Ann & Natalie’s Compliance Corner
Welcome back to Ann & Natalie’s Compliance Corner! This month, we report on the Department of Health and Human Services Office of the Inspector General’s (OIG) recent evaluation of the legality of prompt pay patient discounts. Did you miss last month’s discussion of a proposed regulation implementing the Patient Safety and Quality Improvement Act of 2005 through the establishment of Patient Safety Organizations? Click here.
In an advisory opinion issued on February 8, 2008 the OIG concluded that a health care system may provide discounts to federal healthcare program beneficiaries and other insured patients, regardless of the patient’s financial status or ability to pay, as an incentive for the prompt payment of both inpatient and outpatient services.1
In its request letter to the OIG, an anonymous health system that owns and operates three hospitals proposed to offer discounts to all patients for both prompt payment of their cost-sharing amounts, and for non-covered amounts for which patients received an advanced beneficiary notice. The health system sought the OIG’s advice on whether the provision of such “prompt pay discounts” would violate the Anti-Kickback Statute by providing inducements to federal health insurance beneficiaries.
According to the OIG opinion, the health system stated that the proposed prompt pay discounts were intended to reduce its accounts receivable and the cost of debt collection, while boosting its cash flow. Depending on the timing of the payment and size of the remaining balance owed by the patient, the health system proposed discounts ranging from 5-15 percent, which it argued would bear a reasonable relationship to the amount of collection costs avoided.
Under the proposed arrangement, the health system said that it would offer prompt pay discounts on both inpatient and outpatient services to beneficiaries of federal healthcare programs and all other insured patients, regardless of a patient’s financial status or ability to pay.
The OIG employed a double-pronged analysis in evaluating the health system’s proposal. For discounts associated with inpatient services, the OIG found that the arrangement fell within the safe harbor for waivers of coinsurance and deductibles, set forth at 42 C.F.R. § 1001.952(k). Factors the OIG considered included certifications that the health system would: (1) not claim the prompt pay discount as debt or otherwise shift the burden to the Medicare or Medicaid programs, (2) offer the prompt pay discount without regard to the reason for the patient’s admission, length of stay, diagnostic-related group, or ambulatory payment classification, and (3) not make the prompt pay discount part of a price reduction agreement between the health system and any third party payor.
With respect to outpatient services, which are not covered by the safe harbor, the OIG evaluated whether the prompt pay discount would constitute a “disguised payment for referrals.” The OIG found that health system’s proposed discount was a legitimate incentive, based on the following: (1) third-party payors would be notified of the prompt pay discount, (2) the health system stated it would not “advertise” the prompt pay discount opportunity, but would instead only notify patients during the billing process, (3) the health system would assume responsibility for all costs related to operating the incentive program, and (4) the discount would be reasonably related to the collection costs avoided by the implementation of the proposed program.
Based on these elements, the OIG concluded that, while the health system’s proposed arrangement could potentially generate improper remuneration to federal healthcare program beneficiaries, the prompt pay discount was legitimately intended to improve billing collections. “We believe that these features reduce the likelihood that the proposed arrangement would be used...to draw additional patient referrals” and are “consistent with the characterization” of the prompt payment discount as a means to achieve “more successful bill collection,” said the OIG.
1Please see the LIMITATIONS section of the OIG Opinion found here: http://oig.hhs.gov/fraud/docs/advisoryopinions/2008/AdvOpn08-03A.pdf for more information on the nature of this guidance. This is an advisory opinion, not a law. You should not rely on the information contained in this article or in the OIG opinion. The OIG Opinion is limited in scope to the specific arrangement described in the health system’s letter and has no applicability to any other arrangements.
Disclaimer: The content of Compliance Corner is for general informational purposes only and should not be interpreted as compliance guidance or advice. Consult your compliance advisor or attorney for compliance or legal advice on specific issues related to your practice or compliance program.
