Articles on Compliance Strategies

OIG Opinion: Health System Ambulance Subsidy Would Trigger Civil Monetary Penalties

Reprinted from the March 26, 2007, issue of REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues.

A health system's plan to subsidize the costs of ambulance trips would trigger civil monetary penalties and kickback violations, says HHS Office of Inspector General (OIG). The arrangement could constitute remuneration to the patient and could improperly influence patients to choose the hospital for services, OIG says an advisory opinion (No. 07-02), issued March 7 and posted March 14.

Though technically the ruling applies only to this health system, the message it sends will be a blow to some health systems that engage in similar arrangements, one lawyer says.

The requestor of the OIG opinion is a health system with a large hospital that is considered a leader in cardiovascular services, according to the opinion.

Patients are sometimes transferred by ambulance to this hospital from other facilities outside the local area. Claims for the services had been paid by a local Medicare carrier, but "then [it] began refusing to pay the full amount of these claims, citing Medicare requirements that provide for local ambulance transportation only, except where non-local transportation is necessary to take the patient to the 'nearest institution with appropriate facilities,'" OIG says.

So patients have been receiving bills from ambulance companies for the uncovered portions of the trips, which consist primarily of "excess mileage" — the difference in mileage costs between what Medicare deems the "closest appropriate facility" and the more distant hospital.

Hospital Would 'Absorb' Some Costs

Under the proposed transportation arrangement, the hospital would contract with ambulance suppliers to transport patients from facilities located outside the hospital's service area.

The hospital would pay the ambulances' negotiated fees. It also would directly bill third-party payers for reimbursement, and would "absorb any costs beyond those reimbursed by Medicare and other payers," OIG explains. The services would not be advertised.

OIG says it would impose penalties under such an arrangement because:

• The payment or funding of an expense that would normally be covered by a patient constitutes remuneration to the patient. "This is true whether the expense is the additional cost of non-local transportation (e.g., excess mileage charges) or the patient's cost-sharing obligation," the opinion says.
• The arrangement could improperly influence patients to choose the hospital for services, thus violating federal anti-kickback rules. "For example, many of the patients who benefit from the Proposed Arrangement will be cardiac patients, who are likely to develop ongoing relationships with a hospital provider," OIG says. But the fact that the service would not be advertised doesn't safeguard the facility. "The availability of the reduced cost services will be known to patients' physicians, who may serve as indirect channels of information dissemination in these circumstances," according to the opinion.

Similiar Arrangements Are Common

Doug Wolfberg, a Pennsylvania attorney who specializes in ambulance law, says the opinion is significant because this type of arrangement has become common among health systems and their tertiary facilities. "[Hospitals] are having to send patients bills for uncovered portions of these trips, and it ends up irritating the patients," he says. "This is going to be a blow to some systems. It will hamstring, in some ways, their efforts to keep their referral pattern intact," says Wolfberg, who is with Page, Wolfberg & Wirth LLC.

An area OIG did not explore in this opinion is so-called "under-arrangements," Wolfberg contends. For example, "hospitals can provide services that would normally be provided by Part B suppliers, pay them, then charge them off as hospital services.…This [opinion] might cause hospitals to take a closer look at these under-arrangements with ambulance services," he tells AIS.

Finally, Wolfberg says, OIG is creating an inconsistent body of opinions regarding transportation. "When you look at their opinions on ambulances.they're allowing municipalities to award exclusive ambulance contracts, and have permitted significant payments by ambulance services to secure these contracts, which some people have called public kickbacks," he says. "But you look at something like this designed to get these patients to these tertiary facilities, and OIG calls them kickbacks. It's not consistent. These are becoming a common type of arrangement, and a lot of systems are going to take a very hard look at this," he says.

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