On October 21, 2008, the United States Department of Health and Human Services Office of the Inspector General (OIG) issued Advisory Opinion No. 08-18. In it, the OIG approved a proposed arrangement (the Arrangement) under which a medical center providing emergency medical services (EMS) transportation to county residents would receive payment from the county for cost-sharing amounts, such as copayments and deductibles, owed in connection with its services, rather than billing the individual residents who received the transportation. The county proposed to make such payments from special tax revenue designated to a fund established especially for that purpose (the Fund). Each fiscal year, the county would reasonably approximate the annual total cost-sharing obligations of its residents for EMS transportation services and designate an appropriate amount to the Fund.

The OIG considered whether the Arrangement would constitute an inappropriate waiver of cost-sharing amounts under the Anti-Kickback Statute, and concluded it would not. The OIG acknowledged that the Arrangement could potentially generate prohibited remuneration if it was undertaken with the requisite intent to induce or reward referrals of federal health program business. However, the OIG concluded that it would not impose administrative or civil monetary sanctions in connection with the Arrangement.

Explaining this decision, the OIG reiterated its concern for preventing abusive waivers of cost-sharing amounts, which may constitute prohibited remuneration to induce referrals. However, it determined that while a routine waiver of cost-sharing amounts may violate the Anti-Kickback Statute, the Arrangement did not amount to such a waiver. Although the Arrangement provided that the medical center would not bill bona fide county residents for owed cost-sharing amounts, it provided for these co-insurance obligations to be assumed by the county. The OIG found that the county’s designation to the Fund was reasonably calculated to compensate the medical center for these costs, and that under the Arrangement the county would both collect payments from and make payments on behalf of its residents for the purpose of satisfying the cost-sharing bills.

The OIG further noted in its analysis, however, that the eligibility of individuals who received EMS transportation for relief from their cost-sharing obligations was based solely upon their residency under the Arrangement. The OIG cautioned that its opinion would not apply to a program based upon other criteria.

Advisory Opinion 08-18, like all OIG Advisory Opinions, is not precedential and may not be relied upon by any entity or individual who did not request the opinion. However, it does provide valuable guidance as to OIG’s policy position as to arrangements such as those described above. Health systems considering the implementation of a similar arrangement should engage experienced health care counsel to assist in structuring the agreement and drafting policies and procedures in compliance with applicable law.

For further information, please contact Douglass A. Marshall, Angela M. Rust or your regular Hinshaw attorney.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.