OIG Issues Favorable Advisory Opinion Relating to Free Hotel Lodging and Cafeteria Meals for Qualifying Patients

On March 3, 2017, the U.S. Department of Health and Human Services, Office of Inspector General (OIG) issued Advisory Opinion 17-01. The Opinion relates to a request by an academic medical center (the “Requestor”) consisting of four hospitals, including a Level I trauma center (the “Hospital”). The Hospital provides treatment to patients from an underserved part of the state – including organ transplants and advanced outpatient cancer treatment. Under the proposed arrangement, the Hospital would offer free or reduced-cost hotel lodging and Hospital cafeteria meals to certain patients who reside in rural or underserved areas, including some beneficiaries of Federal health care programs. The lodging would be provided at a “privately owned, modest hotel located approximately two miles from the Hospital.” The accommodations would consist of one room for one night before and up to two nights after treatment at the Hospital. Importantly, a patient’s family member may stay with the patient in the room, but no lodging would be provided solely to family members, nor would the Hospital provide lodging to a patient’s family member during the patient’s Hospital admission. The Hospital would also provide free or reduced-cost Hospital cafeteria meals to the patient, not to exceed a $15-value per overnight stay. To qualify, patients would need to meet all of the following criteria:

(A) the patient resides 90 or more miles from the Hospital and lives in either: (1) a medically underserved area of the State as designated in the Public Health Service Act; or (2) a health professional shortage area of the State, as defined in the Public Health Service Act;

(B) the patient has a household income that does not exceed 500% of the Federal poverty level and otherwise meets Requestor’s financial need criteria, as set forth in the Requestor’s written policy; and

(C) the patient meets one of the following qualifying circumstances: (1) for free or reduced-cost lodging and meals prior to treatment at the Hospital, the patient must be at the Hospital for evaluation before 10:00 a.m.; or (2) for free or reduced-cost lodging and meals following receipt of treatment at the Hospital, the patient must have no need for on-site care at the Hospital and must have a follow-up appointment at the Hospital within 48 hours or must return for surgery within 48 hours.

Under the arrangement, there would be no limit to the number of times a patient could receive services. However, patients would not receive cash, cash equivalents, or other payments. The Requestor would pay the hotel directly for lodging and would provide Hospital cafeteria meals solely to the patient. Eligible patients would be identified after they had been scheduled for treatment at the Hospital, without taking into consideration the patient’s insurance status. Hospital staff would make the determination of the amount of assistance a patient could receive using a “financial need-based sliding scale” established by the Hospital in accordance with its written financial assistance policies. The Hospital Administrator would then approve the funds and monitor the arrangement using the Hospital’s compliance program. There would be no marketing or advertising to patients and the costs of the arrangement would not be shifted to a Federal health care program. The Hospital would not report any costs related to the arrangement on its cost reports, nor would the Hospital condition eligibility on the receipt of any particular item or service provided by the Hospital. No remuneration would be provided to any clinician to encourage referrals to the Hospital. The Requestor estimated that approximately 100 to 200 patients annually would qualify for the proposed arrangement.

OIG’s Analysis

The Requestor inquired whether the arrangement would constitute grounds for imposition of sanctions under the civil monetary penalty provision prohibiting inducements to beneficiaries, Section 1128A(a)(5) of the Social Security Act (the “Act”), or 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 those sections relate to the Federal anti-kickback statute, Section 1128B(b) of the Act. According to OIG, the free or reduced-cost hotel lodging and Hospital cafeteria meals could implicate the Federal anti-kickback statute and Beneficiary Inducements CMP because they could incentivize a patient to select the Hospital as his or her provider for federally reimbursable services. OIG ultimately concluded that the proposed arrangement does not constitute a violation of the Beneficiary Inducements CMP, and that it would not impose sanctions in connection with the Federal anti-kickback statute.

The Federal anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. See section 1128B(b) of the Act. “Remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. Section 1128A(a)(5) of the Act (the “Beneficiary Inducements CMP”), provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to Medicare or state health care program beneficiaries when that benefactor knows or should know the remuneration is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of any item or service for which payment may be made, in whole or in part, by Medicare or a state health care program. “Remuneration” for purposes of the Beneficiary Inducements CMP is defined as “transfer of items or services for free or for other than fair market value.” In addition to the imposition of civil monetary pentalites, OIG may also exclude violators from Federal health care programs.

Beneficiary Inducements CMP Analysis

OIG analyzed the arrangement under an exception to the Beneficiary Inducements CMP, the “Promotes Access to Care Exception.” The exception excludes from the definition of “Remuneration” an item or service “which promotes access to care and poses a low risk of harm to patients and Federal health care programs.” See Section 1128A(i)(6)(F) of the Act. OIG interprets this provision to apply to items or services that may improve a patient’s ability to access health care services, including “items and services payable by Medicare or Medicaid.” See 42 C.F.R. § 1003.110 (2017) (defining “remuneration”). In addition, these services should “pose a low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs.” Id. Services may pose a low risk of harm by “being unlikely to interfere with, or skew, clinical decision making; … [b]eing unlikely to increase costs to Federal health care programs … ; and … [n]ot raising patient safety or quality-of-care concerns[.]” Id.

OIG ultimately concluded that the arrangement would not constitute grounds for sanctions under the Beneficiary Inducements CMP because the arrangement would satisfy the requirements of the “Promotes Access to Care Exception.” First, OIG examined whether the remuneration would improve a patient’s ability to access items or services payable by Medicare or Medicaid. OIG concluded the arrangement would remove certain socioeconomic and geographic barriers to care and facilitate patient attendance at treatment appointments. Patient access to lodging near the place of treatment would remove potential geographic or mobility barriers for patients by enabling them to attend early morning treatment. In addition, post-treatment lodging would make follow-up care more accessible by eliminating round-trip travel. Free or reduced-cost meals would also reduce economic barriers to patients receiving care at the Hospital by ensuring affordable meals during treatment. OIG also noted that, because eligibility for the arrangement is not conditioned on insurance status, the arrangement could increase access to medically necessary services for uninsured patients.

Next, OIG examined whether the arrangement would pose a risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs. OIG concluded that the arrangement would be unlikely to interfere with clinical decision-making because the Requestor would not condition eligibility on the receipt of any particular service or item and because no remuneration would be provided to any clinician to encourage referrals. OIG also noted that the arrangement would be unlikely to increase costs to Federal health care programs because the arrangement would not shift costs to any Federal health care program, nor would costs of the arrangement be reported on the cost reports or claims. Additionally, the Hospital would identify eligible patients only after the patient scheduled a service at the Hospital and would not market the arrangement to patients. Only 100-200 patients out of approximately 36,000 patients discharged annually would qualify to participate in the proposed arrangement. As such, OIG concluded it is unlikely that the arrangement would lead to overutilization or inappropriate utilization of services. Finally, OIG concluded that the arrangement does not raise any patient safety or quality-of-care concerns because nothing in the arrangement would encourage patients to seek unnecessary or poor quality services.

Anti-kickback Statute Analysis

Although the “Promotes Access to Care Exception” to the Beneficiary Inducements CMP does not apply to the Federal anti-kickback statute, OIG concluded that the lodging and meals would not constitute remuneration under the anti-kickback statute for the same reasons the arrangement satisfied the requirements of the “Promotes Access to Care Exception.” As such, OIG concluded it would not subject Requestor to administrative sanctions under the anti-kickback statute.

To review Advisory Opinion 17-01, please click here.

Service Specialties