OIG Advisory Opinion Rejects Proposed Ambulance Subsidy

22 March 2007 Publication
Authors: Lawrence W. Vernaglia

Legal News Alert: Health Care

On March 14, 2007, the US Department of Health and Human Services’ Office of Inspector General (OIG) posted an Advisory Opinion dealing with a Hospital’s plan to subsidize the cost of ambulance transportation for patients coming to the Hospital from outside its local area. The OIG specifically concluded that the arrangement may constitute grounds for sanction under the civil monetary penalty provision prohibiting the offering of inducements to Medicare beneficiaries, and possibly violates the anti-kickback statute resulting in potential criminal sanctions, civil monetary penalties and/or exclusion. This Advisory Opinion is important because it reinforces prior information from the OIG that programs ostensibly designed to improve patient access to needed care may be challenged as patient inducements or kickbacks. 

The Hospital, noted for its work in cardiovascular care, proposed to contract directly with ambulance suppliers to transport patients to the Hospital from hospitals outside its locality. The Hospital asserted that, although historically claims for transportation from outside its locality had been paid, more recently the Medicare carrier had been denying payment for the full amount of the claims based on Medicare rules that provide only for payment for local ambulance transportation.

Under the Hospital’s proposal, ambulance providers would be paid a negotiated fee by the Hospital and the Hospital would bill third party payers directly. The Hospital would absorb costs beyond those reimbursed by Medicare and Medicaid. Although the Hospital anticipated that the majority of patients transported under the arrangements would have cardiac conditions, it stated that the proposed arrangement would not be limited to those patients, nor would it be based upon individual determinations of financial need. Finally, the Hospital stated that it would not advertise the availability of the subsidized ambulance transportation.

In concluding that the arrangement may constitute grounds for the imposition of civil monetary penalties, the OIG pointed out that the subsidizing of an expense that would ordinarily be borne by the patient was “remuneration” within the meaning of the civil monetary penalty statute. This is the case whether the expense was the extra cost of non-local transportation or the patient’s cost sharing responsibility. Moreover, the OIG found that the arrangement might influence the initial, and subsequent, choice of the Hospital and the Hospital’s ambulance suppliers over other competing providers and suppliers. The OIG was not persuaded that the lack of advertising of the subsidy was a meaningful safeguard on the grounds that the availability of reduced cost services would be known to the patients’ physicians who may be the indirect source of information. The OIG also observed that the proposed arrangement, in conjunction with the Hospital’s other advertising of the Hospital’s services, may influence the choice of a provider. Finally, the OIG concluded that the proposed arrangement could constitute prohibited remuneration under the anti-kickback statute if the required intent were found. 

It remains to be seen whether this ruling is the harbinger of increased scrutiny by the OIG of provider programs providing transportation and other subsidies to patients. Although the applicability of the OIG ruling is confined to the facts of the matter presented, it is advisable to thoroughly analyze all subsidy programs in light of their potential to raise violations of the civil monetary penalty and anti-kickback provisions. 

If you have any questions about the foregoing or need additional information, please contact the attorneys listed below or the lawyer in the firm who generally handles your legal matters:

Carl Rosenfield at 617.342.4090 or crosenfield@foley.com

Larry Vernaglia at 617.342.4079 or lvernaglia@foley.com

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