OIG: Copayment waiver could violate fraud rules

The Health and Human Services Office of the Inspector General (OIG) has issued a legal opinion on a practice that may be happening in your own health care organization, saying that waiving the copayment or deductible for patients could violate fraud rules, but it won’t prosecute those cases when it appears the hospital does not benefit financially.

An unknown hospital requested the clarification from the OIG after there were concerns about a method that it used for promoting breast and gynecological exams. The not-for-profit hospital operates a cancer hospital at its main campus and at a satellite location. The cancer center offers an early detection program for breast and gynecological cancers "at no out-of-pocket expense" to its patients. It is financed by a series of federal and state grants, private philanthropic support and, to the extent that grant funds do not cover its annual total operating expenses, by annual grants from the hospital. The center’s office space is owned by the state and provided to the center rent-free.

The Center’s early-detection program includes breast and gynecological cancer screening services provided at the center, certain follow-up services provided at other hospital facilities, including the cancer hospital at the main campus, and related educational, counseling, and referral services. If concerns persist after the follow-up services, the patient is seen by one of three surgeons and scheduled for additional services (most often surgery), usually at one of three hospitals with which the attending physician has admitting privileges. These hospitals are not affiliated with or owned in any manner by the hospital in question, and the hospital receives no financial recompense for such referrals or arrangements.

Patients may elect to receive the required additional services at the original hospital. However, this happens infrequently and, when it does, all of the hospital’s standard patient billing and payment policies apply, including billing patients for coinsurance, except in cases of individualized determinations of financial need.

The cancer center’s outreach program targets individuals of African or Hispanic origin. To encourage use of its services, the center instituted the waiver policy, which it publicizes in connection with its community outreach program. Under the waiver policy, the center accepts reimbursement from its patients’ third-party payers, if any, as payment in full for the screening services and follow-up services.

More on the waiver policy

When the cancer center asked for clarification of whether that arrangement could violate fraud rules, the OIG responded by issuing Opinion No. 01-14. Mac Thornton, JD, chief counsel to the Inspector General, wrote that the waiver policy may potentially generate prohibited remuneration under the civil monetary penalty (CMP) provision prohibiting inducements to beneficiaries, section 1128A(a)(5) of the Social Security Act, for inducements to beneficiaries and under the anti-kickback statute if the requisite intent to induce or reward referrals of federal health care program business were present.

"However, the OIG will not impose administrative sanctions on [the hospital] in connection with the Waiver Policy for violations of the prohibition against inducements to beneficiaries under section 1128A(a)(5) of the Act nor for violations of the anti-kickback statute under sections 1128(b)(7) or 1128A(a)(7) of the Act [as those sections relate to the commission of acts described in section 1128B(b) of the Act]," Thornton wrote.

Thornton concluded that the waiver policy clearly comes within the general statutory prohibition against improper inducements to beneficiaries. The hospital waives coinsurance for the screening services and follow-up services in order to induce patients, including Medicare and Medicaid beneficiaries, to receive those services at the center. Moreover, the waiver policy does not qualify for the preventive care exception, both because the screening services are sometimes tied to the delivery of certain nonpreventive follow-up services, which also are reimbursable under Medicare and Medicaid. Also, the waiver policy applies to certain services that do not fit the regulatory definition of preventive care.

Thornton said the OIG continues to have "serious concerns" regarding the waiver of coinsurance for screening services when the waiver is tied to other services reimbursable by Medicare or Medicaid, but the OIG will not impose administrative sanctions on the hospital. He said the OIG analysis turns on two aspects of the waiver policy, which, taken together, substantially minimize any risk of fraud or abuse.

"First, the large majority of patients benefited by the waiver policy are uninsured individuals, who might otherwise receive no screening services . . . . The receipt of services by some insured patients, including Medicare and Medicaid beneficiaries, does not alter the fundamental charitable nature of the endeavor. In short, given the uninsured status of the majority of patients receiving services, it is unlikely that the screening services, in conjunction with the waiver policy, will generate substantial remunerative services for the hospital."

The second reason is that although the screening services that would otherwise qualify for the preventive care exception are tied in some cases to nonqualifying services, the nonqualifying services are limited to those necessary to confirm the initial screening results. "As such, application of the waiver policy to the follow-up services merely effectuates the initial screening services," Thornton wrote.

As is standard in all such OIG opinions, Thornton pointed out that the conclusions are valid only for the hospital in question and do not provide any protection for other health care providers. But the published OIG opinions are routinely seen as guidelines for how the OIG will interpret the law in certain situations.