.

The applicants requested an opinion regarding the restructuring of three existing agreements between the health system and the clinic. The first agreement is a line of credit note concluded by the health system with the clinic in June 2018 (Note). While the terms of payment for the Billet required monthly installments as well as various penalties for non-payment, the Clinic only made two installments of the balance of the Billet.

The second existing agreement is a lease between the clinic and the health system (lease). The health system purchased property and built a medical office building that the clinic has been leasing from the health system since 2017, to use as one of the clinic’s main locations. The applicants entered into a written agreement which covers the use of the premises and provides for rent at fair market value. However, the clinic made no payments to the health system as required by the terms of the lease and the payments were charged to the ticket.

Finally, in 2019 the Applicants entered into a framework service agreement (MSA) under which the Health System makes certain administrative and medical services available to the Clinic. Under the MSA, the clinic is required to pay a fair market value payment rate. However, except for two partial payments for two months, the Clinic made no payments to the healthcare system as required by the terms of the MSA, and these payments were also charged to the bill.

Since entering the rating in 2018, the health system has approved several rating increases. The Note now includes all sums due to the Health System by the Clinic under the Lease and the MSA. The health system and the clinic certified that the several increases on the rating were necessary because the clinic did not have the sufficient revenue needed to continue operations without extending the rating. The petitioners have also certified that the financial burden of the obligations created under the note, the lease and the MSA prevent the clinic from achieving financial stability.

Proposed arrangement

The health system is offering to waive the entire amount owed by the clinic on the note through a donation to the clinic. After the pardon, the petitioners would also enter into a new rental agreement and a new MSA. Under the terms of the new lease, the health system would allow the clinic to use the leased premises free of charge. The terms of the new MSA would require the clinic to pay fair market value to the health system for the services the health system provides to the clinic.

BIG Analysis

According to the OIG, the proposed arrangement involves the AKS because it would involve compensation from the health care system to the clinic that would constitute compensation prohibited under the law if the required intent were present. The OIG analyzed the implications of the AKS as follows:

  • The arrangement would not qualify for protection under the FQHC safe harbor because that safe harbor only protects the compensation of an FQHC, and the clinic is an FQHC look-alike; however, the applicants’ certifications indicate that the proposed arrangement would be structured and operated in a manner that aligns with all FQHC Safe Harbor requirements and that the clinic is subject to other government oversight due to other federal grants it receives, so the risk of fraud and abuse is low due to government oversight;

  • The petitioners certified that the healthcare system would not restrict the clinic’s ability to refer patients to other providers and thereby avoid the risk of inappropriate referrals;

  • The clinic determined that compensation under the new agreement would contribute significantly to the clinic’s ability to maintain or increase the availability or improve the quality of services provided to a medically underserved population in the service area ( the clinic also agrees to re-evaluate this determination at least once a year for the duration of the arrangement);

  • The applicants have certified that the goods, items, services, donations or loans that the health system would provide to the clinic pursuant to the new agreements would be medical or clinical in nature or otherwise relate directly to the services the clinic provides to its patients;

  • Although the petitioners have certified that the health system and the clinic routinely refer patients when it is in the best interest of the patient and with their consent, neither the health system nor the clinic are required to make such referrals. ; and,

  • The Clinic would be free to enter into agreements with other vendors or suppliers of comparable goods, items or services or with other lenders or donors, and to the extent the Clinic had multiple individuals or entities willing to offer comparable compensation, the Applicants certified that the Clinic would employ a reasonable methodology to determine the persons or entities to be selected and would document its decision.


The OIG has concluded that the above considerations mitigate the risk of fraud and abuse of the arrangement. Therefore, the OIG concluded that while the arrangement would generate prohibited remuneration if the requisite intent were present, it would not impose administrative penalties on the claimants under the arrangement under the AKS .

As the OIG has pointed out, its advisory opinions are issued only to the requesters of the opinion, and do not apply to any person or entity, and cannot be relied upon by any person or entity, and cannot be presented in evidence by anyone other than the plaintiffs. to prove that the individual or entity has not violated anti-bribery or other law.

Erin Howard also contributed to this article.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.National Law Review, Volume XII, Number 304