HHS IG Issues Advisory Opinion on Use of Preferred Hospital Network
Issued:
Posted:
[
SEE ALSO ATTACHED DISTRIBUTION LIST
Re: OIG Advisory Opinion No. 18-04
Dear [
We are writing in response to your request for an advisory opinion regarding the use of a "preferred hospital" network as part of
In issuing this opinion, we have relied solely on the facts and information presented to us. We have not undertaken an independent investigation of such information. This opinion is limited to the facts presented. If material facts have not been disclosed or have been misrepresented, this opinion is without force and effect.
Based on the facts certified in your request for an advisory opinion and supplemental submissions, we conclude that, although the Proposed Arrangement could potentially generate prohibited remuneration under the anti-kickback statute if the requisite intent to induce or reward referrals of Federal health care program business were present, the
I. FACTUAL BACKGROUND
The entities named on the attached distribution list ("Requestors") are wholly owned subsidiaries of a single parent company. Requestors are licensed offerors of Medigap policies. Requestors propose to enter into an agreement with a preferred hospital organization, [name redacted] (the "PHO"), which has contracts with hospitals throughout the country (the "Network Hospitals"). Under these contracts, the Network Hospitals would provide discounts of up to 100 percent on Medicare inpatient deductibles incurred by Requestors' Medigap plan policyholders (the "Policyholders") that otherwise would be covered by Requestors. The discounts would apply only to the Medicare Part A inpatient hospital deductibles covered by the Medigap plans and not to any other costsharing amounts. The Network Hospitals would provide no other benefit to Requestors or their Policyholders as part of the Proposed Arrangement. Each time a Requestor receives this discount from a
If a Requestor's Policyholder were to be admitted to a hospital other than a
A Requestor would return a portion of the savings resulting from the Proposed
Arrangement directly to any Policyholder who had an inpatient stay at a
II. LEGAL ANALYSIS
A. Law
The anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. See section 1128B(b) of the Act. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the anti-kickback statute is violated. By its terms, the statute ascribes criminal liability to parties on both sides of an impermissible "kickback" transaction. For purposes of the anti-kickback statute, "remuneration" includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.
The statute has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals. See, e.g.,
proceedings to impose civil monetary penalties on such party under section 1128A(a)(7) of the Act. The OIG may also initiate administrative proceedings to exclude such party from the Federal health care programs under section 1128(b)(7) of the Act.
The
regulations that define practices that are not subject to the anti-kickback statute because such practices would be unlikely to result in fraud or abuse. See 42 C.F.R. * 1001.952. The safe harbors set forth specific conditions that, if met, assure entities involved of not being prosecuted or sanctioned for the arrangement qualifying for the safe harbor. However, safe harbor protection is afforded only to those arrangements that precisely meet all of the conditions set forth in the safe harbor. Two safe harbors potentially apply to the Proposed Arrangement. The safe harbor for waivers of beneficiary coinsurance and deductible amounts, 42 C.F.R. * 1001.952(k), permits hospitals to waive the Medicare Part A inpatient deductible in certain circumstances. Meanwhile, the safe harbor for reduced premium amounts offered by health plans, 42 C.F.R. * 1001.952(l), allows plans to reduce an enrollee's obligation to pay cost-sharing or premium amounts in certain circumstances.
Section 1128A(a)(5) of the Act provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or State health care program (including Medicaid) beneficiary that the benefactor knows or should know is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of any item or service for which payment may be made, in whole or in part, by Medicare or a State health care program (including Medicaid). The OIG may also initiate administrative proceedings to exclude such party from the Federal health care programs. Section 1128A(i)(6) of the Act defines "remuneration" for purposes of section 1128A(a)(5) of the Act as including "transfers of items or services for free or for other than fair market value."
B. Analysis
The Proposed Arrangement is a straightforward agreement by the Network Hospitals to discount the Medicare inpatient deductible for Requestors' Policyholders--an amount for which Requestors otherwise would be liable. The law is clear that prohibited remuneration under the anti-kickback statute may include waivers of Medicare costsharing amounts. Likewise, relief of a financial obligation may constitute a prohibited kickback. In addition, Requestors would pass back a portion of their savings, in the form of premium credits, to any Policyholder who has an inpatient stay at a
Proposed Arrangement.
1. Anti-kickback Statute
The Proposed Arrangement would not qualify for protection under either the safe harbor for waivers of beneficiary coinsurance and deductible amounts or the safe harbor for reduced premium amounts offered by health plans. The safe harbor for waivers of beneficiary coinsurance and deductible amounts would offer no protection to the Proposed Arrangement because that safe harbor specifically excludes such waivers when they are part of an agreement with insurers, such as Requestors, except in certain circumstances that are not applicable here. See 42 C.F.R. * 1001.952(k)(1)(iii). Similarly, the safe harbor for reduced premium amounts offered by health plans would offer no protection to the Proposed Arrangement. That safe harbor requires health plans to offer the same reduced cost-sharing or premium amounts to all enrollees, see 42 C.F.R. * 1001.952(l)(1), whereas, under the Proposed Arrangement, premium discounts would be offered only to those Policyholders who choose a
Absent any safe harbor protection, we examine whether the Proposed Arrangement would pose more than a minimal risk of fraud and abuse under the anti-kickback statute. We conclude that the discounts on inpatient deductibles the Network Hospitals would provide to Requestors, and the premium credits Requestors would offer to Policyholders who have inpatient stays at the Network Hospitals, would present a sufficiently low risk of fraud or abuse under the anti-kickback statute for the following reasons.
First, neither the discounts nor the premium credits would increase or affect per-service Medicare payments. With the exception of certain pass-through payments and outlier payments, Part A payments for inpatient services are fixed; they are unaffected by beneficiary cost-sharing.
Second, the Proposed Arrangement would be unlikely to increase utilization. In particular, the discounts effectively would be invisible to Policyholders because they would apply only to the portion of the individual's cost-sharing obligations that his or her supplemental insurance otherwise would cover. In addition, we have long held that the waiver of fees for inpatient services is unlikely to result in significant increases in utilization. See, e.g., Preamble to Final Rule: OIG Anti-Kickback Provisions, 56 Fed. Reg. 35,952, 35,962 (
Third, the Proposed Arrangement should not unfairly affect competition among hospitals because membership in the PHO's hospital network would be open to any accredited, Medicare-certified hospital that meets the requirements of applicable state laws.
Fourth, the Proposed Arrangement would be unlikely to affect professional medical judgment because Policyholders' physicians and surgeons would receive no remuneration, and Policyholders would remain free to go to any hospital without incurring any additional out-of-pocket expense for their inpatient hospital stay. Fifth, the Proposed Arrangement would operate transparently, as Requestors certified that they would clearly inform Policyholders of their freedom to choose any hospital without incurring additional liability or a penalty.
2. Civil Monetary Penalties Law
The premium credits also would implicate the prohibition on inducements to
beneficiaries. Unlike incentives to enroll in an insurance plan, which do not implicate the prohibition, see Final Rule Revising OIG Civil Monetary Penalties, 65 Fed. Reg. 24,000, 24,407 (
The definition of remuneration for purposes of section 1128A(a)(5) of the Act includes an exception for differentials in coinsurance and deductible amounts as part of a benefit plan design, as long as the differentials are properly disclosed to affected parties and meet certain other applicable requirements. See section 1128A(i)(6)(C) of the Act. This exception permits benefit plan designs under which plan enrollees pay different costsharing amounts depending on whether, for example, they use network or non-network
providers. Although the premium credit would not technically be a differential in a coinsurance or deductible amount, it would have substantially the same purpose and effect as such a differential. We therefore conclude that the premium credit would present a sufficiently low risk of fraud or abuse under the prohibition on inducements to beneficiaries.
The Proposed Arrangement has the potential to lower Medigap costs for Policyholders who select a
Based on the totality of the facts and circumstances, and given the sufficiently low risk of fraud or abuse and the potential savings for beneficiaries, we would not impose administrative sanctions on Requestors under the anti-kickback statute or the prohibition on inducements to beneficiaries in connection with the Proposed Arrangement.
We note, however, that our opinion relates only to the application of the anti-kickback statute and the prohibition on inducements to beneficiaries. We have no authority and do not express any opinion as to whether the Proposed Arrangement would comply with other Federal laws and regulations, including those administered by the
III. CONCLUSION
Based on the facts certified in your request for an advisory opinion and supplemental submissions, we conclude that, although the Proposed Arrangement could potentially generate prohibited remuneration under the anti-kickback statute if the requisite intent to induce or reward referrals of Federal health care program business were present, the OIG would not impose administrative sanctions on the entities named on the attached distribution list under sections 1128(b)(7) or 1128A(a)(7) of the Act (as those sections relate to the commission of acts described in section 1128B(b) of the Act) in connection with the Proposed Arrangement. In addition, the OIG would not impose administrative sanctions on the entities named on the attached distribution list under section 1128A(a)(5) of the Act in connection with the Proposed Arrangement. This opinion is limited to the Proposed Arrangement and, therefore, we express no opinion about any ancillary agreements or arrangements disclosed or referenced in your request for an advisory opinion or supplemental submissions.
IV. LIMITATIONS
The limitations applicable to this opinion include the following:
* This advisory opinion is issued only to the entities named on the attached
distribution list, the requestors of this opinion. This advisory opinion has
no application to, and cannot be relied upon by, any other individual or
entity.
* This advisory opinion may not be introduced into evidence by a person or
entity other than the entities named on the attached distribution list to prove that the person or entity did not violate the provisions of sections 1128,
1128A, or 1128B of the Act or any other law.
* This advisory opinion is applicable only to the statutory provisions
specifically noted above. No opinion is expressed or implied herein with
respect to the application of any other Federal, state, or local statute, rule, regulation, ordinance, or other law that may be applicable to the Proposed Arrangement, including, without limitation, the physician self-referral law,
section 1877 of the Act (or that provision's application to the Medicaid
program at section 1903(s) of the Act).
* This advisory opinion will not bind or obligate any agency other than the
* This advisory opinion is limited in scope to the specific arrangement
described in this letter and has no applicability to other arrangements, even
those which appear similar in nature or scope.
* No opinion is expressed herein regarding the liability of any party under the False Claims Act or other legal authorities for any improper billing, claims submission, cost reporting, or related conduct. This opinion is also subject to any additional limitations set forth at 42 C.F.R. Part 1008.
The OIG will not proceed against the entities named on the attached distribution list with respect to any action that is part of the Proposed Arrangement taken in good faith reliance upon this advisory opinion, as long as all of the material facts have been fully, completely, and accurately presented, and the Proposed Arrangement in practice comports with the information provided. The OIG reserves the right to reconsider the questions and issues raised in this advisory opinion and, where the public interest requires, to rescind, modify, or terminate this opinion. In the event that this advisory opinion is modified or terminated, the OIG will not proceed against the entities named on the attached distribution list with respect to any action that is part of the Proposed Arrangement taken in good faith reliance upon this advisory opinion, where all of the relevant facts were fully, completely, and accurately presented and where such action was promptly discontinued upon notification of the modification or termination of this advisory opinion. An advisory opinion may be rescinded only if the relevant and material facts have not been fully, completely, and accurately disclosed to the OIG.
Sincerely,
Assistant Inspector General for Legal Affairs
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