On July 14, 2011, the Department of Health and Human Services Office of Inspector General (OIG) issued a favorable advisory opinion regarding the use of a preferred hospital network as part of Medicare Supplemental Health insurance (Medigap) policies. Under the proposed arrangement, the requestors who offer Medigap insurance policies, would establish a preferred provider organization (PPO) comprised of certain hospitals. The PPO network would allow the requestors to receive discounts on Medicare inpatient deductibles for policyholders. Also under the proposed arrangement, the requestors would provide a $100 premium credit to policyholders who opt to use a network hospital for an inpatient stay. Any savings realized by the requestors would be filed with the state insurance departments accountable for regulating the premium rates charged by Medigap insurers.
The OIG determined that the proposed arrangement would implicate both the anti-kickback statute and Section 1128A(a)(5) of the Social Security Act which provides for the imposition of civil monetary penalties for providing remuneration to beneficiaries. However, because of several factors, the OIG concluded that the proposed arrangement would present a low risk of fraud and abuse. Although not directly on point, the OIG looked at the safe harbor for waivers of beneficiary coinsurance and deductible amounts, as well as the safe harbor for reduced premium amounts offered by health plans.
The OIG concluded that the discounts offered on inpatient deductibles by the network hospitals would present a low risk of fraud or abuse for the following reasons:
- The waivers would not increase or affect per service Medicare payments because payments to hospitals under Part A for inpatient services are fixed and unaffected by beneficiary cost-sharing.
- The discounts should not increase utilization because the discounts would not be visible to patients.
- Membership in the network of hospitals would be open to any accredited Medicare-certified hospital that meets the requirements of applicable state laws, and therefore would not affect competition.
- The arrangement would not impact professional judgment of physicians because the inpatient’s physician would not receive any remuneration under the proposed agreement and the policyholder would not be penalized for choosing a non-network hospital.
The premium credit provision was also determined to present a low risk of fraud and abuse, according to the OIG pursuant to the same analysis. The OIG stated that the premium credit provision of the proposed agreement would implicate the prohibition on inducements to beneficiaries, however, the statutory exception for differentials in coinsurance and deductible amounts as part of a benefit design plan would apply so long as the proper disclosure has been given to the affected parties regarding the differentials.
Finally, the OIG found that the proposed arrangement has the potential to lower Medigap costs for the policyholders who opt to utilize the services of network hospitals.
For more information on compliance with the anti-kickback statute, the prohibition on patient remuneration or other Medicare or health care regulations, please contact a Wachler & Associates attorney at 248-544-0888
OIG Opinion: http://oig.hhs.gov/fraud/docs/advisoryopinions/2011/AdvOpn11-09.pdf