OIG Advisory Opinion: Proposed Routine Waivers of Cost-Sharing Obligations Implicates the Anti-Kickback Statute

September 12, 2012

In response to an ambulance supplier’s proposal to routinely waive cost-sharing amounts for the provision of emergency ambulance services, the Department of Health and Human Services Office of the Inspector General (OIG) issued an advisory opinion on September 11, 2012, stating that the arrangement could potentially violate the anti-kickback statute and that the OIG could potentially impose administrative sanctions.

Under the proposed agreements, the ambulance supplier would provide services for a number of municipalities on a part-time, scheduled basis, at times when volunteer first aid squads that routinely provide ambulance services are unavailable. The ambulance supplier would charge insurance providers, including Medicare, for such services, but would waive any copayments or cost-sharing obligations owed by individual residents. While the municipalities require these routine waivers, they will not cover the costs of the cost-sharing fees on behalf of their residents. The OIG maintains that failure on the part of the municipalities to make the copayments or to permit the ambulance supplier to bill residents for the copayments implicates the anti-kickback statute.

The OIG is quick to point out that such routine waivers of cost-sharing or “insurance only billing” has long been a concern because of the risk that “[s]uch waivers may constitute prohibited remuneration to induce referrals.” The opinion references a 1994 Special Fraud Alert, in which the OIG explains that the only permissible exception to the prohibition against waiving copayments is in consideration of an individual’s financial hardship. Such waivers must be assessed on an individual basis and providers must not use them routinely.

Of note, the OIG distinguishes its conclusion in this opinion from a 1999 advisory opinion in which the OIG stated it would not impose sanctions against an ambulance service providing backup (as opposed to part-time) emergency ambulance services when the volunteer first aid squad was unavailable to respond to an emergency. The OIG notes that in the 1999 fact scenario, the volunteer first aid squad was, at all times, the primary supplier of emergency ambulance services, and the backup ambulance supplier only provided its services in isolated and unanticipated circumstances. In contrast, under this proposed agreement, the ambulance supplier would provide its services in a scheduled and predictable manner, creating a risk that its waiver of cost-sharing obligations was an inducement for future referrals.