Free Services Can Violate Safe Harbors
Anecdotally, providers often report that expectations of referral sources include the provision of services to patients free of charge. A number of concerns about this practice have been raised, including questions about whether this practice is compliant with requirements related to fraud and abuse.
Information about this issue can be found in the commentary to Medicare and State Health Care Programs: Fraud and Abuse, Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements published in the Federal Register on December 7, 2016. In this final rule, the OIG added new exceptions or “safe harbors” to the federal anti-kickback statute, including the provision of free or discounted local transportation.
The commentary to this final rule includes the following:
Comment: One commenter was concerned that eligible entities might demand concessions from their existing transportation vendors, despite the prohibitions on cost-shifting. The commenter requested that we clarify that contracts between eligible entities and transportation vendors are subject to existing ‘OIG guidelines.’
Response: While we are unsure which ‘OIG guidelines’ the commenter is referencing, we do confirm that nothing in the safe harbor exempts contracts between eligible entities and transportation vendors from complying with all applicable fraud and abuse laws for terms of an arrangement that are to protected by this safe harbor. For example, an eligible entity may not require an ambulance company to provide free or discounted transportation to its patient as a condition of receiving referrals.
The commentary also says:
…Moreover, this safe harbor protects only the offering, giving, soliciting and receiving of the transportation. It does not protect behind-the-scenes arrangements to implement the transportation. Thus, if a hospital were to shift the costs of its transportation program to an ambulance provider under an explicit or implicit threat of withholding future referrals, such activity could still violate the anti-kickback statute and would not be protected under this safe harbor.”
The above language applies to all types of providers and healthcare services, not just free transportation. Based upon the language above and other guidance from the OIG, referral sources that condition the receipt of referrals on the provision of free services by providers who receive referrals from them likely violate the federal anti-kickback statute.
In addition, providers who give free services to patients and allow staff members to do so run the risk of engaging in fraudulent conduct in the form of inducements to patients to use their services. Specifically, to the extent that free or voluntary services are perceived as inducements to patients to initiate, continue, or re-initiate services, providers may run the risk of violation of Medicare/Medicaid fraud and abuse prohibitions, especially the federal anti-kickback statute. Violations may also occur if provision of free services is an inducement for additional referrals, as described above. The OIG has clearly stated that the provision of free services to beneficiaries may constitute a violation of these prohibitions.
The OIG has also clearly delineated limits on free items and services that may be provided to patients. Providers may give patients only non-cash items of nominal value. Non-cash items, including free services, may not exceed $15.00 in value at a time and $75.00 in value in the aggregate during a calendar year. Most post-acute services, including even one visit to a patient’s home, clearly exceed these limits.
In short, beware of insisting that providers who receive referrals must provide free services to referral sources and the provision of free services to patients or potential patients. Like many situations in healthcare, it’s complicated!
Elizabeth E. Hogue, Esq.