- The OIG Issues an Advisory Opinion on the Use of a Preferred Hospital Network as Part of a Supplemental Medicare Policy
- October 29, 2008 | Authors: Joseph V. (Joe) Geraci; Mia C. Garcia
- Law Firms: Brown McCarroll, L.L.P. - Austin Office ; Brown McCarroll, L.L.P. - Houston Office
On October 2, 2008, the OIG released Advisory Opinion 08-13 concerning the use of a “preferred hospital” network by Medicare Supplemental Health Insurance (“Medigap”) insurers in order to obtain discounts on otherwise applicable Medicare inpatient deductibles for the insurers’ policyholders (the “Proposal”). The OIG concluded that it would not impose civil monetary penalties although the Proposal could potentially violate the Anti-kickback statute if the proper intent were present.
The entities requesting the OIG option (the “Companies”) are subsidiaries of insurance companies that provide Medigap policies throughout the country. These Companies contract with managed care organizations who, in turn, contract with hospitals throughout the country to provide up to 100% discounts to the Medigap policyholders on their Medicare inpatient deductibles, for which the Companies would otherwise be financially responsible. The discounts only apply to the Part A inpatient hospital deductibles and not to any other coinsurance or cost-sharing amounts. The hospitals provide no other benefit. If a policyholder is treated at a non-network hospital, the Companies pay the full deductible amount, per the terms of the Medigap policy. On the other hand, if a policyholder has an inpatient stay at one of the network hospitals, that individual also receives a $100 credit against as part of the Proposal on their next renewal premium. In other words, the Companies returns a portion of the savings achieved from the discounts directly to the policyholders.
The OIG first looked at the discounts offered on inpatient deductibles by the network hospitals, and concluded that they presented a low risk of fraud and/or abuse for the following reasons: (1) the waivers would not increase or affect Medicare per service payments; (2) the discounts should not increase utilization; (3) the Arrangement would not unfairly effect competition among hospitals, given that membership in the networks would be open to any accredited, Medicare-certified hospital; and (4) professional medical judgment is unlikely to be effected because the patient’s physician would not receive remuneration, and the patient would be able to go to any hospital without additional out-of-pocket expenses.
The OIG then examined the $100 premium credit for patients who have inpatient stays in network hospitals. Citing the same reasons listed above, the OIG concluded that such a Proposal would not violate the Anti-kickback statute, but it noted that the credits did implicate the prohibition on inducements to beneficiaries. On this issue, the OIG reasoned that the statutory exception for differentials in coinsurance and deductibles as part of a benefit plan likely applied.