Dear [Names have been redacted]:
We are writing in response to your request for an advisory opinion, which we accepted pursuant to 42 C.F.R. § 1008.41 on April 11, 1997. Your request asks whether donations by renal dialysis providers to an independent 501(c)(3) charitable organization for the purpose of funding a program to pay for Supplementary Medical Insurance Program ("Medicare Part B") or Medicare Supplementary Health Insurance ("Medigap") premiums for financially needy Medicare beneficiaries with end-stage renal disease where such beneficiaries may be receiving treatment from the donor-dialysis providers (the "Proposed Arrangement") would constitute grounds for the imposition of a civil monetary penalty under Section 231(h) of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).
You have certified that all of the information you provided in your request, including all supplementary letters, is true and correct, and constitutes a complete description of the facts and agreements among the parties regarding the Proposed Arrangement. You have also certified that upon our approval of the Proposed Arrangement, you will undertake to effectuate the Proposed Arrangement.
In issuing this opinion, we have relied solely on the facts and information you presented to us. We have not undertaken an independent investigation of such information. This opinion is limited to the facts presented. If material facts have not been disclosed, this opinion is without force and effect.
Based on the information provided and subject to certain conditions described below, we have determined that the Proposed Arrangement would not constitute grounds for the imposition of civil monetary penalties under Section 231(h) of HIPAA. This opinion may not be relied on by any person other than the addressees and is further qualified as set out in Part III below and in 42 C.F.R. Part 1008.
In 1972, Congress created a special Medicare ESRD benefit. This benefit is for all individuals with ESRD who have earned a certain level of eligibility for Social Security benefits (or are dependents of those who have attained that level). People in this category are entitled to benefits under Medicare Part A and are eligible to enroll in Medicare Part B. Medicare Part B payments on behalf of ESRD patients generally cover eighty percent of the composite rate for Medicare-covered maintenance dialysis services, as well as eighty percent of physician services and certain ancillary services. 1 Medigap insurance can be purchased to cover a patient's annual Medicare coinsurance obligations for Medicare-covered services.
In addition to its educational efforts on behalf of those suffering from renal failure, AKF provides direct financial support in the form of grants to needy persons with ESRD for items such as transportation, medication, and insurance premiums. In the past, AKF has funded 100 percent of all eligible grant requests from ESRD patients. In 1995, AKF assisted over 12,000 patients with ESRD and received over $5 million in donations. Of that amount, less than ten percent was contributed by the Companies. The largest percentage of AKF’s funds was directed towards patient aid. AKF disseminates information about its patient assistance and other programs throughout the national dialysis provider community, especially to social workers who work with ESRD patients.
Upon receipt of a patient's application, a member of AKF’s staff reviews the application, gathers additional information, if necessary, and makes an initial recommendation as to the disposition of the application based upon AKF’s needs assessment and eligibility criteria. A senior staff employee reviews the recommendation and makes a final determination. All determinations are made by AKF employees who have no financial interest in the Companies or other dialysis providers and are based on their good faith assessment that the applicant is in financial need and eligible for assistance. If AKF determines that a patient is eligible for assistance, AKF notifies the dialysis provider's social worker that the insurance premium has been paid in order to ensure that the patient's billing information is accurate.
Because of AKF’s limited financial resources, an AKF patient assistance grant is provided for a specific time period. Upon expiration of the period, the patient must submit another grant application. Grant requests are reviewed on a first-come, first-served basis to the extent funding is available.
AKF will continue to use its current procedures in assessing the financial need and eligibility of all patients, whether self-referred or referred by the Companies, or other non-donor dialysis providers. Determinations will be made solely on AKF’s good faith assessment of a patient’s financial need. AKF staff involved in awarding patient grants will not take the identity of the referring facility or the amount of any provider's donation into consideration when assessing patient applications or making grant determinations.
Under the Proposed Arrangement, the Companies will be free to determine whether to make contributions to AKF and, if so, how much to contribute. All the Companies have certified that they will not track the amount that AKF pays on behalf of patients dialyzing at their facilities in order to calculate future contributions. However, in calculating their contributions to AKF, the Companies have indicated that they may consider what they would have otherwise paid on behalf of financially needy patients utilizing their facilities. The Companies will not disclose to each other, or other dialysis providers, the amount or method of calculating their respective contributions to AKF, and AKF will not disclose one Company’s contribution to another Company or to other dialysis providers. Contributions will be made without any restrictions or conditions placed on the donation. The Companies have acknowledged that "contributions . . . will be gifts without any guarantee or promise on the part of AKF that patients referred to AKF for possible financial assistance with their insurance premiums will receive such assistance. AKF’s discretion as to the uses of contributions will be absolute, independent, and autonomous."
offers or transfers remuneration to any individual eligible for benefits under [Federal health care programs (including Medicare or Medicaid)] that such person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, [by a Federal health care program].Section 231(h) defines "remuneration", in relevant part, as "transfers of items or services for free or for other than fair market value." 3
We conclude that the Proposed Arrangement would not constitute grounds for the imposition of civil monetary penalties under Section 231(h) of HIPAA. A violation of Section 231(h) requires that something of value be given to a beneficiary, either directly or on his or her behalf. Simply put, the contributions to AKF by the Companies are not made to or on behalf of beneficiaries. 4 Moreover, while the premium payments by AKF may constitute remuneration to beneficiaries, they are not likely to influence patients to order or receive services from particular providers. To the contrary, the insurance coverage purchased by AKF will follow a patient regardless of which provider the patient selects, thereby enhancing patient freedom of choice in health care providers.
Moreover, eligibility for HIPP assistance is available to any financially needy ESRD patient regardless of provider; it is not limited to patients of the companies. AKF will make all AKF eligibility determinations using its own criteria, and AKF staff will not take into account the identity of the referring provider or the amount of any donation to AKF by such provider.
Finally, as an additional safeguard, the Companies have represented that they will not track the amounts that AKF pays on behalf of patients dialyzing at their facilities in order to calculate amounts of future contributions, although donations may take into account the amounts that the Companies would have otherwise expended on financially needy patients. Contributions will not be earmarked for the use of particular beneficiaries or groups of beneficiaries. The Companies may change the amount of their contributions or discontinue contributing to AKF at any time. The Companies have represented that they will individually determine the amount of their contributions without consulting with the other Companies or other contributing dialysis providers.
In sum, the interposition of AKF, a bona fide, independent, charitable organization, and its administration of HIPP provides sufficient insulation so that the premium payments should not be attributed to the Companies. The Companies who contribute to AKF will not be assured that the amount of HIPP assistance their patients receive bears any relationship to the amount of their donations. Indeed, the Companies are not guaranteed that beneficiaries they refer to HIPP will receive any assistance at all. In these circumstances, we do not believe that the donations by the Companies to AKF can reasonably be construed as payments to eligible beneficiaries of a Federal health care program.
The OIG will not proceed against the Requestors with respect to any action taken in good faith reliance upon this advisory opinion as long as all of the material facts have been fully, completely, and accurately presented, and the arrangement in practice comports with the information provided. The OIG reserves the right to reconsider the questions and issues raised in this advisory opinion and, where the public interest requires, modify or terminate this opinion. In the event that this advisory opinion is modified or terminated, the OIG will not proceed against the requestors with respect to any action taken in good faith reliance upon this advisory opinion, where all of the relevant facts were fully, completely, and accurately presented and where such action was promptly discontinued upon notification of the modification or termination of this advisory opinion.
D. McCarty Thornton
Chief Counsel to the Inspector General