A recent advisory opinion (No. 08-03) issued by the Office of the Inspector General of the Department of Health and Human Services (OIG) concluded that the OIG would not impose sanctions on a provider health system's program offering prompt payment discounts to patients. The prompt pay arrangement at issue would grant between a 5 percent to 15 percent discount depending on the timing and amount of payment, with payments prior to discharge and payments of larger balances receiving larger discount percentages.
Because the program covered both inpatient and outpatient hospital bills, the OIG considered the safe harbor for waivers of beneficiary coinsurance and deductible amounts for inpatient services, but 'approved' the program even though it covered outpatient services which were not protected by the anti-kickback safe harbor. This opinion is significant in that it sheds light on the type of safeguards healthcare facilities should implement if they wish to discount or waive the patient responsibility portion of bills, and evidences an increasing willingness of the OIG to move beyond the technical requirements of certain safe harbors where efficiencies can be gained and appropriate safeguards from abuse are in place.
The OIG noted that certain protections utilized by the health system suggest the discount was a legitimate incentive and "not a means to induce patients to self-refer." First, the discount would not be advertised and would be offered to patients only during the billing process. Second, the health system certified that third party payers would be notified of the policies and the health system would bear all costs of the arrangement. Finally, the health system certified that the amount of fees discounted to patients would bear a "reasonable relationship" to the amount of avoided collection costs. The health system also certified that they would not claim any waived payments as bad debt and that the discount program would be offered to all patients, regardless of admission, length of stay, diagnostic-related group, or financial status. While OIG opinions are limited to the instant facts, providers considering implementing a prompt payment discount program are well advised to consult counsel and consider incorporating as many of these and other protections as possible.
Despite acknowledging the Waiver Safe Harbor's protections are limited to "arrangements that precisely meet all of the conditions set forth in the safe harbor," after applying the Waiver Safe Harbor and noting compliance with regard to inpatient hospital services, the OIG reviewed the entire discount program--including discounts extended to outpatient patients--to ascertain whether the program might be used to "draw additional patient referrals." In this case, the opinion effectively extends the Waiver Safe Harbor from inpatient to outpatient services, citing no indication that these discounts would be used to encourage illicit Medicare referrals.
The functional extension of the Waiver Safe Harbor in this case is consistent with a trend in OIG opinions focusing less on the technical requirements of the safe harbors and more on underlying safeguards. As budgets tighten and providers search for ways to address the uninsured population, this may be particularly true where programs both increase overall efficiencies and benefit patients. It has become increasingly evident over the last few years that the OIG may be willing to take a more holistic view of situations that might previously have been rejected as outside the technical bounds of a safe harbor. Examples include programs that promote efficiencies in provider operations (OIG Advisory Opinion Nos. 07-22 and 07-21 - gainsharing); financial or quality of care benefit to beneficiaries (OIG Advisory Opinion No. 08-01 - patient assistance programs for drugs); or improved access or patient care by physicians (OIG Advisory Opinions Nos. 07-19 - radiology group interpretations - and 07-10 - on-call coverage).
This evolving regulatory environment is an opportunity for facilities that have felt hamstrung by the strict technical bounds of the safe harbors. Nonetheless, this remains confusing territory for providers as enforcement actions may focus on the technical. Providers must also continue to analyze state insurance laws, the anti-kickback law, payment rules, civil monetary penalty and state fraud and abuse provisions separately. Through careful structuring and the use of appropriate safeguards, facilities may minimize risk faced executing even novel programs not fully covered under the safe harbors. Certainly providers wishing to extend prompt payment discounts to the outpatient setting may do so with more confidence.
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