On October 18, 2018, the Office of Inspector General (OIG) of the Department of Health and Human Services published a favorable Advisory Opinion regarding a Medicaid managed care organization’s (Requestor) proposal to pay incentives to its network providers who meet benchmarks for increasing the amount of early and periodic screening, diagnostic, and treatment (EPSDT) services provided to Medicaid beneficiaries (Proposed Arrangement).

Beneficiaries of the Medicaid program are entitled to EPSDT services from birth to age 21. The purpose of ESPDT services are to provide children with early detection and treatment of health problems. The Requestor acts as a Medicaid managed care organization and entered into a full-risk, capitated contract with a state’s Medicaid program, under which it contracts with health care providers to provide, among other things, EPSDT services. The Requestor is responsible for payments to the providers. Under the Proposed Arrangement, the Requestor would enter into agreements with providers that would require Requestor to pay the providers certain incentive payments for increasing the amount of EPSDT services provided to beneficiaries enrolled in Requestor’s managed care program. All costs related to the incentive payments would be borne by Requestor.

In the Advisory Opinion, the OIG explained that the Proposed Arrangement implicated the federal anti-kickback statute (AKS) because Requestor would pay remuneration to providers to encourage providers to increase provision of health care services to Medicaid beneficiaries, for which payment is made under a federal health care program. The OIG assessed whether the Proposed Arrangement satisfied the eligible managed care organization (EMCO) safe harbor to the AKS. In its analysis, the OIG found that the Proposed Arrangement satisfied the three applicable prongs of the EMCO safe harbor as follows:

  • The Proposed Arrangement would:
    • be governed by a written agreement, signed by the parties and be for a period of at least one year;
    • specify the items and services covered by the Proposed Arrangement, i.e., the increased EPSDT services; and
    • specify that providers could not claim payment from a Federal health care program for the EPSDT services.
  • The Requestor would not provide remuneration to providers in exchange for federal health care program business because the incentive payments would be based solely on the provision of Medicaid services to existing enrollees in Requestor’s managed care program. The OIG also noted that the Requestor would not offer the incentive payments to induce providers to participate in its other lines of federal health care program business.
  • The Requestor would not shift the cost of the Proposed Arrangement. The OIG concluded that the Requestor would not shift costs in the year it implemented the Proposed Arrangement because Requestor would bear the full financial risk for all EPSDT services costs due to the capitated nature of its managed care organization agreement. The OIG found that a cost-shift was unlikely to occur in future years because any increase in capitation payment rates would likely be an appropriate reflection of the increased cost of care. The OIG also noted that in designing the Proposed Arrangement, the Requestor did not make any assessment of potential increases in capitation payments from the state’s Medicaid program.


As the OIG has emphasized, Advisory Opinions are issued only to the requestors of the opinion, and have no application to, and cannot be relied upon by, any individual or entity, nor may they be introduced into evidence by anyone other than the requestors to prove the individual or entity did not violate the anti-kickback statute, or any other law.