Malpractice Premium Supports

Transcription

1 FEBRUARY 4, 2005 Malpractice Premium Supports Introduction Within the last month, the Office of the Inspector General ( OIG ) has issued two important statements of interest to hospitals that may be considering offering subsidies to members of their medical staffs for professional liability insurance coverage. The first statement, posted on January 6, 2005, was in the form of a new fraud and abuse advisory opinion. In that opinion, the OIG acknowledged that many areas of the United States are facing a malpractice crisis and that some physicians may find it more economical to retire than to pay increasing premium costs. Although the OIG expressed concern with hospitals subsidizing the malpractice expenses of physicians in a position to refer them business, the OIG stated that it would not impose administrative sanctions in connection with the particular arrangement under consideration. The second statement was included in the OIG s Supplemental Compliance Program for Hospitals. That document, issued January 28, 2005, enumerated factors that hospitals should consider when contemplating premium subsidy arrangements with possible referral sources. OIG Advisory Opinion The facts of Advisory Opinion include the following The only two neurosurgeons on the medical staff of the hospital requesting the opinion (the Hospital ) were facing (i) fewer choices for malpractice coverage, and (ii) increasing malpractice premiums. The neurosurgeons had been purchasing malpractice from a particular carrier on a claims made basis for a number of years. The carrier informed the neurosurgeons that it would not renew their malpractice insurance, but would offer them tail coverage at no charge, if they retired from the practice of medicine. If the neurosurgeons decided to continue practicing, they would be obliged to pay both (i) the cost of tail coverage relating to their current insurance, and (ii) substantially higher malpractice premiums on a going forward basis. After considering this dilemma, the neurosurgeons informed the Hospital that they would retire immediately. 1 of 5

2 The Hospital stated that the nearest hospital for neurosurgical services was 45 miles away and that the Hospital depended on its neurosurgeons to ensure the community s access to neurosurgical services, especially for emergency care. The Hospital had tried to recruit a new neurosurgeon to the community, without success. In light of the circumstances, the Hospital agreed to provide the neurosurgeons the following assistance as part of a two-year arrangement: Subsidize the entire cost of the neurosurgeons tail coverage from their existing carrier; Provide premium supports equaling 75% of the difference between the neurosurgeons old malpractice premium costs and the cost of the neurosurgeons premiums from their new carrier for the first year. (Note that the arrangement also provided for premium supports in the second year if the community need for the neurosurgeons persisted and the neurosurgeons again faced significant premium increases--but premium increases did not increase significantly in year two, so the Hospital did not pay additional supports for that year). Pay for additional tail coverage for the neurosurgeons relating to their new insurance policies, if they retired at the end of the second year of the arrangement. The Hospital certified to the OIG that: the amount of the premium support did not take into account the volume or value of any referrals or business otherwise generated by the neurosurgeons for the Hospital; the neurosurgeons were not required to refer patients to, or otherwise generate referrals for, the Hospital; and the neurosurgeons could furnish services at locations other than the Hospital and such services would be covered by the subsidized malpractice insurance. In return for the malpractice subsidy, the Hospital required the neurosurgeons to: Maintain membership on the Hospital s medical staff; Maintain a full-time practice in neurosurgery in the Hospital s community; Provide neurosurgical call coverage for the Hospital s emergency department; Participate in assigned Hospital committees; Care for beneficiaries of the Medicare program; Provide at least as much Medicaid and/or indigent care as the neurosurgeons provided when they entered into the arrangement; and Cooperate with the Hospital s neurosurgical recruitment efforts. 2 of 5

3 OIG Analysis The OIG recognized that the malpractice crisis in certain states has an impact on citizens access to medically necessary patient care. The OIG also recognized that: This particular arrangement was implemented as a temporary and urgent measure to prevent a gap in the local availability of neurosurgical services that would have resulted had the neurosurgeons retired. The arrangement was structured to prevent a significant financial windfall for the Physicians (i.e., the neurosurgeons were required to pay at least a portion of the increased premium amounts in both years, and payments were structured so as to be made directly to the malpractice carrier when possible). The risk of undue benefit to the neurosurgeons was further reduced because the neurosurgeons were required to perform various services as consideration for the Hospital s premium support payments. The risk that the premium supports might be connected to referrals was also minimized because the subsidized malpractice insurance covered services furnished at sites other than the Hospital. For these reasons, the OIG concluded that the arrangement adequately minimizes the risk of fraud and abuse under the anti-kickback statute. SUPPLEMENTAL COMPLIANCE PROGRAM GUIDANCE In its Supplemental Compliance Program Guidance for Hospitals, the OIG reiterated its concern that hospital malpractice premium subsidies might be used to induce referrals. The OIG also reiterated its awareness of the current disruption in the medical malpractice insurance market, however, and it highlighted its existing safe harbor for premium subsidies to obstetrical care practitioners in health professional shortage areas, and stated that premium support may also be structured to fit other safe harbors. As to arrangements that do not fit a safe harbor, the OIG stated that hospitals should closely monitor such arrangements to ensure that there is no improper inducement involved. It identified several relevant factors for hospitals consideration, including: Whether the subsidy is being provided on an interim basis for a reasonable fixed period in an area experiencing severe access or affordability problems; Whether the subsidy is being offered only to current active medical staff; Whether the criteria for receiving a subsidy is unrelated to the volume or value of referrals or other business generated by the subsidized physician or practice; Whether physicians receiving subsidies are paying at least as much as they currently pay for malpractice insurance; Whether physicians are required to perform services or relinquish rights that have an equal value to the value of the insurance assistance; and 3 of 5

4 Whether the insurance is available regardless of where the physician provides services. The OIG stated that no one of these factors is determinative and that its list is not intended to be exhaustive of possible relevant considerations. It further suggested that hospitals contemplating malpractice subsidy programs that do not fit into a safe harbor might want to consider obtaining an advisory opinion, and that hospitals should also be mindful that their subsidy arrangements implicate the Stark law. * * * Taken together, the OIG pronouncements indicate a sensitivity to the current malpractice crisis which will better enable hospitals to take necessary steps to help ensure access to physicians services, provided that the hospitals do so with the OIG s guidance in mind. If you have any questions or require further information regarding these or other matters, please call your regular Nixon Peabody contact, or feel free to contact one of the attorneys listed below: Boston: Alan Einhorn at aeinhorn@nixonpeabody.com Boston: Susan T. Valente at svalente@nixonpeabody.com Garden City: Claudia Hinrichsen at chinrichsen@nixonpeabody.com New York City: James Fabian at jfabian@nixonpeabody.com Rochester: Richard Yarmel at ryarmel@nixonpeabody.com Providence: Stephen Zubiago at szubiago@nixonpeabody.com The foregoing summary is provided by Nixon Peabody for educational and informational purposes only. This Alert is not a full analysis of the matters discussed and is not intended to provide, nor should it be construed as, legal advice. This publication may be considered advertising under applicable laws. 4 of 5

5 Health Services Practice Group Please feel free to call or any of the Health Services group members listed below. ATTORNEY PHONE Jennifer G. Bolton Stephanie M. Caffera David DeCerbo Alan H. Einhorn James Fabian Linn Foster Freedman Carolyn Jacoby Gabbay Mark A. Hartman Claudia A. Hinrichsen Allen A. Lynch, II Regina C. MacAdam Michele A. Masucci Peter J. Millock Richard F. Minicucci Leigh-Ann M. Patterson Loren Ratner Susan S. Robfogel Regina S. Rockefeller Michael J. Taubin Susan T. Valente Amy L. Ventry Jeffrey G. Wright Richard T. Yarmel Stephen D. Zubiago ALBANY, NY Omni Plaza 30 South Pearl Street Albany, NY (518) Fax: (518) BOSTON, MA 100 Summer Street Boston, MA (617) Fax: (617) BUFFALO, NY 1600 Main Place Tower Buffalo, NY (716) Fax: (716) LONG ISLAND, NY 990 Stewart Avenue Garden City, NY (516) Fax: (516) MANCHESTER, NH 889 Elm Street Manchester, NH (603) Fax: (603) NEW YORK, NY 437 Madison Avenue New York, NY (212) Fax: (212) NORTHERN VIRGINIA Suite Corporate Ridge McLean, VA (703) Fax: (703) ORANGE COUNTY, CA 2040 Main Street Irvine, CA (949) Fax: (949) PHILADELPHIA, PA 1818 Market Street 11 th Floor Philadelphia, PA (215) Fax: (215) PROVIDENCE, RI One Citizens Plaza Providence, RI (401) Fax: (401) ROCHESTER, NY Clinton Square P.O. Box Rochester, NY (585) Fax: (585) SAN FRANCISCO, CA Two Embarcadero Center San Francisco, CA (415) Fax: (415) WASHINGTON, D.C. Suite th Street, N.W. Washington, D.C (202) Fax: (202) Visit our web site at 5 of 5