OIG’s Advisory Opinion Trends in 2013 & 2014

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Half of the OIG’s last 26 advisory opinions during 2013 and 2014 have focused on just two types of arrangements.  Can you guess what two types of arrangements have drawn the most inquiries?

#1 – Financial arrangements involving local government-funded or local government-operated ambulance services, emergency services, and non-emergency transport services

Seven out of the last 26 advisory opinions have focused on financial arrangements for local government-funded or local government-operated ambulance services, emergency services, and non-emergency transport services.  Upon review, the commonality of these requests is not surprising given that there are over 3,000 counties in the United States.

All seven arrangements involve routine waiving of patients’ out-of-pocket costs.  The OIG has generally favored arrangements involving the waiver of patient out-of-pocket costs for government-owned ambulance and emergency services because of a special rule identified in the Medicare Benefit Policy Manual, Chapter 16, section 50.3.1, which provides that:

A [state or local government] facility which reduces or waives its charges for patients unable to pay, or charges patients only to the extent of their Medicare and other health insurance coverage is not viewed as furnishing free services and may therefore receive program payment.

In this respect, it may be viewed that if the county, city, or district only bills and collects from insurers (including Medicare and Medicaid) for ambulance services, the residents are still paying for their cost of the ambulance services indirectly through their local taxes, rather than directly in the form of co-pays and deductibles.

The OIG further elaborates that a local government-owned ambulance service may generally waive out-of-pocket amounts for residents, but a local government cannot require independent ambulance contractors to waive patient out-of-pocket portions, unless the local government periodically compensates the independent ambulance contractor on behalf of its residents on the basis of reasonable calculations to cover the uncollected amounts.  In this type of arrangement, the residents would again be paying their out-of-pocket costs through their taxes.

7 Advisory Opinions for Municipal Ambulance, Emergency & Non-Emergency Transportation

Advisory Opinion Synopsis Potential administrative sanctions
13-18 City issued an RFP for all emergency ambulance services in the City.  RFP requires the successful bidder to provide three services at free or reduced pricing, as well as below-market leases for equipment. Yes
13-17 County-owned ambulance service waives all deductibles and co-pays for county residents under special federal rules. Proposes to waive out-of-pocket costs for non-residents as well. No
13-14 County’s fire and rescue department, and sub-contractor volunteer companies, propose to waive out-of-pocket ambulance costs for bona fide county residents. No
13-11 Township proposes to reimburse contracted ambulance supplier for residents’ out-of-pocket costs from tax revenues.  Supplier would also waive periodic out-of-pocket costs for backup provided in other local municipalities. No
13-8 Fire protection district seeks to provide district residents with emergency medical services without billing residents or their insurance.  The district will bill non-district residents and their insurance. No
13-5 Ambulance company proposes to reimburse town for 50% of the actual 911 dispatch center costs each year. No
13-4 Four cities and a village have granted the county health district the exclusive right to provide non-emergency transport services within their respective boundaries.  The service does not transport patients to county clinics or health facilities.  Each year the health district pays the county any net profits for the transport services less a 10% reserve, or the county subsidizes any net losses for the transport services. No

#2 – Financial arrangements involving preferred hospital networks and supplemental Medicare policies (Medigap)

Six out of the last 26 advisory opinions have focused on inpatient hospital pricing discounts given by preferred hospital networks to Medicare supplemental health insurance plans (Medigap).  These six advisory opinions are essentially carbon copies of each other (14-07, 14-04,14-02,13-12, 13-06,13-01).

The flows of funds for these arrangements are somewhat confusing to those who are not familiar with Medigap policies.  Medigap is a supplemental insurance (i.e., secondary insurance) to Medicare.  For example, Medicare patients’ out-of-pocket deductible for hospital services is about $1,200 per year.  Rather than risk paying this and other out-of-pocket costs, Medicare beneficiaries can purchase supplemental insurance for a relatively low monthly premium, which will cover these out-of-pocket costs if and when they are incurred.

The flows of funds for these arrangements are somewhat confusing for those who are not familiar with Medigap policies.

The six proposed arrangements involve contractual arrangements between licensed Medigap offerors and preferred hospital networks, whereby the hospitals included in the Medigap provider networks grant pricing discounts to the plans related to the inpatient out-of-pocket costs which would be otherwise incurred by the Medigap plan (i.e., the $1,200 hospital deductible).

These hospital networks waive up to 100% of the hospital inpatient deductibles that would be paid by the Medigap plans.  If a patient used one of the network hospitals, they would receive a $100 to $150 credit towards their future premiums.

The OIG generally granted favorable opinions for all six arrangements for five reasons.

  • Neither the discounts nor the premium credits would increase or affect per-service Medicare payments.
  • The arrangements would be unlikely to increase utilization. The discounts are invisible to policy holders.
  • The arrangements should not unfairly affect competition among hospitals, because membership in the contracting hospital network would be open to any accredited, Medicare-certified hospital.
  • The arrangements would be unlikely to affect physician judgment because physicians are not parties to the arrangements.
  • The arrangements would be transparent in that the Medigap plans would make it clear to policyholders that they can choose any hospital without incurring a penalty. The arrangements lower Medigap costs for users of network hospitals, without increasing costs for those who do not.
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