• Office of Inspector General Approves Insurance Subsidy for Neurosurgeons
  • January 14, 2005 | Author: Roy M. Bossen
  • Law Firm: Hinshaw & Culbertson LLP - Chicago Office
  • On January 6, 2005, the Office of Inspector General ("OIG") indicated in Advisory Opinion 04-19 that it would not impose administrative sanctions under the Anti-Kickback Act for an insurance subsidy arrangement between a hospital and two neurosurgeons, although the arrangement could potentially generate prohibited remuneration under the Anti-Kickback Statute.

    The hospital had two neurosurgeons on staff, both of whom were given notice by their insurance carrier, two weeks before the expiration of their respective policies, that the carrier would not renew their coverage.

    The carrier indicated that it would provide tail coverage at no charge if the physicians retired from the medical practice. However, if the physicians continued to provide medical services, the carrier would charge a substantial premium for tail coverage.

    The hospital entered into an arrangement with these two physicians to subsidize the tail coverage from the old carrier, as well as to subsidize the premiums of the new carrier for a two year period because the possible retirement of the only two neurosurgeons in the community was potentially harmful to the hospital and the patient care community. In the agreement, the hospital indicated that the amount of the premium support would not be based on whether the physicians refer patients to the hospital or on the volume or value of referrals of business generated by the physicians. The agreement further states that the physicians could provide services to patients at sites other than the hospital, and those services would be also covered by the subsidized malpractice insurance. The physicians, in addition to remaining on staff at the hospital, agreed to maintain a full-time neurosurgery practice in the community, take neurosurgery calls for the hospital's emergency department, participate in assigned hospital committees, continue to provide care for beneficiaries of the Medicare program, provide at least as much Medicaid or indigent care as they were providing when they entered into the arrangement, and to cooperate with the hospital in its efforts to recruit additional neurosurgeons.

    The OIG concluded that the premium support would not be an improper payment for referrals or for the generation of federal healthcare program business. The OIG indicated the subsidy arrangement was only temporary and an urgent measure to prevent a gap in the local availability of neurosurgical services. The OIG also felt that the risk of undue benefit to the physicians was reduced because the physicians were required to provide various services in return of the support, and that the subsidy covered services furnished at sites other than the hospital. Based on these findings, the OIG concluded that the totality of facts and circumstances surrounding the arrangement minimized the risk of fraud and abuse under the Anti-Kickback Statute, and while the arrangement could potentially generate prohibited remuneration under the Anti-Kickback Statute, the OIG would not impose administrative sanctions under the Act.

    The Advisory Opinion, while informative of OIG policy, cannot be relied upon by any other entity or individual and does not assess whether the transaction is in compliance with the Ethics in Patient Referral Act ("Stark"). Stark prohibits physician referrals of patients to hospitals for certain designated health services, if the physician has a financial arrangement with the hospital, unless an applicable exception applies. The Stark Physician Recruitment exception does not apply to this subsidy arrangement. However, the Fair Market Value Compensation exception might apply if the amount of the insurance subsidy corresponded to the fair market value of the services provided by the physicians including on-call coverage, indigent care, committee work and assistance in the recruitment of additional neurosurgeons.