Patient Financial Assistance Program OIG Advisory Opinion

On May 18, 2009, the Office of Inspector General issued an advisory opinion in which it found that a tax-exempt hospital’s financial assistance program for patients requiring certain therapy management services and advanced diagnostic testing.  The primary focus of the program was to assist HIV-positive patients who require phenotype and tropism testing and colorectal cancer patients who require KRAS and Epidermal Growth Factor Receptor testing.

Funding for the program is obtained from private individual donors, corporations and foundation.  Donors include drug manufacturers, pharmacies, dispensers and suppliers ot the types of products and services received by patients who arre beneficiaries of the program.  Donations are placed in a various funds that is administered by the tax-exempt hospital.  Donors may provide unrestricted donations or may earmark contributions to one of the funds.  However, donations may not be designated for patients using a specific test or testing provider.  Donors are not permitted to exert direct or indirect influence over the program and the hospital maintain absolute discretion over the use of contributions to the funds.

Additionally, the hospital does not provide individual patient information to the donors but does provide information concerning the aggregate number of donors that qualify for assistance from each fund.  Additionally, the patients are not provided information concerning the donors except for general information that is required to be publicly provided in connection with Internal Revenue filings in support of the hospital’s tax-exempt status.

Patients that require care that is funded by the program must apply for coverage.  Requests are taken on a first-come, first-serve basis and patients receive available funding upon meeting objective eligibility standards involving financial necessity and diagnosis with HIV or colorectal cancer, among other factors.  Decisions on coverage are not based on the identity of the provider, ordering physician, supplier, service or product being used in connection with the treatment.

Other details of the program are laid out in the advisory opinion.

Based on the program details provided by the hospital, the OIG concluded that it would not pursue the arrangement under the Anti-kickback Statute.  The OIG addressed two potential areas of the program that could be considered to be remuneration intended to induce referrals; (1) the donations made by the donors, and (2) the benefit provided to the patient through participation in the program.

The OIG stated that long-standing guidance makes it permissible for industry stakeholders to contributed to the “health care safety net” for financially needy patients if the contribution is to an independent, bona fide charitable assistance program, as long as the program is properly structured to avoid inducement issues.  The OIG goes on to describe several elements that constitute a proper contribution program including:

– Independent decisions are made by the charitable organization without influence by the industry donors.
– The operator of the program is an independent charitable organization with autonomous decision-making power over the use of the funds.
– Donors interests are not taken into account when making decisions regarding use of the donated funds.
– Neither the applicants choice of provider, practitioner, supplier, service or product nor the identity of the referring party is taken into account when making program determinations.
– Tests and services provided with program funds are consistent with widely recognized clinical standards.

In short, the OIG concluded that the program provided sufficient objective insulation between the donor, patients, and determinations as to the use of the funds so that the donations would not be considered to be referral inducements.

The OIG also analyzed whether benefits provided to patients could be considered as inducement referral because of the chance that the benefits would induce patients to use the services of the hospital.  The OIG concluded that the program was a legitimate use of the hospital’s tax-exempt resources to fulfill its charitable mission.  The OIG also pointed to the objective standards that were developed to guide program administration.

Tax-exempt hospitals are often looking for means to provide beneficial assistance to needy patients in fulfillment of their tax-exempt and charitable purposes.  At the same time, charitable hospitals are under increased financial pressures due to economic conditions, increased regulation and decreased reimbursement.  The OIG decision is noteworthy because it provides a roadmap for tax-exempt providers who may be looking for ways to fulfill their charitable purposes in a manner that does not place additional financial burdens on their operating revenues.  Hospitals are encouraged to look at the details of this recent advisory opinion if they are considering commencing a similar program.