On April 24, 2023, the Department of Health and Human Services’ Office of Inspector General (“OIG”) issued a modification to advisory opinion 20-04, from July 2020, where the OIG opined favorably on the proposal to purchase or receive donations of unpaid medical debt owed by qualifying patients from certain types of health care providers, including hospitals, and then forgive that debt.  Now, the OIG has been asked to modify certain conditions related to the public disclosure of hospitals’ donation or sale of medical debt. The requestor of the modification is a charitable organization that locates, buys, and forgives individual patents’ medical debt.

OIG Advisory Opinion No. 20-24

The OIG’s analysis in 2020 acknowledged that the Requestor’s forgiveness of a patient’s debt that was donated or sold to the Requestor by a provider, if known to the patient, could induce such patient to seek items or services from that provider or could influence the patient’s future selection of the provider. The proposed Arrangement, therefore, would implicate both the Beneficiary Inducements CMP and the anti-kickback statute.

Section 1128A(a)(5) of the anti-kickback statute provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or State health care program (including Medicaid) beneficiary that the benefactor knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of any item or service for which payment may be made, in whole or in part, by Medicare or a State health care program. Moreover, Section 1128A(i)(6) of the anti-kickback statute defines “remuneration” as including “transfers of items or services for free or for other than fair market value”. There is an exception for the waiver of coinsurance and deductible amounts of a person, if (i) the waiver is not offered as part of any advertisement or solicitation; (ii) the person does not routinely waive coinsurance or deductible amounts; and (iii) the person waives the coinsurance and deductible amounts after determining in good faith that the individual is in financial need or fails to collect coinsurance or deductible amounts after making reasonable collection efforts.

However, the OIG noted the following reasons as to why they would not impose sanctions under the Beneficiary Inducements CMP in connection with the proposed arrangement and found the arrangement to be sufficiently low risk under the anti-kickback statute:

1. The OIG noted that the exception to the definition of remuneration under the Beneficiary Inducements CMP would not apply to the proposed arrangement because that exception only applies to providers or suppliers to whom copayments or deductibles are owed. The OIG further found that any waivers by providers of cost-sharing amounts under the arrangement would not be routine, and therefore, would not implicate the anti-kickback statute.  Here, the OIG found, the requestor would forgive debt only after the following:  (i) a provider attempted and failed to collect the debt; and (ii) an individualized financial need determination. Accordingly, neither the debt forgiveness by the requestor nor the cost-sharing waiver, if any, by a provider would be routine. 
2. Additionally, the OIG found that as a condition of participating in the proposed arrangement, providers would have to agree not to publicize the sale or donation of debt to the requestor. The requestor, not the provider, would notify the patient that his or her debt has been paid in full. 
3. Third, the OIG found the arrangement should not lead to increased costs to Federal health care programs. The debt forgiveness would take place only after the provider rendered the services with the expectation of collecting payment and attempted to collect payment. Purchasing or receiving a donation of debt after it is incurred and deemed uncollectible does not carry the same risks as agreeing to subsidize an ongoing payment obligation or waiving a payment obligation in advance.
4. Fourth, purchasing or receiving debt directly form the provider–instead of from a debt purchasing company–does not materially impact the risk of the arrangement. If the patient account meets the requestor’s criteria for debt forgiveness and the requestor follows the safeguards then the end result to the provider and patient is the same.
5. Lastly, the OIG found the donors would have only limited control over how their donations to the requestor are used to forgive medical debt.

Under the arrangement, the providers agreed not to publicize the sale or donation of debt to requestor and the requestor did not identify providers by name in promotional or marketing materials that were available to the public. However, when explaining the arrangement to potential provider partners, the requestor was able, with permission, to provide the names of other providers that had sold or donated medical debt to the requestor.

Proposed Modifications

In its most recent filing, the requestor sought to modify the condition in the arrangement that prohibited providers from publicizing the sale or donation of debt to the requestor and identifying providers by name in promotional or marketing materials that are available to the public. Specifically, the proposed modifications included the following:

• The requestor would limit the context of disclosure to instances of reporting a hospital’s community benefits, financial assistance policies, or both;
• A hospital that participated would be required to acknowledge that in any such disclosure that it made good faith efforts to collect patients’ medical debt and that the requestor’s financial requirements were met;
• The requestor could publicize its debt relief and identify hospitals that sold or donated such debt by name in testimonials or other materials on the requestor’s website relating to its existing partnerships with hospitals;
• To the extent a testimonial refers to debt that the requestor has forgiven for patients of a certain hospital, the testimonial would be clear that the hospital sold or transferred the debt to the requestor and that the requestor forgave such debt;
• The requestor raised the financial need qualification level to 400 percent of the Federal poverty level; and
• The requestor sought to modify and clarify the patient notification process.

The OIG found that the modifications would not materially increase the risk of fraud and abuse under either the Federal anti-kickback statute or the Beneficiary Inducements CMP. Thus, the limited disclosures by the participating hospitals are unlikely to be perceived by patients as an incentive to seek care at participating hospitals. Moreover, the OIG found that it is unlikely that patients would be influenced or incentivized to seek treatment from a participating hospital on the basis of the hospital being named on a charitable organization’s website in this context.

Reed Smith will continue to follow updates with regard to this opinion. If you have any questions about this advisory opinion or need to seek an opinion of your own, please do not hesitate to reach out to the health care lawyers at Reed Smith.