Summary of OIG Advisory Opinions 09-14 and 09-15 

Issued August 27, 2009, and posted September 3, 2009
Written by Joseph Kahn; reviewed by Catherine Martin*

On August 27, 2009, the Department of Health and Human Services Office of Inspector General (OIG) issued Advisory Opinions 09-14 and 09-15, each favorably addressing exclusive contracts between local governmental units and ambulance companies for ambulance transport services which provide for reimbursement to the local governmental units for certain costs associated with the units' dispatch and monitoring services (Arrangements). OIG found that the Arrangements could implicate the anti-kickback statute if requisite intent existed, but would not result in exclusion under 42 U.S.C. 1320a-7 or in civil monetary penalties or administrative sanctions under 42 U.S.C. 1320a-7b. The facts and OIG's analysis of the Opinions are nearly identical. In each, the local governmental unit (Unit(s)) is responsible for providing essential governmental and public safety services within their geographic limits. Each Unit operates an emergency 911 dispatch center to take and monitor distress calls, including calls for emergency medical services (EMS). In 09-15, the Unit is also responsible for monitoring the quality of the local EMS services. Each Unit issued a request for proposal (RFP) for an exclusive, three-year contract to provide local ambulance transport and EMS. The requestors (each was the successful ambulance company) certified that the RFP process was open, transparent, and competitive, and that the contracts were awarded in a manner consistent with local contracting laws. In each case, the ambulance company selected had already been providing ambulance services to the respective Units for many years.

Under each contract, the ambulance company is required to pay an annual amount to the respective Unit as reimbursement for the Units' costs associated with their respective 911 dispatch centers' handling of EMS calls (and, in the case of the arrangement in 09-15, the costs associated with the Unit's monitoring of the quality of the EMS services). The annual amount was determined based on the good-faith approximated costs associated solely with the EMS services as a portion of the Units' total 911 dispatch center and monitoring costs.

Under the contracts, the ambulance companies provide exclusive EMS services to the Units. Many Medicare or Medicaid beneficiaries receive these services. The Units do not pay a fee for such EMS services, and the companies are solely responsible for the maintenance and storage of their equipment. Only minor changes were made to the dispatch process of each Unit as a result of the contracts.

Because the contracts could be construed as "pay to play" arrangements, OIG determined that the arrangements implicated the anti-kickback statute. For the reasons summarized below, however, OIG concluded that each arrangement included sufficient safeguards to mitigate the risk of fraud or abuse. These factors included:

1. Each arrangement is part of a comprehensive regulatory scheme by the respective Units to manage EMS delivery;
   
   
2. The amount of compensation to be paid under the contracts is limited to and directly correlates with the approximate costs incurred by the Units related to EMS dispatch (and monitoring) services, and does not appear to overpay the Units;
   
   
3. The annual fee is a fixed fee (subject to inflation adjustments) and is not tied to the volume or value of referrals;
   
   
4. The nature of the arrangements should not have any impact on federal healthcare program costs, nor should they increase the risk of overutilization;
   
   
5. As a result of the competitive bidding RFP process, the contract should not have an adverse impact on competition;
   
   
6. The compensation under the contract inures to the public, rather than a private benefit; and
   
   
7. The arrangements were initiated by the respective Units and do not represent a fundamental change in EMS delivery within the Units.

The OIG did add that it might have viewed the arrangements differently if the ambulance companies had paid the Units remuneration not directly related to EMS provision. Finally, in Advisory Opinion 09-15, the respective Unit was withholding payment under the contract pending OIG's determination, and OIG commented in a footnote that nonpayment of amounts otherwise due under a contract does not, by itself, absolve parties from fraud and abuse liability.

*The Practice Group Leadership would like to thank Advisory Opinions Task Force members Joseph Kahn, Esquire (Nexsen Pruet PLLC, Greensboro, NC), and Catherine A. Martin, Esquire (Adelman Sheff & Smith LLC, Annapolis, MD), for drafting and reviewing this summary, respectively.