OIG Advisory Opinion No. 13-01

In Advisory Opinion 13-01, the U.S. Department of Health and Human Services, Office of Inspector General ("OIG") issued a favorable opinion regarding an arrangement in which insurers (the "Requestors") would indirectly contract with a hospital network. Under the arrangement, the Requestors would contract with one or more preferred provider organizations ("PPOs") that also contract with hospitals throughout the area (the "Proposed Arrangement").
This Proposed Arrangement would allow the network hospitals to provide discounts or waivers on inpatient deductibles for Medicare patients whose deductible is covered by Medigap. The Requestors' enrollees would be provided with discounts. In some cases, the discounts could be up to 100 percent of the Medicare inpatient deductibles incurred by the hospitals in the PPO network. This discount would otherwise be covered by the Requestors.
The OIG analyzed whether this Proposed Arrangement would constitute grounds for imposition of civil monetary penalties ("CMPs"). The OIG found that the Requestor would not be subject to CMPs under the Anti-Kickback Statute ("AKS") for the following reasons:

  • The waivers would not increase Medicare payments because payments to hospitals are fixed under Part A for inpatient services.
  • The discounts were unlikely to increase utilization.  The discounts would be invisible to patients because they would only apply to the portion of the beneficiary's cost-sharing obligations that would already be covered.
  • It would not affect competition among hospitals because membership in the network is open to any accredited hospital.
  • Because the patient's physician or surgeon would receive no remuneration and the patient could visit any hospital with no additional costs, the Proposed Arrangement would not affect professional medical judgement.
  • The Requestors certified that they would allow the policyholders the freedom to choose any hospital without resulting in additional liability or penalty.
  • Overall the Proposed Arrangement may lower costs because savings would be reported to insurance rate-setting regulators.
If your organization is indirectly or directly contracting with hospitals in which discounts are being applied for Medicare beneficiaries that would otherwise be paid by your organization, you should be mindful of the factors the OIG has discussed in this Advisory Opinion and the safeguards proposed by the Requestors.In conclusion, the OIG decided not to impose administrative sanctions because the proposed safeguards would result in a low level of risk for fraud and abuse that may result from the Proposed Arrangement.
If you would like additional information or have any questions regarding this Advisory Opinion, please contact Robert A. Wade at rwade@kdlegal.com or 574.485.2002.