Compliance Issues in Hospital and Health System Sports Sponsorships

Many hospital, health systems and other health care providers have seen benefits in sponsoring sports teams, stadiums and athletic tournaments. Considerations include general branding in the community, recruitment of staff or a desire to associate the provider with a beloved or high-quality local institution, like a baseball or hockey team. While in some markets, such sponsorships appear ubiquitous, providers and their management teams negotiate each of these arrangements separately, and there are a variety of terms, conditions and expectations that are baked into these contracts, some that turn on the specific rules of the sports league involved. Foley’s Health Care and Sports & Entertainment Groups have designed a series of training modules for health care providers and their boards considering these transactions.  

For health care providers, considerations include not only business and marketing concerns, but also health care compliance and enforcement priorities that are not present in a manufacturing, entertainment or beverage company contemplating a sports sponsorship deal. The following is a brief outline of some of these issues and how health care providers manage them.

1. Fraud & Abuse Issues

Virtually all health care providers entering into sports sponsorship arrangements will need to assure compliance with the federal and state fraud and abuse laws, including the Stark Law, Anti-kickback Statute and Civil Money Penalties Law’s prohibition on “beneficiary inducements.”

The highest level of risk in this area (absent unique situations, such as team or stadium ownership by other health care providers or physicians) relates to the use of various “perks” that come along with sponsorships. For larger sponsorships, such perks often include preferred seating or access to a suite and hospitality, private meetings with athletes, gifts, and better food and alcohol. Providers should draft compliance policies around the use of such perks, including prohibitions on the provider using access to these benefits to reward or entice referrals from physicians or other referring-providers. There is little risk if such individuals pay fair market value for such access, but once the tickets or access are provided without a charge, the fraud and abuse laws are implicated.

With respect to the Physician Self-Referral (“Stark”) Law, some benefits provided to physicians and their immediate family members may be protected under the “non-monetary compensation” exception, which requires that the offer of the tickets or access is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician. Also, the tickets or other benefits may not be solicited by the physician or the physician’s practice (including employees and staff members). But perhaps the most challenging aspect of the exception is that the value of the tickets, food and other benefits cannot exceed a set amount, which is adjusted annually. For 2022, that amount is $452 per year. If more than one ticket is provided, the value of the seat plus meals, drinks and other benefits can easily exceed this amount in most major market sporting venues.

A 2020 amendment to the Stark regulations introduced a new exception for “limited remuneration to a physician,” allowing certain undocumented arrangements with physicians under which they are paid around $5,000 ($5,270 for 2022). While this may initially seem like the solution for this compliance challenge, the exception only protects remuneration paid to the physician “for the provision of items or services provided by the physician to the entity.” In addition to compliance protections such as those addressed in the non-monetary compensation exception discussed above, this compensation must also be fair market value and commercially reasonable. Consequently, a pure gift would seem unlikely to comply with this exception. Of course, if tickets or other benefits are treated as compensation for an item or service actually provided by the physician to the entity, it could meet this new exception, as well as other long-standing exceptions, such as for “personal services” arrangements.

In addition to the Stark considerations, sponsoring providers must take care to protect against federal and state anti-kickback (criminal) violations. These risks can arise if tickets, suite access or other benefits are provided to any referring provider for free or at a reduced cost as an inducement or reward for referrals. This might include executives of other health care providers that could be considered referral sources, such as long term care facilities or other community health care organizations. Unlike under the Stark law, there is no “de minimis” exception to an anti-kickback violation.

Similar risks are present if the provider offers to co-brand these sponsorships with other providers without a good assessment of the relative benefits, and an effort is made to split the costs on a fair market value basis.

A reverse of this compliance risk is when the provider sells or leases its suite to other health care providers, vendors, pharmaceutical companies or device manufacturers who seek to do business with the provider. If suite access, tickets or other benefits are transferred above fair market value, the anti-kickback laws are implicated.

Finally, providers may wish to provide tickets or other benefits to patients and their families. Often this is done for truly charitable or benevolent purposes and should not be considered a high-level risk. But if they are provided as part of a marketing or patient solicitation effort, the “beneficiary inducement” prohibitions of the Civil Money Penalty Law could be implicated. There are de minimis rules of thumb under this law, but the level of that protection is extremely low, with no more than $75/year as a maximum.

2. Marketing and Advertising Issues

A health care provider should certainly promote its relationship with a sports team. However, a health care provider must be cognizant of, and comply with, all applicable federal and state laws governing marketing and advertising practices. In general, any advertising of the sponsorship must be truthful, not misleading, and avoid making claims or promises. Promotional activities by health care providers, are subject to the Federal Trade Commission Act and other general advertising rules and regulations enforced by the Federal Trade Commission (“FTC”). At its core, the FTC Act prohibits unfair and deceptive acts or practices. In addition, the majority, if not all, of the states have adopted deceptive trade practice laws or consumer protection statutes with similar prohibitions as the FTC rules and regulations. Such statutes are typically enforced by state attorneys general. Penalties for violating federal or state truth-in-advertising laws include steep civil fines.

It is a best practice to have your attorney review any advertising or marketing materials prior to publication to ensure compliance with these truth-in-advertising laws.

3. Medicare Cost Reports

Hospitals and other Medicare-certified institutional health care providers must submit an annual cost report to the Medicare Administrative Contractor. The cost report contains certain information about the provider’s operations, financial utilization data, and costs and charges by cost centers. There are certain costs that must be included on the provider’s cost report. Items that are unrelated to patient care are not considered “reasonable costs” that can be included in the provider’s cost report.

Entertainment, including tickets to sporting and other entertainment events, is specifically identified as a cost that may not be included in a health care provider’s cost report. Hospitals or health care providers should make sure that any fees or expenses incurred by the provider in connection with the sports sponsorship arrangement are not included in the provider’s cost report.