By John W. Jones, Esq.
By now, most physicians know that giving anything of more than nominal value to a patient or prospective patient with the intent of influencing the individual’s decision in his selection of that provider is improper. Not always clear, however, is what constitutes nominal value or what would otherwise be a permissible courtesy or marketing arrangement. If physicians are not careful in their approaches to marketing and advertising, they may find themselves in violation of a myriad of federal and state laws and regulations which carry heavy civil and criminal sanctions, as well as licensure discipline.
Civil Money Penalties Law
Generally, the civil money penalties law prohibits a physician from offering or transferring remuneration to any individual eligible for Medicare or Medicaid that such physician knows or should know is likely to influence the individual to order or receive from such physician any item or service for which payment may be made under Medicare or Medicaid. Violation of the Civil Money Penalties law can result in fines of up to $10,000 for each wrongful act.
Remuneration includes the waiver of coinsurance and deductible amounts and transfers of items or services for free or for other than fair market value. Remuneration does not, however, include:
• The waiver of coinsurance and deductible amounts by a physician, if the waiver is not offered as part of any advertisement or solicitation; the physician does not routinely waive coinsurance or deductible amounts; and the physician waives coinsurance and deductible amounts after determining in good faith that the individual is in financial need or failure by the physician to collect coinsurance or deductible amounts after making reasonable collection efforts.
• Any practice permitted under the Anti-kickback Statute safe harbors, such as permissible discount or waiver arrangements.
• Incentives given to individuals to promote the delivery of preventive care services as defined in the current U.S. Preventive Services Task Force’s Guide to Clinical Preventive Services, including prenatal services or a post-natal well-baby visit, provided that the delivery of such services is not tied either directly or indirectly to the provision of other Medicare or Medicaid reimburseable services. Incentives may not include cash or instruments convertible to cash or an incentive the value of which is disproportionately large in relationship to the value of the preventive care service.
Additionally, according to an Office of Inspector General (OIG) Special Advisory Bulletin published in August 2002, gifts and services (other than cash or cash equivalents) with a retail value of no more than $10 individually and no more than $50 in the aggregate annually per patient may be provided by physicians to patients.
The federal Anti-kickback Statute proscribes the offering, payment, solicitation or receipt of any remuneration in exchange for a patient referral or referral of other business for which payment may be made by a federal health care program, including Medicare and Medicaid. Violations of the Anti-kickback Statute can result in significant criminal penalties, civil penalties of up to $50,000 for each violation, as well as imprisonment.
The OIG has historically taken the position that under certain circumstances, professional courtesies could result in a violation of the Anti-kickback Statute. The theory is that a blanket policy of waiving coinsurance or deductible amounts or the forgiveness of debts, without a good faith attempt to collect the debts, may induce the patient to purchase additional items or services from the physician. Given the severity of the criminal and civil sanctions under the Anti-kickback Statute, physicians need to be very careful when waiving coinsurance and deductible amounts and forgiving bad debts and ensure that their policies and practices are consistent with permissible practices under the safe harbors of the Anti-kickback Statute or Civil Money Penalties law.
False Claims Act
The False Claims Act (Act) prohibits a physician from submitting or causing to submit a false or fraudulent claim for payment to the government. The Act could be implicated when, as a result of a professional courtesy, the government pays more for a item or service than it would have paid had the courtesy not been extended. For example, if the courtesy is the waiver of a copay or deductible, the government could take the position that the physician has submitted an inflated claim. That is, if the listed charge for the service was $50 and the copay equaled $10, but the physician made an agreement with the patient that the copay would be waived, the government could take the position that its obligation was to reimburse the physician 80 percent of the actual charge (which would be $40) instead of the listed charge of $50. This would mean that the government should have reimbursed the physician $32 instead of $40. Sanctions for violating the False Claims Act include treble damages, fines and administrative penalties.
The OIG has issued a number of advisory opinions concerning marketing arrangements and the offering of items, goods and services to beneficiaries of the Medicare or Medicaid program. Accordingly, when structuring any marketing arrangement, it would be prudent for physicians to review these advisory opinions to determine if the OIG has opined on a similar arrangement. Although the opinion cannot be relied upon by a physician who did not request the opinion, it can provide him with useful guidance as to OIG’s thinking on certain matters. OIG advisory opinions can be accessed at www.oig.hhs.gov.
Pennsylvania Insurance Fraud Act
With respect to insurance benefits or claims covered by the Pennsylvania Insurance Fraud Act, a physician may not compensate or give anything of value to a person to recommend or secure the physician’s service to or employment by a patient or as a reward for having made a recommendation resulting in the physician’s service to or employment by a patient. A physician may, however, pay the reasonable cost of advertising or written communication as permitted under the rules of professional conduct. Violation of this act results in mandatory suspension of the physician’s license and could result in fines and imprisonment.
Clearly, the offering of free services, cash or anything of more than nominal value to a patient or prospective patient could be viewed as a violation of the Act (if the requisite intent could be demonstrated). Accordingly, it would be prudent for physicians to ensure that any marketing arrangement, which involves the provision of free gifts or services (not cash or cash equivalents) of nominal value (as permitted under federal law), not be used in a manner to secure the physician’s services to a patient.
State Board of Medicine and AMA Opinions
Generally, the Pennsylvania State Board of Medicine regulations prohibit the advertisement of a medical business which is intended to or has a tendency to deceive the public. Violations of the regulations could result in fines and licensure discipline. Additionally, the American Medical Association (AMA) has published ethical opinions concerning physician marketing and advertising. AMA Opinion E-5.02 provides that:
• Physician’s commercial publicity or other public communication is permissible, provided the communication is not misleading because of the omission of necessary material information, does not contain any false or misleading statement or does not otherwise operate to deceive.
• Information must be communicated in a readily comprehensible manner, without the use of medical terms or illustrations that are difficult to understand.
• Aggressive, high pressure advertising and publicity should be avoided if they are accompanied by deceptive claims or create unjustified medical expectation
• Communications may include: (i) educational background of physician; (ii) the basis on which fees are determined (including charges for specific services); (iii) available credit or other methods of payment; and (iv) other non-deceptive information.
Violation of these ethical tenants could result in licensure discipline to the physician.
Understanding that there will always be gray areas, a physician’s marketing and adverting plan should, at a minimum, comport with the following guidelines:
• Any waiver of coinsurance and deductible amounts should be based on financial hardship, occur after reasonable collection efforts or otherwise fall within an exception or safe harbor under the Civil Money Penalties law or Anti-kickback Statute.
• Discount arrangements should fall within the Anti-kickback safe harbor.
• An incentive to a patient or prospective patient can be a permissible marketing practice provided that the incentive is to promote the delivery of preventive care services as defined by the Guide to Clinical Preventive Services and provided further that the delivery of such preventive services is not tied to the provision of other services.
• Incentives may not include cash or instruments convertible to cash.
• The value of an incentive cannot be disproportionately large in relationship to the value of the preventive care services.
• Inexpensive gifts or services (other than cash or cash equivalents) may be provided to an individual, provided that the gifts or services have a retail value of no more than $10 individually and no more than $50 in the aggregate annually per patient (e.g., exercise videos, pens and t-shirts would be permissible, but not club memberships) and provided further, that the provision of the gifts does not have the purpose of securing the physician’s services to the patient.
• Marketing materials should not be deceptive, misleading or false and should be readily understandable to a layperson.
• The marketing and advertising should not create unjustified medical expectations
John W. Jones, Esq. is a member of the Health Care Services Group at Pepper Hamilton LLP in Philadelphia PA.