Important New OIG Advisory Opinion Issued

OIG Reaffirms Position on Discounting Ambulance Rates to SNFs

On December 28, 2010 the Office of the Inspector General issued a key Advisory Opinion for the ambulance industry, reaffirming its stance that offering discounted rates to skilled nursing facilities (SNFs) could violate the Federal anti-kickback statute (AKS). The OIG held that a prospective arrangement, where an ambulance service provider wanted to offer SNFs “below-cost” rates for Medicaid transport services, could be seen as illegally offering something of value in exchange for more profitable business. This opinion involved Medicaid bundling and it is a further warning to all providers that offering discounted prices to SNFs, even prices tied to state Medicaid rates, could violate the AKS.
Click here to read OIG Advisory Opinion No. 10-26. 
Over the last decade, we have witnessed a shift from traditional fee-for-service reimbursement toward “bundled” reimbursement schemes. In fact, the Healthcare Reform Bill contains a pilot bundling program in the coming years for different types of Medicare services. Unfortunately, bundled payment rates are often inadequate to cover all of the necessary medical services that facility inpatients receive. Because of this, SNFs and other facilities now have an even greater incentive to maximize their per diem payments by asking ambulance providers for deeper discounts on inpatient transport rates. But, as Advisory Opinion 10-26 demonstrates, ambulance providers need to be more cautious than ever when offering any reduction in their rates.  
The ambulance provider in Advisory Opinion 10-26 operates in a state where Medicaid bundling recently became law and SNFs are now responsible to pay providers for Medicaid-covered transports for their inpatients. This provider wanted to offer two types of payment plans to SNFs. Under the first plan, the provider would offer SNFs a capitated rate based on Medicaid resident days, regardless of the number of transports that were actually performed. The capitation amount would cover the SNF’s liability for all Medicaid transport services and would discharge the SNF’s responsibility to pay any Medicaid-covered copayment and deductible when Medicare was the primary payer. Under the second payment plan, the provider would offer SNFs a contracted rate, where the SNFs would pay on a fee-for-service basis for all Medicaid transports. Here, the SNF would still be responsible for copayments and deductibles when Medicare was the primary payer. 
The OIG noted that under both payment plans, the rates charged to the SNF were actually below the provider’s cost of providing the services, so the provider would be taking a loss on Medicaid-only patients. However, the OIG also noted that these SNFs typically had other inpatients who require ambulance services that are reimbursed under Medicare Part B and other payers. So, the provider was likely going to make up for those Medicaid losses by getting more lucrative rates from other payers. The provider here indicated that, particularly under its capitated payment plan, SNFs would likely refer Part B and other business to the provider.  
Based on the facts presented, the OIG found that that the provider may be offering improper discounts (below-cost rates for  Medicaid inpatients) to the SNFs with the intent to induce referrals of more lucrative Federal business (transports covered by Medicare Part B).  In addition, the OIG noted that any SNF engaging in this arrangement could be soliciting improper discounts on Medicaid business in exchange for referrals of Medicare Part B business for which they bear no financial risk.  Like in Advisory Opinion 99-2, the OIG found that the proposed arrangement “pose[d] a substantial risk of such improper ‘swapping ‘of business that may run afoul of the anti-kickback statute.”
The OIG has still not drawn a bright line as to what level of discounting would invariably violate the AKS. However, any discounts to SNFs below the provider’s normal charges could be inherently suspect, especially when they are below the provider’s cost. Ambulance providers should take caution any time they offer discounted rates to any facility that has the ability to refer Medicare or Medicaid business to them. There is really no such thing as a “safe-harbor” amount under the AKS, and each arrangement must be analyzed on an individual basis. Providers cannot not simply assume that offering prices that are in line with Medicare or Medicaid rates will not violate the AKS because the OIG could still infer that there is an intent to induce referrals depending on certain circumstances.  
The good news for the ambulance industry is that Advisory Opinion 10-26 offers additional support for the position that facilities have a duty to negotiate proper rates for transport services, despite the poor rates that Medicare or Medicaid pays. Providers can use Advisory Opinions 99-2 (available on our website), and 10-26 when negotiating rates for transport services to educate facilities on the dangers of discounting. Most importantly, this Opinion offers the ambulance industry and facilities an even greater reason and explanation as to why ambulance providers cannot offer such discounts.