Staying Compliant in a Non-Compliant World (Pt. 1)
Portable Diagnostics in Skilled Nursing Facilities: Market Pressures, Compliance Risks, and Opportunities
A Research White Paper for Industry Discussion
Disclaimer
This paper is provided for informational purposes only. It is not legal advice and may contain incomplete or interpretive information. Readers are encouraged to conduct further research, review source documents, and consult compliance or legal professionals before making decisions.
Executive Summary
The portable diagnostics industry- particularly portable X-ray providers servicing skilled nursing facilities (SNFs) and long-term care facilities- has evolved under the weight of Medicare regulations, corporate consolidation, and increasing scrutiny from regulators.
Market imbalance: Large, national and multi-regional x-ray providers often dominate through exclusive contracts with multi-facility SNF chains, leaving diagnostic providers with smaller or local service area footprints struggling to compete.
CMS rules: Consolidated Billing (CB) requires SNFs to contract for Part A services, but Part B and Medicare Advantage residents are not bound by these exclusivity rules. This creates a compliance and care pathway for facilities to work with multiple providers.
Swapping & inducements: The Office of Inspector General (OIG) has long identified “swapping,” where portable x-ray vendors offer large discount services under Part A in exchange for Part B referrals- as a violation of the Anti-Kickback Statute (AKS). Enforcement has expanded beyond imaging into durable medical equipment (DME), ambulance services, pharmacies, food and laundry contracts, and rehabilitation providers.
Facility risk: Administrators, directors of nursing, marketing directors, and even public hospital district boards can face compliance risk when exclusive or below-market contracts distort patient choice and service delivery.
Strategic opportunity: By allowing multiple x-ray providers, facilities can reduce compliance risk, improve patient care options, and demonstrate alignment with CMS expectations for resident choice and quality improvement.
1. Background: Market Context
Portable X-ray and diagnostic providers play a critical role in serving frail and homebound residents of SNFs and long-term care facilities. These services reduce unnecessary hospital transfers, improve continuity of care, and lower costs to Medicare.
Over the past two decades, however, the market has consolidated:
Large national and regional providers leverage scale to contract with regional and national nursing home chains for an all in one contract.
Smaller and local providers often find themselves excluded, even when they can provide faster response times, tailored services, and community-based innovation (e.g., fracture risk screenings, echocardiography).
Compliance concerns arise when these exclusive contracts are tied to inducements or swapping arrangements. OIG has explicitly warned that these practices undermine patient choice and violate federal law.
The result is a tension between efficiency of scale and rules-based compliance. This white paper examines where the balance lies, and how facilities can avoid regulatory pitfalls while improving resident care.
2. CMS Consolidated Billing: Part A vs. Part B
Understanding how services are billed and paid is essential:
Medicare Part A (Skilled Nursing Facility benefit period):
Medicare Part B / Medicare Advantage (long-term residents):
Key takeaway: Facilities that impose “blanket exclusivity” for all residents, including Part B/MA patients, may unintentionally restrict patient rights and create compliance exposure.
3. Swapping and Inducement Practices Across Industries
The OIG has repeatedly highlighted the dangers of “swapping,” or arrangements where a supplier provides discounted services the facility must pay for (under Part A) in exchange for access to more profitable referrals (Part B, MA, or other payors).
3.1 Portable Imaging
Vendors might offer below-cost X-rays for Part A residents to secure all Part B residents’ business. Beware!
OIG has explicitly flagged these arrangements as non-compliant with the AKS.
“Loss leader” pricing with an expectation of referrals... is a red flag.
3.2 Ambulance Services
Advisory Opinions (e.g., AO 99-02, AO 10-26) addressed ambulance providers offering deep discounts to SNFs for rides they had to pay for, in exchange for receiving all Medicare-covered rides billed directly to Part B.
OIG made clear: such arrangements violate AKS unless rates are fair market value and stand-alone commercially reasonable.
3.3 Durable Medical Equipment (DME) & Pharmacies
Similar patterns occur in DME and pharmacy services, where vendors discount items/services SNFs must cover under Part A while steering Part B business.
Enforcement actions against large LTC pharmacies (e.g., Omnicare) often involve inducements such as free consulting, technology, or rebates tied to referral volume.
3.4 Food Service & Laundry
Less visible but still relevant: vendors providing below-cost food, laundry, or housekeeping services in exchange for preferred contracts.
Though not as heavily publicized, these arrangements carry similar AKS risks when tied to federally reimbursed services.
3.5 On-Site Rehabilitation Contracts
Contract rehab companies (physical, occupational, speech therapy) are often embedded within SNFs.
While therapy remains carved into consolidated billing, below-market rehab contracts offered in exchange for referrals of other covered services can create the same “swapping” concerns.
This area is under increasing scrutiny as therapy providers consolidate.
We’ve set the stage with the background, the CMS payment rules, and cross-industry examples of swapping/inducement.
Next (Part 2): I’ll cover:
Compliance & liability risks (administrators, corporate, hospital districts).
Why facilities benefit from multiple providers.
Market advantages of smaller/regional providers.
