OIG Issues Advisory Opinion on Charitable Pediatric Clinic Providing Cost-Sharing Waivers

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently issued an advisory opinion regarding a charitable pediatric clinic’s arrangement to waive cost-sharing amounts in certain circumstances.  The charitable pediatric clinic (Requestor), provides medical, psychiatric, and dental care to children residing in a low-income county (the County), and regularly waives cost-sharing amounts for patients in financial need (Arrangement).  Requestor sought an advisory opinion as to whether the Arrangement would be susceptible to sanctions under the civil monetary penalty (CMP) provision prohibiting inducements to beneficiaries (Beneficiary Inducement CMP), section 1128A(a)(5) of the Social Security Act (Act),  under the exclusion authority at section 1128(b)(7) of the Act, or the civil monetary penalty provision at section 1128A(a)(7) of the Act, as these sections relate to the federal Anti-Kickback Statute (AKS).

The OIG noted the following key facts:

• Requestor is located in a city (the City), within the County, where it provides its services to at-risk children. The County contains a disproportionately large number of children living in poverty and the City is a Health Resources and Services Administration (HRSA)-designated Health Professional Shortage Area for Primary Care, Dental Care, and Mental Health, and it sits a few blocks outside of a HRSA-designated Medically Underserved Area.
• To receive continuing services from Requestor, patients must: 1) reside in the County; 2) meet Requestor’s age guidelines (from birth to 19 years old); and 3) satisfy Requestor’s financial need standard (the Need Standard).
• The Need Standard requires patients to either participate in Medicaid or state health care programs (the State Insurance Programs), or present evidence that his or her family’s income does not exceed 200 percent of the Poverty Level.
• More than 90 percent of patients Requestor deems eligible to receive continuing services (Enrolled Patients) participate in at least one of the State Insurance Programs. For the less than 10 percent of Enrolled Patients who do not participate in a State Insurance Program, Requestor verified that they meet the Need Standard and their financial needs are reevaluated on an annual basis.
• Less than one percent of its Enrolled Patients have TRICARE coverage, and very few, if any, have Medicare coverage.
• Under certain circumstances, Requestor provides limited health care services to pediatric patients that do not satisfy the Need Standard (Non-Enrolled Patients), before referring them to other providers for follow up care. For example, Requestor certified that its limited services represent only a small percentage of the aggregate care that it provides.  At the time of this advisory opinion submission, Requestor had provided less than 50 Non-Enrolled Patients with emergency dental care over the past few years.
• Under the Arrangement, Requestor waives applicable patient cost-sharing amounts but bills and accepts payment from third party payors, including federal health care programs.
• Most of Requestor’s patients participate in State Insurance Programs and very few are covered by TRICARE or solely Medicare. Since State Insurance Programs do not require cost-sharing, the majority of Requestor’s patients do not owe cost-sharing amounts.  Therefore, the waiver applies to very few patients that participate in federal health care programs.
• Further, Requestor certified that it does not: 1) consider a patient’s medical condition or insurance status when determining whether a patient is eligible to receive its services; 2) offer waivers of cost-sharing amounts in any advertisement or solicitation; 3) compensate physicians, dentists, and other staff including independent contractors depending on the volume or value of services performed and referrals made; 4) directly or indirectly tie the delivery of services to the provision of other services reimbursed in whole or in part by any federal health care program; and 5) report waived cost-sharing amounts as bad debt on cost reports or shift those amounts to third party payors, including federal health care programs.

Based on Requestor’s certifications and other pertinent facts and circumstances, the OIG analyzed the Arrangement.  First, the OIG found that the Arrangement could potentially generate prohibited remuneration under the AKS if the requisite intent to induce or reward referrals of federal health care programs was present.  In addition, the OIG noted that cost-sharing waivers may constitute prohibited inducements under the Beneficiary Inducement CMP if they are meant to induce the Medicare beneficiary to choose a specific provider, practitioner, or supplier.  Moreover, the OIG found that the Arrangement did not meet the exception for permitted waivers of cost-sharing amounts under the Beneficiary Inducement CMP.  Requestor waives cost-sharing amounts routinely and verifies the financial need of some patients but does not do so for every patient with a cost-sharing obligation, a requirement of the exception.

Nonetheless, the OIG exercised its discretion not to impose applicable administrative sanctions under the Act.  The OIG noted that Requestor waives federal health care program cost-sharing amounts for only a small percentage of TRICARE and Medicare beneficiaries who receive services that State Insurance Programs do not cover.  Consequently, the Arrangement implicates the AKS in relation to very few services Requestor provides.  Additionally, the OIG found that the Arrangement implicates these provisions to an even more limited extent compared to the AKS because the Beneficiary Inducement CMP does not apply to TRICARE.   Finally, the OIG found that the Arrangement presents a minimal risk of fraud and abuse for the following reasons:

• Requestor waives cost-sharing amounts for very few federal health care program patients absent individually verified need, if any, because the services provided to Non-Enrolled Patients who may not satisfy the Need Standard make up a small percentage of Requestor’s aggregate services.
• Requestor does not offer waivers of cost-sharing amounts as part of any advertisement or solicitation. The OIG concluded that this safeguard reduces potential risks from routine cost-sharing waivers.
• Requestor does not offer financial incentives to its physicians, dentists, or other health care providers to steer patient referrals or order unnecessary care. The compensation does not vary based on the volume or value of services provided or referrals made.
• Requestor serves a large number of children in poverty in multiple overlapping HRSA-designated Health Professional Shortage Areas. Patients are likely to receive their services from Requestor due to the lack of other provider options for a particularly vulnerable patient population, and not due to any improper inducements under the AKS.  The OIG notes, however, that the lack of alternative sources of care alone would not justify the routine waiver of cost-sharing amounts.  This factor, along with the other factors Requestor certified, were considered together to evaluate the risk the Arrangement posed.
• Requestor implemented the following safeguards to minimize the risk of the Arrangement: 1) Requestor does not consider a patient’s medical condition or insurance status when determining patient eligibility for services or receipt of a course of treatment, therefore reducing the likelihood of attracting highly profitable patients; and 2) Requestor does not tie the direct or indirect delivery of services to the provision of other services reimbursed in whole or in part by a federal health care program. As a result, the OIG finds that these efforts reduce the risks of overutilization, unnecessary services, and increased federal health care program costs.  In addition, Requestor does not claim patient cost-sharing amounts it waives as bad debt or otherwise shift the burden to federal health care programs, further reducing the risk of increased federal health care program costs.

Given the totality of the circumstances, the OIG determined that it would not impose administrative sanctions under the AKS or Beneficiary Inducement CMP in connection with the Arrangement.

The OIG Advisory Opinion No. 19-01 is available at:

https://oig.hhs.gov/fraud/docs/advisoryopinions/2019/AdvOpn19-01.pdf