Andrew and Quynh are law clerks at the firm and their work is supervised by licensed attorneys. Their admission to – respectively – the Washington, D.C. and California bar is pending.

On October 4, 2021, the Department of Health and Human Services Office of Inspector General (OIG) issued a favorable advisory opinion on a proposal by a chiropractic clinic operator to extend an existing discount program to federal health plan beneficiaries.

The requesting clinics initially offered various discount programs to their privately insured or self-paid patients, but not to Federal health care program beneficiaries. Many healthcare providers are hesitant to give federal beneficiaries access to certain discount programs because of concern that doing so would run afoul Federal anti-kickback and beneficiary inducement statutes. Specifically, the concern is that if the beneficiaries receive discounts, clinics would provide patients with something of value—a discount on self-paid services—in exchange for the option to seek federally reimbursed services through a specific provider.

To address these concerns, the chiropractic clinic operator requested an advisory opinion from OIG on a new discount model that would extend discount programs to Federal health care program beneficiaries. While OIG found that the proposed discount program could result in prohibited compensation to patients, it also stated that it would not pursue an enforcement action based on the nature of the requesting clinics’ specific discount model.

Although only the requesting chiropractic clinic operator may rely on this opinion, OIG’s analysis implies that equalizing discount rates across federally reimbursable and non-reimbursable chiropractic services reduces legal risk under anti-kickback and beneficiary inducement statutes. Providers offering similar discount programs should take note to inform their compliance strategies.

Lenient Treatment of Uniform Discounts by Non-Participating Providers

Providing discounts on a combination of federally reimbursable and non-reimbursable services creates substantial legal risk. Federal healthcare programs do not cover all chiropractic treatments and the requesting clinics in this scenario are non-participating providers. The clinics submit requests for reimbursement directly to Medicare, which then reimburses the patients for payments they made to the provider.

Discount programs in this setting can trigger penalties under the anti-kickback and beneficiary inducement statute when discounts for self-paid services induce patients to ask for less-discounted services, which the federal government will ultimately pay for. Because of this risk, the chiropractic clinics prohibited Federal health care program beneficiaries from using similar discounts.

Under the proposed discount model involved in this advisory opinion, the chiropractic clinics’ programs would equalize the percentage discount across a package of services. Clinics would discount all services provided within a bundled package, including federally reimbursed services, at the same exact rate. Therefore, if a discount induces a patient to seek services, the federal healthcare program would receive an equivalent discount to that received by the commercial payor. In addition, the clinics would permit all patients access to discounts on the same terms—whether they self-paid, were publicly insured, or were privately insured. This alignment of incentives and business practices was key to OIG’s opinion that it would not impose administrative sanctions for this discount model.

Uncertain Application of Analysis to Similar Discount Programs

Although OIG gave the requesting clinics a green light on their proposed discount model, there is no guarantee that similarly structured discounts would be immune from administrative sanction. OIG noted that similar programs might amount to prohibited payments when a healthcare provider intends discounts on self-paid services to create higher demand for federally reimbursed services. Given this uncertainty, providers seeking to establish similar arrangements should not assume they are safe from OIG sanctions.

Analysis of this discount model and the related advisory opinion sheds some light on how to prepare future discount programs for regulatory scrutiny. In addition to evenly weighing discounts across services, OIG noted several factors in their decision to permit the discounts here. For example, the proposed discount model would be identical for self-paid, privately-insured, and federally-covered services. In addition, the discounts would be publicly advertised outside of the clinics, but not available at the point of service unless a patient mentioned them. Healthcare providers should consider similar administrative safeguards in their own discount programs to avoid the appearance of impropriety through strategic discounting.