The U.S. Department of Health and Human Services Office of Inspector General’s (OIG) has a webpage with numerous valuable resources regarding Compliance, Compliance Resources, and Compliance Guidance. There are sections regarding information on Accountable Care Organizations, Advisory Opinions, Corporate Integrity Agreements, Safe Harbor Regulations, Self-Disclosure, Special Fraud Alerts,  Bulletins, and Other Guidance.

What is an OIG Special Fraud Alert?

The OIG has used fraud alerts as a way to identify fraudulent and abusive practices in the health care industry, which are communicated internally at the OIG’s Office of Investigations as well as other agencies within the OIG Department. Special Fraud Alerts are specifically for the health care provider’s community, developed and issued by the OIG. These Special Fraud Alerts address trends in terms of health care fraud and specific practices. The OIG Special Fraud Alerts serve to provide general guidance on violations of Federal law as well as insight to Medicare provider communities on identifying health care fraud schemes.

Special Fraud Alerts are generally reserved for national health care fraud trends to address potential Medicare and Medicaid, and State health care program’s Anti-Kickback Statute (AKS) violations.

What is the Anti-Kickback Statue (AKS)?

The AKS penalizes anyone knowingly and willfully solicits, receives, offers, or pays remuneration in case or in kind to induce, or in return for:

  1. Referring an individual to a person for the furnishing, or arranging for the furnishing, of any item or service payable under the Medicare or Medicaid program; or
  2. Purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering, any goods, facility, service, or item payable under the Medicare or Medicaid program.”

“Violators of the AKS are subject to criminal penalties, or exclusion from participation in the Medicare and Medicaid programs, or both.”

In order for the OIG to issue Special Fraud Alerts, they rely on numerous sources including, but not limited to studies, consultations with subject matter experts within and outside of the OIG, and management and program evaluations, which are conducted by the OIG’s Office of Evaluation and Inspections. The areas below could potentially violate the AKS:

  1. Joint Venture Arrangements
  2. Routine Waiver of Medicare Part B Copayments and Deductibles
  3. Hospital Incentives to Referring Physicians
  4. Prescription Drug Marketing Practices
  5. Arrangements for the Provision of Clinical Laboratory Services

In December 19, 1994, the OIG used the Federal Register Document Number 94-31157  to reprint the above five previously issued Special Fraud Alerts. Even though this Special Fraud Alert was issued in 1994, it is still applicable today. Let us focus on number two: Routine Waiver of Medicare Part B Copayments and Deductibles.

What is a Medicare Deductible and Copayment?

The Medicare Deductible is the annual amount that the patient must pay out of pocket within a particular time period for an item or service before Medicare will pay. The Copayment is a flat fee amount that the patient pays for certain items or services. The Coinsurance is the percentage portion of the cost of an item or service in which the Medicare patient must pay. For Medicare Part B, the coinsurance is twenty percent of the item/service charge.

The OIG provides this example: If the Part B item/service is $100, the patient would have to pay 20% of $100, or $20, for that particular item/service. Medicare will pay the remainder 80%, or $80, for that same item/service for this patient.

IF the Medicare provider routinely “waives” the Medicare Copayment and Deductibles, this is unlawful because it results in False Claims (violating the False Claims Act), it also violates the AKS, and this practice leads to excessive utilization of items/services paid for by Medicare. Let us see how:

  • False Claim Implication: Per the Special Fraud Alert, the provider, “is misstating its actual charge.” OIG’s example, “if a supplier claims that its’ charge for a piece of equipment is $100, but routinely waives the copayment, the actual charge is $80. Medicare should be paying 80 percent of $80 (or $64), rather than 80 percent of $100 (or $80). As a result of the supplier’s misrepresentation, the Medicare program is paying $16 more than it should for this item.”
  • Anti-Kickback Statute Violation: Per the Special Fraud Alert, “When providers, practitioners, or suppliers forgive financial obligations for reasons other than genuine financial hardship of the particular patient, they may be unlawfully inducing that patient to purchase items or services from them.”
  • Excessive Utilization of Items/Services: Per the Special Fraud Alert, “By waiving Medicare copayments and deductibles, the provider of services may claim that the beneficiary incurs no costs. In fact, this is not true. Studies have shown that if patients are required to pay even a small portion of their care, they will be better health care consumers, and select items or services because they are medically needed, rather than simply because they are free. Ultimately, if Medicare pays more for an item or service than it should, or if it pays for unnecessary items or services, there are less Medicare funds available to pay for truly needed services.”

There is one important exception to waiving copayments and deductibles and that is if the patient is experiencing financial hardship. However, financial hardship must not be routinely used. The OIG expects this exception to be an occasional practice to individual patients experiencing financial hardship.  The provider must prove that in good faith, they have made a valid effort to collect deductibles and copayments. If the provider is informed that the patient is experiencing a financial hardship, the provider must make a valid effort to attempt to determine the patient’s actual financial condition in order to waive deductibles and copayments under the financial hardship exception. Most providers use a financial hardship form in their efforts to determine the patient’s financial condition.

Next Steps:

  1. Review your deductible and copayment patient practices to ensure you are invoicing patients consistently and appropriately
  2. Avoid marketing practices that could be suspect.  The Special Fraud Alert provides examples such as, but not limited to:
    • “Advertisements which state, “Medicare Accepted as Payment in Full,” “Insurance Accepted as Payment in Full,” or “No Out-of-Pocket Expense.””
    • Advertisements which promise that “discounts” will be given to Medicare beneficiaries.”
    •  “Routine use of “financial hardship” forms which state that the beneficiary is unable to pay the coinsurance/deductible.”
    • “Collection of copayments and deductibles only where the beneficiary has Medicare supplemental insurance (“Medigap”) coverage.”
  3. Review policies and procedures within your organization to ensure they are in alignment the HHS OIG guidance in this Special Fraud Alert.

Gina Elkins, Director of Compliance and Regulatory Strategy

Source Websites and Documents:

HHS OIG Special Fraud Alerts Website: https://oig.hhs.gov/compliance/alerts/index.asp

Federal Register Document Number 94-31157 https://www.federalregister.gov/documents/1994/12/19/94-31157/publication-of-oig-special-fraud-alerts

OIG Special Fraud Alert: https://oig.hhs.gov/fraud/docs/alertsandbulletins/121994.html