The Office of Inspector General (OIG) recently released a new advisory opinion regarding the use of a “preferred hospital” network as part of Medigap, in which a “Requestor” would indirectly contract with hospitals for discounts on the otherwise-applicable Medicare inpatient deductibles for its policyholders, and in turn, would provide a premium credit of $100 off the next renewal premium to its policyholders who use a network hospital for an inpatient stay. This “proposed arrangement” was presented to the OIG so that the OIG could issue an advisory opinion whether it potentially violates federal anti-kickback statutes.

Under these contracts, the network hospitals would provide discounts of up to 100 percent on Medicare inpatient deductibles incurred by the Requestor’s Medigap plan policyholders that would otherwise be covered by the Requestor. These discounts would apply only to the Medicare Part A impatient hospital deductibles covered by the Medicare plans, and not to any other cost-sharing amounts. Each time the Requestor would receive this discount from a network hospital, the Requestor would pay the PPO a fee for administrative services.

The Requestor would return a portion of the savings resulting from the “proposed arrangement” directly to any policyholder who had an inpatient stay at a network hospital. The savings would be shared with the policyholder in the form of a $100 credit toward the policyholder’s next renewal premium owed to the Requestor.

Based upon this set of facts, the OIG concluded that the “proposed arrangement” could potentially violate the anti-kickback statute if the requisite intent to induce or reward referrals of federal health care program business were present. Nevertheless, the OIG’s advisory opinion held that the OIG would not impose administrative sanctions on any party in connection with the “proposed arrangement.” 

The full text of the Advisory Opinion is set forth here.