Issued August 11, 2009, and posted August 18, 2009
Written by Catherine A. Martin; reviewed by Ingrid Brydolf*
On August 11, 2009, the Department of Health and Human Services Office of Inspector General (OIG) issued Advisory Opinion 09-13, concerning a hospital providing a subsidy to an affiliated ambulance cooperative for the provision of ambulance services currently being provided to the community by the hospital (Proposed Arrangement). The OIG found that the Proposed Arrangement could implicate the anti-kickback statute if the requisite intent existed, but that the OIG would not impose civil monetary penalties or administrative sanctions.
The Requestor, a tax-exempt entity, owns and operates an acute-care hospital that is certified to have "comprehensive emergency services capability" (Hospital). The Hospital is the only hospital in its town and within a thirty-five mile radius capable of providing comprehensive emergency services. The other hospital in the area is also owned by the Requestor, but has only general emergency-room capability. For the past twenty-three years, the Hospital has provided advanced life support (ALS) services and non-transport paramedic services for the town and surrounding areas. This arrangement was established in response to severe budget problems experienced by the town that threatened to significantly limit the fire rescue services and ambulances services in the community. Basic life support (BLS) services are provided through a nonprofit, taxable cooperative corporation—the Ambulance Cooperative—to the town and surrounding communities. The Requestor is the controlling member of the Ambulance Cooperative, which has three local volunteer fire companies as additional members. The Ambulance Cooperative also provides intra-hospital transports and other services to support the volunteer fire companies and specialty-need transport services.
The Hospital provides the ALS services to the community at a financial loss, due in part to the large, sparsely populated geographical area. In addition, there are no for-profit entities licensed to provide ALS services in the area and only two non-Ambulance Cooperative volunteer fire companies that are designated to provide ALS services through the State EMS system, but only within a designated service area. Under the Proposed Arrangement and in an effort to provide services more efficiently and reduce operational costs, ALS services provided by the Hospital and BLS services provided by the Ambulance Cooperative would be consolidated. The Ambulance Cooperative would assume the responsibility of providing ALS services and the Hospital would provide a subsidy to the Ambulance Cooperative in the form of cash, equipment, and services. The purpose of the subsidy is to temporarily bridge financial losses until the consolidated entity obtains tax-exempt status and, as a result, qualifies for increased ALS funding. Thereafter, the Hospital expects the consolidated entity to break even and not require subsidies. The services would continue to be provided by the same personnel and using the same equipment.
In examining the Proposed Arrangement and the potential kickback risk, the OIG focused on whether the Hospital's donation of cash, equipment, and supplies to the Ambulance Cooperative could constitute remuneration in exchange for the referrals of patients to the Hospital. The OIG concluded that the Proposed Arrangement posed a sufficiently low risk of abuse for a combination of reasons.
- First, the Ambulance Cooperative and its members receive no net financial benefit from the Proposed Arrangement. The Ambulance Cooperative is receiving only that which is necessary to provide the ALS services and the volunteer fire companies are continuing to provide and bill for the BLS services.
- Second, the subsidy provided by the Hospital would not vary with volume or value of referrals to the Hospital by the Ambulance Cooperative.
- Third, the ability of the Ambulance Cooperative and its members to influence referrals to the Hospital is insignificant—the Hospital is the only hospital in the area certified to provide comprehensive emergency-care services; state regulations and protocols require transport of a patient to the hospital of the patient's choice where the patient is in a position to express such a choice and otherwise to the nearest facility equipped to handle the patient; and patients or their representatives choose the medical facility for non-emergent transports.
- Finally, the OIG concluded that any risk posed by the Proposed Arrangement is offset by the circumstances giving rise to the Proposed Arrangement. Namely, the lack of for-profit ambulance services in the area, the inability of the Hospital to provide ALS services without a loss, and the certification by the Hospital that these services would cease to be available without the subsidy.
*The Practice Group Leadership would like to thank Advisory Opinions Task Force members Catherine A. Martin, Esquire (Adelman Sheff & Smith LLC, Annapolis, MD), and Ingrid Brydolf, Esquire (Davis Wright Tremaine LLP, Portland, OR), for drafting and reviewing this summary, respectively.