On January 14, 2019, the Health and Human Services Office of Inspector General (OIG) published the favorable Advisory Opinion 19-01 allowing a charitable pediatric clinic (“Clinic”) to routinely waive cost-sharing amounts for patients in financial need (“Arrangement”). OIG noted that the Arrangement did not meet the regulatory exception for permitted waivers of cost sharing amounts under the Civil Monetary Penalties Law (CMP), but ultimately decided not to impose administrative sanctions in connection with the Arrangement.

The Clinic provides medical, psychiatric and dental care to children in an area designated a Health Professional Shortage Area for Primary Care, Dental Care, and Mental Health, and is located just a few blocks away from a designated Medically Underserved Area. Most of the Clinic’s patients are low-income and covered by state insurance programs having no cost-sharing obligation. Under the Arrangement, the Clinic waives Federal health care program cost-sharing amounts for the percentage of TRICARE and Medicare beneficiaries not covered by a state insurance program.

The CMP regulations carve out certain permitted cost-sharing waivers from the definition of “remuneration” under the CMP. To fall within the exception, the waivers must be offered to patients in financial need, not offered through any advertisement or solicitation, not offered routinely, and made following an individual determination of financial need. On review, OIG determined the Arrangement did not meet the exception, because the Clinic routinely provides waivers, and does not individually verify financial need for such patients. According to the OIG, “We consider [Clinic’s] waiver of cost-sharing amounts under the Arrangement to be routine because it waives cost-sharing amounts for 100 percent of its patients to whom they apply. The fact that [Clinic] waives Federal health care program cost-sharing obligations for a very few patients in the aggregate does not make the waivers any less routine.”

Nevertheless, OIG determined there was low risk of fraud and abuse in the Arrangement, citing facts including: the Clinic does not provide the cost-sharing waivers through advertisement or solicitation, provider compensation is not based on the volume or value of referrals, the delivery of services is not tied to other Federally-reimbursed services, and the Clinic does not shift the waived cost-sharing amounts to other payors. In addition, OIG acknowledges that the lack of alternative providers in the area likely brings patients to the Clinic, rather than the cost-sharing waiver.

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.