By Charles I. Artz, Esq.
Some physicians rely on marketing as a method to obtain new patients. Not all marketing programs, however, take into consideration complex federal and state prohibitions against certain types of marketing.
The Office of Inspector General (OIG) published a Special Advisory Bulletin (SAB) on August 29, 2002 entitled: Offering Gifts and Other Inducements to Beneficiaries. This type of publication is essentially a fraud alert. It signals a clear enforcement priority against improper marketing and patient inducements in the near future against health care providers.
The OIG SAB summarizes patient inducement prohibitions and allows some leeway to non-compliant providers at the very end of the document. That is, OIG states that if providers cease non-compliant conduct immediately, OIG will seriously consider being lenient if any marketing or patient inducement violations are discovered, as long as the improper conduct ceased shortly after the Bulletin was published. Accordingly, it would be prudent for physicians to have their marketing programs analyzed by experienced health care legal counsel and modify any program that is not compliant with the law.
The patient inducement prohibition under federal law states as follows:
“Any person…that offers or transfers remuneration to any individual eligible for benefits under [Medicare or Medicaid] that such person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner or supplier any item or service for which payment may be made, in whole or in part, under [Medicare or Medicaid]…shall be subject to…a civil money penalty of not more than $10,000 for each item or service…and damages of not more than three times the total amount of remuneration offered, paid, solicited or received.”
This provision appears in the Civil Money Penalties Law. Generally, it bars incentives paid to influence the choice of provider for covered services. As noted from the highlighted text, sanctions include a $10,000 civil money penalty for each item or service billed, plus three times the amount claimed, plus discretionary exclusion from the Medicare program by OIG.
OIG’s burden of proof in a Civil Monetary Penalties case is not nearly as difficult to satisfy as in a criminal case. The term “should know” means a person either acts in deliberate ignorance of the truth or falsity of the information, or acts in reckless disregard of the truth or falsity of the information; proof of specific intent to defraud is not required.
Several important terms must be defined in order to understand the parameters of this prohibition. The term “remuneration” is defined in the statute as follows:
“…the waiver of co-insurance and deductible amounts (or any part thereof), and transfers of items or services for free or for other than fair market value.”
Accordingly, free x-rays, free examinations and any gift certificates for free cognitive or other valuable services offered or given to Medicare, Medicaid or other beneficiaries of federal programs violate this prohibition.
Several important exceptions exist that may provide avenues of lawful marketing. The crucial term “remuneration” as defined above does not include “incentives given to individuals to promote the delivery of preventive care.” The Congressional History of HIPAA demonstrates Congress’ intent to also exclude from the meaning of “inducement” items of nominal value.
OIG stated its policy rationale against improper patient inducements in the SAB, as follows:
“Offering valuable gifts to beneficiaries to influence their choice of a Medicare or Medicaid provider raises cost and quality concerns. Providers may have an economic incentive to offset the additional costs attributable to the give-away by providing unnecessary services or by substituting cheaper or lower quality services. The use of give-aways to attract business also favors large providers with greater financial resources for such activities, disadvantaging smaller providers and businesses.”
The OIG SAB also establishes “bright line guidance” concerning the nominal gift exception. Free items or services that have a retail value of no more than $10 individually, and no more than $50 in the aggregate annually per patient, satisfy this exception.
OIG also pointed out the five statutory exceptions discussed above, including waivers of copayments or deductibles based upon a documented financial hardship; properly disclosed copayment differentials in health plans; incentives to promote the delivery of certain preventive care services; any arrangement that satisfies an anti-kickback statute safe harbor; and other exceptions inapplicable to doctors in private practice.
OIG also indicated it is considering amending its regulations to add more detailed exceptions for complementary local transportation and for free goods in connection with participation in certain clinical studies.
OIG invited comments for additional exceptions to be made under new regulations, but warned that “additional exceptions will likely be few in number and narrow in scope.”
Marketing programs must also be analyzed under state law. First, Pennsylvania’s Insurance Fraud Act prohibits and renders unlawful giving anything of value to a person to recommend or secure a provider’s service. This is a criminal statute with sanctions including imprisonment up to five years and significant civil money penalties. The statute may be broad enough to apply not only to kickbacks given to induce referrals, but also to inducements given by the provider directly to the patient. OIG has consistently taken the position that similar language under the federal anti-kickback statute applies to physician-patient inducements.
Second, several marketing programs I have seen violate or come very close to violating the state medical or osteopathic board licensure regulations.
Marketing is vital to the continued existence of some practices. Compliance with federal and state law is clearly more important than a successful marketing program that contravenes the law that places the physician at risk for serious civil sanctions.
Charles I. Artz, Esq., is the founder of the law firm Charles I. Artz & Associates, located in Harrisburg, Pa.