The Department of Health and Human Services Office of Inspector General (OIG) issued an advisory opinion in early March 2007 concluding that a hospital’s proposal to subsidize ambulance transportation costs for patients who reside outside of its local area may violate both the civil monetary penalty (CMP) provisions of the Social Security Act and the antikickback statute.

The proposed arrangement
The hospital is part of an integrated nonprofit health care system. Patients are periodically transferred to this hospital from other facilities outside its local area because it’s recognized as a leader in cardiovascular services. The hospital’s local Medicare carrier began denying payment for the excess mileage associated with transferring patients to the hospital, on the grounds that less distant hospitals satisfied the Medicare rules that nonlocal transportation costs be paid for transport only to the nearest institution with appropriate facilities.

In response, the hospital proposed an arrangement under which it would pay ambulance providers a negotiated fee to transport patients residing outside the local area and then submit the claims for reimbursement directly to the payors, including Medicare and Medicaid. Under the arrangement, the hospital would absorb any costs that weren’t reimbursed by the payors.

Although the hospital anticipated that most of the patients benefiting from the arrangement would be cardiac patients, the subsidy would be available to all patients. Moreover, the hospital wouldn’t advertise the subsidy.

The OIG’s analysis
In reaching its conclusion that the proposed arrangement could constitute grounds for CMP and antikickback statute violations, the OIG noted that the payment or subsidy of any expense that would normally be the patient’s responsibility — such as the excess mileage charges — would constitute impermissible remuneration. Plus, the hospital acknowledged that the subsidy of transportation costs was likely to generate federal health care program business unrelated to that of the patient involved.

The OIG also indicated that the lack of advertising wasn’t a meaningful safeguard, because physicians could serve as “indirect channels of information dissemination” due to their awareness of the subsidy, and that the subsidy could influence patients’ choice of hospitals, ambulance suppliers and physicians.

Caution is warranted
Although this Advisory Opinion is limited to the facts and circumstances surrounding the proposed arrangement, providers should be aware that any type of subsidy program may raise CMP and antikickback concerns.

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