Reader Question

Check before offering to subsidize docs’ insurance

Question: Can our hospital subsidize physicians medical liability insurance without facing prosecution under the portion of the Social Security Act that addresses kickbacks? We’ve heard that the government recently approved these arrangements but we don’t want to go ahead without being sure it’s OK.

Answer: You’re right to be cautious, says Leonard J. Nelson III, JD, a professor of health care law at Samford University’s Cumberland School of Law in Birmingham, AL. There may be a way for you to subsidize the physicians’ insurance, but you will need to ask federal regulators to assess your specific situation, he says.

Risk managers took notice recently when, for the second time in less than six months, the Department of Health and Human Services’ Office of Inspector General (OIG) issued an advisory opinion saying that a hospital could subsidize physicians’ medical liability insurance without facing prosecution for kickbacks.

The most recent opinion stemmed from a situation in which a hospital’s two neurosurgeons faced nonrenewal, apparently through no fault of their own. The insurance companies chose not to renew the policies because neurosurgery is a high risk specialty. The two doctors planned to retire, which would have forced patients in the community to travel 45 miles to see a neurosurgeon. To try to avoid that situation, the hospital paid for the physicians’ tail coverage with the old insurer and covered 75% of the cost increase between the new and old insurance.

The hospital asked the OIG if such an arrangement was acceptable, and the OIG noted that patients in the community would suffer if the two physicians no longer practiced there. So even though the arrangement could violate the anti-kickback statute, the OIG said it would not punish the hospital or the physicians for the arrangement. The OIG noted these factors that led to the special permission:

  • The arrangement is temporary and in response to an urgent situation.
  • It is structured to prevent a significant financial boon for the physicians.
  • The arrangement requires that physicians to provide certain services for the hospital, and it covers services at sites other than the hospital.

The full opinion can be found on-line at

The problem, Nelson says, is that the government is very specific in assessing such requests. The recent opinion may be encouraging if you are in a similar situation, he says, but you must be careful not to interpret it as a blanket statement or a safe harbor that may apply to a lot of health care providers. So far, the OIG is only approving such arrangements on a case-by-case basis, other than the pre-existing safe harbor for obstetricians.

But that’s good news of a sort, Nelson says. It means that you can request an OIG opinion and if you get a "yes," then you can rest assured that you have rock solid approval as you proceed.

"In the recent opinion, it was pretty clear that there was not much risk of this turning into a situation of payment for referrals," he explains. "They needed these neurosurgeons and they were going to lose them if they didn’t help with the insurance. They were trying to provide service in the community, and the OIG said it was done in a way that minimized the chance of paying for referrals," Nelson adds.

The recent OIG opinion is limited to two years, reflecting the fact that the hospital was responding to an urgent need. The limit also underscores the OIG’s concern that permission of this sort not be so general that it can be abused.

"These opinions are very narrow. They are limited to the specific situation outlined in the request to the OIG," he says. "You can learn something from an opinion issued to someone else, but it would be a mistake to take that opinion and proceed as if it applied to you as well."

The recent opinion suggests that the OIG is amenable to subsidizing insurance when it is necessary to preserve patient access to specialists or health care in general. But Nelson says the best bet is to request an opinion from the OIG for your own situation. And be forewarned: Don’t try anything tricky with the request. If you have any motive other than preserving patient access to health care, you could be in for big trouble down the road.

"It’s a criminal statute. If they find that just one of the purposes of the arrangement was to induce referrals, you could face criminal prosecution," Nelson says. "Plus, you could be excluded from Medicare and face civil monetary penalties. There are lots of bad things that can happen if you’re not careful."