On June 23, the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services published Advisory Opinion 22-13, approving an arrangement under which a durable medical equipment (DME) manufacturer (Requestor) maintains arrangements with financial institutions to offer zero-interest financing to Requestor’s qualified customers.

This favorable opinion is noteworthy because it reinforces OIG’s skepticism of loans between parties in a position to generate federally reimbursable business and outlines various safeguards the parties may put into place to insulate such loans from fraud and abuse risks.

The Arrangement

Requestor manufactures and sells DME to DME suppliers (Customers) who, in turn, dispense the products to patients, including Federal health program beneficiaries. Under the arrangement, Requestor has entered into agreements with two third-party financial institutions (Lenders) to make zero-interest financing available to certain Customers who request or are offered financing because they are unwilling or unable to pay Requestor’s total invoiced amounts.

To be eligible, a Customer must meet all of the following criteria:

  • Owe at least $10,000 to Requestor.
  • Be in good standing with Requestor.
  • Be an acceptable credit risk, as reasonably determined by Requestor.

Upon learning that a Customer desires zero-interest financing and meets the criteria, Requestor’s credit and collections personnel contact one of the Lenders, which then performs a creditworthiness analysis. If the Lender approves the Customer for zero-interest financing, the Lender executes a financing agreement with the Customer under which the Customer makes payments to the Lender in 12 equal monthly installments. The Lender then remits the invoiced amount to Requestor, less a fair market value finance charge.

Under the arrangement, the Lenders have the exclusive right to seek payment from Customers and to administer, enforce, collect, litigate, settle, waive, or compromise on any defaulted transaction. However, the agreements between Requestor and each Lender establish “loss pools” that allocate responsibility between the Lender and Requestor in the event of a Customer’s default.

Requestor certified that it neither advertises the potential for zero-interest financing nor guarantees zero-interest financing to any Customer or potential Customer.

OIG’s Analysis

OIG concluded that the arrangement implicates the federal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b) because the zero-interest financing constitutes a “clear benefit” to Requestor’s Customers. OIG nevertheless concluded that the arrangement includes several safeguards that warrant a favorable opinion.

OIG first noted that, although the zero-interest financing constitutes remuneration to Requestor’s Customers, the Customers do not receive any other discounts or price concessions under the arrangement. In other words, absent default, the Customers ultimately end up paying the same amount they would have paid, just over a longer period.

Second, OIG found that the Lenders’ involvement reduced the risks that Requestor might improperly use the zero-interest loans to secure future referrals because the Lenders’ creditworthiness analyses and decisions on whether to enter into financing agreements were independent of Requestor.

Additional safeguards upon which OIG relied include:

  • Neither Lender is a healthcare provider or supplier in a position to refer federal healthcare program business to Requestor.
  • The arrangement would be unlikely to increase costs to federal healthcare programs because DME is reimbursed based on fee schedule amounts, regardless of the amount Customers pay for such products, and because Customers do not prescribe DME, limiting the potential for overutilization.
  • Requestor does not market the possibility of, or guarantee access to, the zero-interest loans.
  • Because Requestor bears some financial risk due to the loss pooling arrangements with the Lenders, Requestor’s incentive to initiate zero-interest financing on a Customer’s behalf is limited.


While this decision does not break any new ground, it serves as an important reminder that loans constitute remuneration under the Anti-Kickback Statute and that OIG will carefully consider the facts and circumstances surrounding loans between parties in a position to generate federally reimbursable business.

Requestor’s separation from the party making and administering the loan appears to have been critical to OIG’s analysis and approval of the arrangement. Given OIG’s statement that zero-interest loans provide a “clear benefit” to customers, DME manufacturers and others who sell federally reimbursable items or services should carefully evaluate any loan program.

If you have any questions about how this latest Advisory Opinion may impact your business, please contact the authors.