On March 1, 2016, the Department of Health and Human Services Office of Inspector General (OIG) posted Advisory Opinion No. 16-02 (Advisory Opinion).1 In the Advisory Opinion, the OIG declined to impose administrative sanctions against a state academic medical center's arrangement to offer transportation aid and temporary lodging to pregnant women under certain circumstances. The OIG noted that while the arrangement implicates the federal Anti-Kickback Statute (AKS) and the federal Civil Monetary Penalty (CMP) law, the risks of this arrangement are minimal and there are clear benefits to the patients.

Although this Advisory Opinion is limited to its specific factual situation and cannot be officially relied upon by any entity other than the requestor, the OIG appears to be affirming an overall intent to provide more regulatory flexibility with respect to arrangements that might otherwise constitute beneficiary inducements under statutes like the CMP and the AKS. The OIG first set forth this intent to provide more regulatory flexibility in the major proposed rule published by the OIG on October 3, 2014 (the "Proposed Rule").2 There, the OIG proposed to amend the AKS regulatory safe harbors, as well as the CMP, in order to provide additional protections for certain payment practices and business arrangements. At the time the Proposed Rule was published in the Federal Register, the OIG was generally applauded by healthcare providers for its thoughtful approach to realistically address the needs of a rapidly changing healthcare delivery system. While the Proposed Rule has not yet been finalized, one can hope that this Advisory Opinion, which approves transportation and lodging benefits that are clearly more than nominal, signals the type of flexibility to come in the final rule.

Factual Background on Advisory Opinion No. 16-02

The party requesting the Advisory Opinion was an academic medical center that was part of a state public university system. The academic medical center had a large acute care hospital on its main campus. The hospital had labor and delivery facilities operated by the Department of Obstetrics and Gynecology. Additionally, the academic medical center operated 12 hospital-based clinics within the state. With the exception of one clinic in close proximity to the hospital, the other 11 clinics were located between 14 to 103 miles from the hospital.

The 12 clinics primarily served low-income women who qualified for state or federal healthcare programs. Typically, the patient would start and continue her prenatal care at one of the 12 clinics until the point of labor and delivery. Each patient, prior to labor and delivery, would determine her birth plan and potential delivery location in collaboration with the clinic staff. Clinic staff explained to the patient that in addition to the hospital on the main campus, the patient had the option to deliver at an unaffiliated hospital where most clinic staff members did not have privileges. Regardless of where the patient chose to deliver, there was no impact or effect on the patient's subsequent treatment at the clinic. Practically, many of the patients who chose the hospital as the delivery location were those patients experiencing high-risk pregnancies.

The hospital kept each clinic patient's electronic medical records, and the records were accessible at the hospital and the 12 clinics. The clinics provided care to the patients without considering the patient's financial resources.

As the clinic might be as far as 103 miles from the hospital, when a high-risk pregnancy patient expressed concerns about the costs and difficulty of travel to the hospital for delivery, the academic medical center offered transportation assistance through mileage reimbursement or fare reimbursement for public transportation. The academic medical center did not offer to provide or reimburse for luxury or ambulance conveyance or airline tickets.

Furthermore, under certain circumstances, the academic medical center might offer to provide free temporary lodging at a perinatal residence that was four blocks from the hospital. The residence was a 12 room apartment building leased by the academic medical center for use by clinic patients. This free temporary lodging offer was only available to those patients with a physician's order justifying the stay. The physician orders were issued according to the terms of a written protocol. Most of the patients who stayed at the residence were those with high-risk pregnancies requiring frequent maternal and fetal monitoring. For the minority of the non-high-risk patients that might be offered free lodging, they might be experiencing contractions but not yet in active labor, or they were scheduled to deliver the following day. An on-call nurse staffed the residence, and the living accommodations were simple. The four block transport between the residence and the hospital was offered free of charge.

The academic medical center did not advertise any of its transportation or accommodation programs, and said aid was only available to existing patients who were already receiving prenatal care at a clinic. A patient's ability to utilize either of those services was not conditioned on her use of any other goods or services from the hospital or the clinics, or the specific selection of any affiliated provider or practitioner. When providing the transportation or accommodation services, the academic medical center did not consider the source of her payments for healthcare or whether the patient was a federal healthcare program beneficiary. The academic medical center further certified that none of the costs of providing said services would be claimed as bad debt, and none of the costs would be shifted to Medicare, Medicaid or other payers. The academic medical center asserted that such transportation and accommodation aid removed hurdles that otherwise would prevent clinic patients from accessing the specialty care and continuity of care provided at the hospital.

OIG'S Legal Analysis on Advisory Opinion No. 16-02

The OIG recognized that the AKS 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 healthcare program.3 Further, the OIG noted that under Section 1128A(a)(5) of the Social Security Act (SSA), there is the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or state healthcare program beneficiary that the benefactor knows or should know is likely to influence the beneficiary's selection of a particular provider of any item or services for which payment may be made, in whole or in part, by the Medicare or a state healthcare program. "Remuneration" for the purposes of the CMP is defined as "transfers of items or services for free or for other than fair market value." Previously, the OIG took the stance that the "incentives that are only nominal in value are not prohibited by the statute," and had interpreted "nominal in value" to be "no more than $10 per item, or $50 in the aggregate on an annual basis."

OIG acknowledged that the arrangement for free transportation and short-term lodging in this Advisory Opinion might influence the patients' selection of the hospital as the delivery location, and some of those patients were Medicaid beneficiaries. Thus, to the OIG, the arrangement implicated both the CMP and the AKS. Nonetheless, the OIG continued by stating that for a combination of reasons (and the OIG emphasized that it was all the factors taken together, rather than just one factor) and in an exercise of its discretion, the OIG would not pursue administrative sanctions against the academic medical center. The combination of factors was as follows:

  1. The arrangement was beneficial to clinic patients because it provided high-risk patients with the continuity of care that would otherwise not be feasible because of financial constraints of traveling to the hospital for delivery.
  2. The aid provided was modest and offered in limited circumstances. The transportation aid was only offered to high-risk patients after they expressed concern about the financial burden of traveling to the hospital to deliver, and the free lodging was only available following a physician's determination that it was medically necessary.
  3. The arrangement was not advertised and was available only to existing clinic patients, which, as the clinics are hospital-based, meant that those patients were also existing hospital patients.
  4. The patient's health insurance coverage was not considered when determining eligibility and access to the arrangement.
  5. None of the costs was claimed as bad debt or otherwise shifted to Medicare or state healthcare programs.
  6. This arrangement was a part of a program administered by a state academic medical center for the benefit of a specific patient population served by federal healthcare programs operated and partially funded by the state.

Again, the OIG emphasized that it was taking such a stance and exercising its discretion in such a manner because of the unique combination of all six factors and that no individual factor above, nor any subset of factors, would justify this conclusion.

Significance of Advisory Opinion No. 16-02

The Proposed Rule released by the OIG on October 3, 2014, as well as several prior OIG advisory opinions, such as Advisory Opinion No. 11-01 (January 3, 2011), signaled a potential desire by the OIG to foster an overall framework that allows for more regulatory flexibility with respect to arrangements that might otherwise constitute beneficiary inducements under CMP and the AKS. Specifically, and as related to this recent Advisory Opinion, the OIG in the Proposed Rule based certain proposed exceptions to the definition of "remuneration" under CMP on its statutory authority to promulgate exceptions that "promote access/involve low risk of harm" or that respond to "financial-need." Promoting access and responding to financial need were key factors underlying the analysis in Advisory Opinion 16-02. The Advisory Opinion's reasoning also echoes the Proposed Rule's proposal to establish a new AKS safe harbor to protect free or discounted local transportation services for established patients and where the transportation is provided in a manner unrelated to the past or anticipated volume or value of federal healthcare program business (although note that the proposed safe harbor has a distance limit of 25 miles, while the clinics in the Advisory Opinion were up to 103 miles away from the hospital). Additional details on the Proposed Rule and Advisory Op. No 11-01 can be found here. While the Proposed Rule has not yet been finalized, some commenters are speculating that the final rule will be issued as soon as this summer. One hopes that the final version of the rule will reflect the same sorts of regulatory flexibility, as well as a desire to promote arrangements that enhance access to and coordination of care, as found in Advisory Opinion 16-02.