No. 05-07: OIG Approves Exclusive Ambulance Services Contract
OIG Advisory Opinion 05-07, issued February 18, 2005, analyzed under the antikickback statute, 42 U.S.C. § 1320a-7b(b), an arrangement between a municipal corporation (City) and an ambulance services provider (Ambulance Company) pursuant to which the Ambulance Company would exclusively provide emergency ambulance services to the City for a term of five years. The Ambulance Company would also provide billing and collection services in exchange for dispatch services.

Pursuant to a competitive bidding process, the City awarded an exclusive five year contract to the Ambulance Company for the provision of emergency ambulance services in the City. As part of the Arrangement, the City would provide, at no cost to the Ambulance Company, dispatch services through its "Communication Center." Instead of the Ambulance Company having to dispatch an ambulance in response to a call from the Communication Center, the Communication Center would automatically dispatch the Ambulance Company to the emergency location. In exchange for these services, the Ambulance Company would provide billing and collection services for the City. The exchange of these services was equitable as they were equal in value.

The OIG noted its long-standing concern with the provision of free services to actual or potential referral sources. It also pointed out that the facts could suggest that one purpose of the provision of such services would be to induce the award of the exclusive contract, under which some of the ambulance services would be reimbursed under federal health care programs. Despite this cautionary discussion, the OIG refused to impose sanctions under the antikickback statute based on the following four factors.

First, the exchanged services have comparable values, thus the exchange was fair and equitable.

Second, the Arrangement will likely have a positive impact on the quality of patient care by increasing the efficiency, speed and effectiveness of responses to emergency situations. For example, cutting out an extra step in the dispatch process will directly impact response time and benefit the person in need of assistance.

Third, the Arrangement itself, and the fact that it is exclusive, is unlikely to increase the risks of overutilization or costs to the federal health care programs. Neither the number of federal program beneficiaries requiring emergency transport in the City, nor the treatment these patients will receive or receive at a hospital would be related to, or impacted by the Arrangement.

Fourth, the exclusivity of the Arrangement should neither impact competition nor freedom of choice given that the contract was awarded through an open competitive bidding process and an ambulance driver's choice in hospitals is directed by local emergency response protocols, not the driver's discretion.

Based on these factors, the OIG found that the totality of the facts and circumstances surrounding the Arrangement adequately minimized the risk of fraud and abuse under the antikickback statute and, accordingly, the OIG refused to impose administrative sanctions.

While Advisory Opinion 05-07 is largely unremarkable in its ultimate result, it raises some interesting issues. First, it seems somewhat curious that the OIG has characterized this situation as involving free services. In fact, the parties have exchanged services of equal value. Rather than free services, the parties are paying fair market value for the services in the form of exchanged services of equal value.

Second, as in other advisory opinions dealing with emergency transport, the OIG seems to draw a fair amount of comfort from the fact that overutilization is unlikely. The OIG's view is that patients are unlikely to order more emergency transport than they reasonably need. Third, the OIG seems to give the City a fair amount of discretion to design the program, including choosing to use an exclusive arrangement, to adequately address "administrative and system efficiencies." Finally, the OIG stressed the positive impact of the program on patient care, primarily through reduced response times.

No. 05-08: OIG Rejects Laboratory's Payment to Physicians for Blood Draws
On June 6, 2005, the OIG issued Advisory Opinion 05-08, which disapproved a laboratory's provision of free blood sample collection materials to physicians and the laboratory's payment to such physicians for the collection of blood samples. The OIG analyzed the arrangement under the antikickback statute.

The laboratory at issue currently performs on-site blood draws and related tests. The referring physicians now would like to perform the blood draws themselves during office visits. The physicians also would like the laboratory to provide blood sample collection supplies at no charge and to pay a per-patient blood sample collection fee. Though Medicare pays a $3 specimen (such as blood samples) collection fee, per patient encounter, to the entity or person that extracts the specimen, the Laboratory would pay the physicians between $3 and $6 for blood sample collection.

The OIG concluded that the proposed arrangement would implicate the antikickback statute and that it could potentially impose administrative sanctions on the parties involved. The OIG explained that by paying physicians a specimen collection fee that could equal twice the amount of that which Medicare would pay, the laboratory is providing a financial benefit to the physicians. More significantly, the OIG stated it could easily infer this financial benefit to be either an inducement from the laboratory to the physicians for new or continued referrals or the physicians' solicitation of blood sample collection fees as a condition of sending new or continued referrals.

The OIG also pointed out that because the collection fee would effectively come from the laboratory's Medicare reimbursement for its services in performing blood tests, there exists a strong incentive for the physicians to continue ordering blood tests. According to the OIG this presents risks for overutilization and inappropriate cost increases to federal health care programs.

The OIG seemed to suggest that the proposed arrangement could be legitimized if appropriate safeguards were in place by noting that their absence from the proposed arrangement increased the OIG's negative inferences.

The OIG further stated that the laboratory's submission of blood sample collection claims to Medicare could implicate the FCA. Medicare only provides such fees to the entity or person extracting the blood sample, which, under the proposed arrangement, would be the physicians. Furthermore, though under certain circumstances the physicians could seek Medicare reimbursement for blood sample collection fees, where the laboratory also paid the physicians for such services the physicians would be impermissibly "double dipping."

Because it is uncommon for the OIG to issue an advisory opinion concluding that it would impose sanctions upon a proposed arrangement, it is possible that the requestor was seeking a negative opinion that would invalidate its competitors' existing practices. This is even more probable considering the laboratory's reason for wanting to enter into the proposed arrangement was the fact that its competitors were paying referring physicians to perform blood draws. Finally, it is interesting that the OIG responded to a billing issue when typically it defers to CMS on such issues. One might infer that the OIG viewed this as a clear and simple billing issue.

Nos. 05-09 & 05-10: OIG Approves Insurance-only Billing for EMS Services
In two recent and nearly identical advisory opinions, the OIG again approved two municipalities' insurance-only billing structures for EMS and ambulance services provided to residents and taxpayers. Similar to last year's Advisory Opinions Nos. 04-12, 04-13, and 04-14, the OIG concluded it would not impose sanctions under the antikickback statute or the CMP provision prohibiting inducements to beneficiaries.

In both proposed arrangements, a municipality, through its owned and operated fire department, was the exclusive provider of EMS services to its residents. The funds for these services came from tax revenue generated by the municipalities' residents (No. 05-09) and/or tourists (No. 05-10). The municipalities in turn billed recipients' insurers, including federal health care programs. The municipalities proposed to alter there billing structure to bill patients only to the extent of their insurance coverage, commonly referred to as insurance-only billing.

Consistent with prior advisory opinions on the topic, the OIG noted its long-standing position that waivers of cost-sharing obligations are considered suspect under the federal fraud and abuse statutes. Nevertheless, the OIG cited to a CMS policy that permits government entities to reduce or waive their charges for beneficiaries unable to pay, or to charge only to the extent of beneficiaries' Medicare or other health insurance coverage. See Medicare Benefit Policy Manual, Pub.100-2 ch.16 § 50.3.1. CMS does not view this practice as the provision of free services. CMS has also confirmed that this policy applies to a state or municipal ambulance company that waives cost sharing amounts for residents in a designated area (No. 05-09) and for taxpaying nonresidents within the municipality's limits (No. 05-10). The OIG clearly stated in both advisory opinions that this CMS policy applies only to governmental entities and that the same analysis would not apply to a private EMS supplier under contract with a municipality or government entity.

Taking into consideration the previous Advisory Opinions Nos. 04-12, 04-13, and 04-14, the outcomes of these two advisory opinion requests are not surprising. The differences are subtle. As opposed to the insurance-only billing for residents in general that was proposed in the 2004 advisory opinions, Advisory Opinion 05-09 involved insurance-only billing for residents of a remote section of the municipality and Advisory Opinion 05-10 involved insurance-only billing for tourists who pay city taxes as well as for residents.