Although in most cases the following areas do not pose significant fraud and abuse risk, the OIG has received numerous inquiries from hospitals and others on these topics. Therefore, we offer the following guidance to assist hospitals in their review of these arrangements.

Discounts to Uninsured Patients

No OIG authority, including the Federal anti-kickback statute, prohibits or restricts hospitals from offering discounts to uninsured patients who are unable to pay their hospital bills. In addition, the OIG has never excluded or attempted to exclude any provider or supplier for offering discounts to uninsured or underinsured patients under the permissive exclusion authority at section 1128(b)(6)(A) of the Act. However, to provide additional assurance to the industry, the OIG recently proposed regulations that would define key terms in the statute.

CMS rules provide that a hospital can determine its own individual indigency criteria as long as it applies the criteria to Medicare and non-Medicare patients uniformly. For Medicare patients, however, if a hospital wants to claim Medicare bad debt reimbursement, CMS requires documentation to support the indigency determination. To claim Medicare bad debt reimbursement, the hospital must follow the guidance stated in the Provider Reimbursement Manual. A hospital should examine a patient’s total resources, which could include, but are not limited to, an analysis of assets, liabilities, income, expenses, and any extenuating circumstances that would affect the determination. The hospital should document the method by which it determined the indigency and include all backup information to substantiate the determination. In addition, if collection efforts are made, Medicare requires the efforts to be documented in the patient’s file with copies of the bill(s), follow-up letters, and reports of telephone and personal contacts. In the case of a dually-eligible patient (i.e., a patient entitled to both Medicare and Medicaid

Among other things, the proposed regulations would make clear that free or substantially reduced charges to uninsured persons would not affect the calculation of a provider’s or supplier’s ‘‘usual’’ charges, as the term ‘‘usual charges’’ is used in the exclusion provision. The OIG is currently reviewing the public comments to the proposed regulations. Until such time as a final regulation is promulgated or the OIG indicates its intention not to promulgate a final rule, it will continue to be the OIG’s enforcement policy that when calculating their ‘‘usual charges’’ for purposes of section 1128(b)(6)(A), individuals and entities do not need to consider free or substantially reduced charges to (i) uninsured patients or (ii) underinsured patients who are selfpaying patients for the items or services furnished. In offering such discounts, a hospital should reflect full uniform charges, rather than the discounted amounts, on its Medicare cost report and make the FI aware that it has reported its full charges.

Under CMS rules, Medicare generally reimburses a hospital for a percentage of the ‘‘bad debt’’ of a Medicare beneficiary (i.e., unpaid deductibles or coinsurance) as long as the hospital bills a patient and engages in reasonable, consistent collection efforts. However, as explained in CMS’s paper titled ‘‘Questions On Charges For The Uninsured,’’ a hospital can forgo any collection effort aimed at a Medicare patient, if the hospital, using its customary methods, can document that the patient is indigent or medically indigent. In addition, if the hospital also determines that no source other than the patient is legally responsible for the unpaid deductibles and coinsurance, the hospital may claim the amounts as Medicare bad debts.

Preventive Care Services

Hospitals, particularly non-profit hospitals, frequently participate in community-based efforts to deliver preventive care services. The Medicare and Medicaid programs encourage patients to access preventive care services. The prohibition against beneficiary inducements at section 1128A(a)(5) of the Act does not apply to incentives offered to promote the delivery of certain preventive care services, if the programs are structured in accordance with the regulatory requirements at 42 CFR 1003.101.

Generally, to fit within the preventive care exception, a service must be a prenatal service or post-natal well-baby visit or a specific clinical service described in the current U.S. Preventive Services Task Force’s Guide to Clinical Preventive Services that is reimbursed by Medicare or Medicaid. Obtaining the service may not be tied directly or indirectly to the provision of other Medicare or Medicaid services. In addition, the incentives may not be in the form of cash or cash equivalents and may not be disproportionate to the value of the preventive care provided. From an anti-kickback perspective, the chief concern is whether an arrangement to induce patients to obtain preventive care services is intended to induce other business payable by a Federal health care program. Relevant factors in making this evaluation would include, but not be limited to: the nature and scope of the preventive care services; whether the preventive care services are tied directly or indirectly to the provision of other items or services and, if so, the nature and scope of the other services; the basis on which patients are selected to receive the free or discounted services; and whether the patient is able to afford the services.

Professional Courtesy

Although historically ‘‘professional courtesy’’ referred to the practice of physicians waiving the entire professional fee for other physicians, the term is variously used in the industry now to describe a range of practices involving free or discounted services (including ‘‘insurance only’’ billing) furnished to physicians and their families and staff. Some hospitals have used the term ‘‘professional courtesy’’ to describe various programs that offer free or discounted hospital services to medical staff, employees, community physicians, and their families and staff. Although many professional courtesy programs are unlikely to pose a significant risk of abuse (and many may be legitimate employee benefits programs eligible for the employee safe harbor), some hospital-sponsored ‘‘professional courtesy’’ programs may implicate the fraud and abuse statutes.

In general, whether a professional courtesy program runs afoul of the anti-kickback statute turns on whether the recipients of the professional courtesy are selected in a manner that takes into account, directly or indirectly, any recipient’s ability to refer to, or otherwise generate business for, the hospital. Also relevant is whether the physicians have solicited the professional courtesy in return for referrals. With respect to the Stark Law, the key inquiry is whether the arrangement fits in the exception for professional courtesy at 42 CFR 411.357(s). Finally, hospitals should evaluate the method by which the courtesy is granted. For example, ‘‘insurance only’’ billing offered to a Federal program beneficiary potentially implicates the anti-kickback statute, the False Claims Act, and the CMP provision prohibiting inducements to Medicare and Medicaid beneficiaries (discussed in section II.F above). Notably, the Stark Law exception for professional courtesy requires that insurers be notified if ‘‘professional courtesy’’ includes ‘‘insurance only’’ billing.