Insights & Resources

The U.S. Department of Health and Human Services, Office of Inspector General (OIG) posted two favorable Advisory Opinions (23-09 and 23-10) to allow a licensed offeror of Medicare Supplemental Health Insurance (Medigap Plan) policies and a preferred health organization (PHO) (collectively, “the requestors”) to incentivize Medigap Plan policyholders to seek inpatient care from a hospital within the PHO’s network.  Notably, OIG issued these favorable opinions even though the proposed incentives implicated the Anti-Kickback Statute (AKS) and the Beneficiary Inducement Civil Money Penalty (CMP), and there was no applicable exception or safe harbor.

Medigap Plan policies are issued by private insurance companies.  In exchange for a premium payment, these policies may cover certain health care costs that Medicare Part A and Part B do not cover such as all or part of the Medicare Part A deductible.  The requestors proposed the following incentives:

• Each hospital in the PHO’s network would provide a discount on the Medicare Part A inpatient deductible that the Medigap Plan would otherwise cover for any policyholder;

• The Medigap Plan would offer a $100 premium credit to each policyholder who selected a Network Hospital for a Medicare Part A-covered inpatient stay, subject to certain frequency limitations; and

• The PHO and the Medigap Plan would enter into a written agreement where the Medigap Plan would pay the PHO a monthly administrative fee as compensation for establishing the hospital network and arranging for the Network Hospitals to discount the Medicare Part A inpatient deductible.

According to OIG, each of these three remuneration streams implicated the AKS, and the premium credit offered by the Medigap Plan to policyholders implicated the Beneficiary Inducement CMP.  Despite this, OIG concluded that the proposed incentives: (1) posed a sufficiently low risk of fraud and abuse under the AKS; and (2) would not result in the imposition of administrative sanctions under the CMP because:

1. Neither the use of discounts, nor the offer of a premium credit, would likely result in overutilization of health care items or services because:

1. it is generally in the Medigap Plan’s financial interest to ensure appropriate utilization and costs; therefore, it is unlikely that the Medigap Plan would promote improper utilization based on any savings realized by the incentives;

2. patients generally do not control whether they are admitted as an inpatient because this is a clinical decision; and

3. the premium credit is not an affirmative payment to policyholders like a check or cash, but rather, it would reduce the amount of money policyholders owe to the Medigap Plan.

2. The potential for patient harm or interference with patient choice posed by the use of discounts or the offer of a premium credit was minimal because:

1. the discounts would apply universally to all policyholders and would not be limited by discriminatory eligibility criteria; and

2. policyholders could elect to receive care at a non-Network Hospital without any increase in cost-sharing obligations or premiums by the Medigap Plan.

3. The use of discounts or the offer of a premium credit would not significantly impact competition because:

1.  neither incentive would be advertised;

2. receipt of the premium credit is limited to policyholders who require one or more inpatient stays in a policy year and select a Network Hospital for these stays, which may not happen or be foreseeable;

3. policyholders are not limited to getting inpatient care at Network Hospitals; and

4. any interested hospital is eligible to join the network provided the hospital is Medicare-certified, meets applicable state law requirements, and agrees to discount the Part A inpatient deductible for all Medigap Plans that contract with the PHO.

4. The Medigap Plan’s payment of an administrative fee to the PHO reflects a sufficiently low risk under the AKS because:

1. the PHO’s administrative fee would be consistent with fair market value;

2. while tied to the volume or value of referrals between the Medigap Plan and the Network Hospitals, the administrative fee ultimately reflects a percentage of the savings realized by the Medigap Plan, not revenue generated by the Network Hospitals;

3. it would be contrary to the Medigap Plan’s financial interests and responsibilities to drive overutilization of inpatient hospital services paid for by Medicare Part A;

4. the Medigap Plan certified that it would not pass on, or otherwise shift, the cost of the PHO’s administrative fee to any Federal health care program; and

5. the PHO certified that it would not (acting by itself or in conjunction with its Network Hospitals) advertise these incentives, which limits the potential for the PHO or the Network Hospitals to impact policyholder referrals to the Network Hospitals and, in turn, the PHO’s administrative fee.

These favorable advisory opinions allow the use of incentives in limited circumstances, but every arrangement is different and should be evaluated on its own merits. Therefore, providers and organizations must proceed with caution when proposing arrangements that involve incentives or any kind of referral and remuneration.

A complete copy of Advisory Opinion 23-09 is available at: https://oig.hhs.gov/compliance/advisory-opinions/23-09/

A complete copy of Advisory Opinion 23-10 is available at: https://oig.hhs.gov/compliance/advisory-opinions/23-10/

Should you have any questions regarding the above, please contact the authors, the Garfunkel Wild attorney with whom you regularly work, or contact us at [email protected].