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OIG rules hospital’s offer of free transportation, lodging doesn’t violate anti-kickback statute

published in McAfee & Taft Healthcare Alert | March 10, 2016

By Elizabeth L. Dalton

The Office of Inspector General of the Department of Health and Human Services recently posted an Advisory Opinion describing a proposed arrangement by an academic medical center that offers free transportation and lodging to pregnant women under certain circumstances. Many of the recipients of this arrangement qualify for aid from state or federal health care programs, including Medicaid and the State Children’s Health Insurance Program.

We frequently receive inquiries from clients about items or services they want to provide for free to their patients, such as transportation, lodging, meals, screening examinations, and other services. The proposed beneficiaries of these services are frequently poor, live in rural areas, or are elderly, and without such assistance, their care may be limited or non-existent.

The Federal Anti-Kickback Statute prohibits payments to induce referrals of government health program patients. In Advisory Opinion No. 16-02, the OIG concluded that, although the arrangement could potentially generate prohibited remuneration under the Federal Anti-Kickback Statute if the requisite intent to induce or reward referrals were present, it would not impose administrative sanctions on the medical center.

Advisory Opinion No. 16-02

The medical center requesting the opinion is a component of a state public university system, with a large acute care hospital on the main campus that includes labor and delivery facilities and a neonatal intensive care unit. The hospital has 12 hospital-based clinics within the state, one close by and the others between 14 and 103 miles away. The transportation and lodging assistance programs are only available to patients of the 11 distant clinics. A significant number of the clinic patients qualify for state or federal health care programs.

Patients typically begin prenatal care at one of the local clinics. The hospital maintains each clinic patient’s electronic health record, which is available throughout the hospital and all of the clinics. When establishing her birth plan, a pregnant patient is advised by clinic staff that the hospital is a potential delivery location. However, the staff is required to explain that clinic patients may choose to deliver at an unaffiliated hospital, where clinic staff members typically do not have privileges. Nearly all of the clinic patients who elect to use the hospital to deliver are experiencing high-risk pregnancies.

When a clinic patient experiencing a high-risk pregnancy expresses concern about the costs and difficulty of travel to the hospital for delivery, aid is offered in the form of mileage reimbursement or fare reimbursement for public transportation. There is no offer of or reimbursement for luxury or ambulance conveyance or airline tickets.

Additionally, the medical center may offer a clinic patient free lodging at a perinatal residence located close to the Hospital. The clinic patient must have a physician’s order justifying the stay, issued under the terms of a written protocol, to stay at the residence. Most women who stay at the residence are experiencing high-risk pregnancies and require frequent maternal and fetal monitoring. Others may be offered lodging if they are experiencing contractions but are not yet in active labor, or if they are scheduled to deliver the following day. The residence is staffed by an on-call nurse and provides simple accommodations for the patient and a companion, as well as free transport back and forth to the hospital.

The transportation and accommodation programs are not advertised and are only available to clinic patients. The medical center indicated that a clinic patient’s receipt of aid is not conditioned on her use of any other goods or services from the hospital or clinics or the selection of any particular provider or practitioner.

The medical center does not consider whether the patient is a federal health care program beneficiary or the source of her payments for health care when distributing aid. It certified that none of the costs of the arrangement are claimed as bad debt, nor is the burden otherwise shifted to the Medicare or Medicaid program or other payers. It stated that the arrangements removes obstacles that otherwise would prevent clinic patients from benefiting from the specialty care and continuity of care available at the hospital.

The OIG’s analysis

The OIG acknowledged that the Federal 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. Additionally, the Social Security 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 beneficiary that the benefactor knows or should know is likely to influence the beneficiary’s selection of a particular provider, petitioner or other supplier of any item or service for which payment may be made, in whole or in part, by the Medicare or a state health care program. “Remuneration” includes “transfers of items or services for free or for other than fair market value.” The OIG has previously taken the position that the statute does not prohibit incentives that are “nominal in value,” i.e., no more than $10 per item, or $50 in the aggregate on an annual basis.

Conceding that the transportation and lodging program could influence the patients’ (including Medicaid beneficiaries) selection of the hospital as their provider for labor and delivery and postpartum care, the OIG nonetheless concluded that it would not pursue administrative sanctions for the following reasons:

  • The arrangement is beneficial to clinic patients because it enables the hospital to provide high-risk patients with continuity of care.
  • The aid that patients receive is modest in nature and made available only in limited circumstances.
  • The aid is not advertised and is offered only to existing patients who, because the clinics are hospital-based, are already hospital patients.
  • Eligibility is not limited to a group of patients targeted on the basis of their health insurance coverage.
  • None of the costs are claimed as bad debt, nor is the burden otherwise shifted to the Medicare or Medicaid program or other payers.
  • The arrangement is part of a program of care established and operated by a state academic medical center for the benefit of a specific patient population served by federal health care programs operated and partially funded by the state. The OIG has relied, in part, on the state’s own responsibility in carrying out the arrangement to promote both the well-being of these patients and the integrity of these programs.

The OIG stressed that it relied on the unique combination of all of these factors and that no individual factor or subset of factors would justify this conclusion.

The takeaway

Advisory Opinion 16-02 is significant in that it permits a hospital to provide services of modest, but not “nominal,” value for free to persons who are already hospital patients, albeit under limited circumstances. This was a somewhat predictable response, given the population in question (at-risk pregnant women and newborns). However, beneficiaries of federal government health programs are typically prone to be fragile – either impoverished children or the elderly.

Often, those in need are from rural communities or are suffering from high-risk medical conditions. Although some assistance is designed for the poor, some accommodations are designed more for well-being. A meal means that a mother can stay beside her child’s bed in the hospital. Concierge services provided by “brand name” health systems help alleviate the stress to patients when medical care is provided far from home.

Hospitals and physicians frequently desire to provide items or services to the populations they serve. Whether it’s health fairs, free physicals for high school athletes, blood pressure or vein screening, meals for a family member of an inpatient, transportation for an elderly patient who cannot secure a ride for a vital procedure, or overnight accommodations for rural patients during an extended course of treatment, the population served by these services may include federal healthcare program beneficiaries. Healthcare facilities and providers frequently witness significant hardships that may interfere with their patients’ medical care. The impact can be life-threatening. Yet, sometimes overly broad statutes and extremely narrow regulatory exceptions leave little room for healthcare facilities and practitioners to provide essential care without the threat of fines or even incarceration.

While the OIG has clearly indicated that its opinion is related to the “unique combination” of factors outlined above, the opinion reflects a certain tolerance for aid that is clearly designed to promote continuity of care under exigent circumstances, where the risk that the aid will influence the selection of a provider, practitioner or supplier by a federal health care program beneficiary is limited.

If you have any questions about healthcare transactions or would like assistance in reviewing or evaluating your compliance risk regarding healthcare transactions, please do not hesitate to contact any of our healthcare industry lawyers.

This publication has been provided for clients and friends of McAfee & Taft A Professional Corporation. It does not provide legal advice, and is not intended to create a lawyer-client relationship. Readers should not act upon information in this publication without seeking professional counsel.

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