OIG Says Medigap Plans May Use Preferred Hospital Networks
- January 12, 2024
The Department of Health and Human Services Office of Inspector General (OIG) in a pair of advisory opinions posted January 3 once again ruled out sanctions in connection with proposed arrangements in which Medicare Supplemental Health Insurance (Medigap) Plans provide a premium credit off the next renewal premium to policyholders who use a network hospital for an inpatient stay.
The Medigap Plan requestors would participate in arrangements with preferred hospital organizations (PHOs) that involve three streams of remuneration: (1) each network hospital provides a discount on the Medicare Part A inpatient deductible that the Medigap Plans otherwise would cover; (2) the Medigap Plans offer a $100 premium credit to each policyholder who selects a network hospital for a Medicare Part A-covered inpatient stay, subject to frequency limitations; and (3) the PHOs receive from the Medigap Plans monthly percentage-based administrative fees as compensation for establishing the hospital networks and arranging the discounts.
While all three remuneration streams implicate the Anti-Kickback Statute (AKS), and the premium credit also implicates the Beneficiary Inducements civil monetary penalty (CMP), OIG found the proposed arrangements posed a low risk of fraud and abuse.
As to the AKS, OIG noted that the arrangements: (1) were unlikely to result in overutilization of health care items or services or increase costs to federal health care programs; (2) the potential for patient harm that may be posed by the deductible discounts and the premium credits was minimal; and (3) the remuneration was unlikely to significantly impact competition.
For similar reasons, OIG found the premium credits posed a low risk of fraud under the Beneficiary Inducements CMP.
OIG also said it wouldn’t impose sanctions related to the administrative fees the Medigap Plans would pay to the PHOs. The remuneration would implicate the AKS, but the fees would be consistent with fair market value.
Although tied to the volume or value of referrals between the Medigap Plans and the network hospitals, the administrative fees would reflect a percentage of the savings realized by the Plans, not revenue generated by the network hospitals; it would be against the Plans’ interest to drive overutilization of inpatient hospital services; and the Plans certified that they would not pass on or otherwise shift the cost of the PHOs’ administrative fees to any federal health care program.
Advisory Opinion No. 23-13 (Dep’t of Health and Human Servs. Office of Inspector Gen. Dec. 28, 2023).
Advisory Opinion No. 23-14 (Dep’t of Health and Human Servs. Office of Inspector Gen. Dec. 28, 2023).