OIG Issues Advisory Opinion on Health Plan’s Incentive Payment Program for Preventive Services.

The Department of Health and Human Services Office of Inspector General (OIG) recently issued an advisory opinion regarding a Medicaid managed care organization’s (MCO) proposed incentive payment program related to Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services.  The Medicaid MCO (Requestor) is proposing to pay incentives to its contracted providers and clinics (Network Providers) that meet certain benchmarks for increasing the amount of EPSDT services provided to the MCO’s Medicaid beneficiaries (Enrollees) (the Arrangement).  Under the EPSDT benefit, Medicaid beneficiaries are entitled to receive comprehensive and preventive health care screenings and services from birth to age 21.  The purpose of the EPSDT benefit is to detect, diagnose, and treat or avert health problems as early as possible in children.  The Requestor sought an advisory opinion as to whether the Arrangement would be susceptible to administrative sanctions under the exclusion authority of the Social Security Act (Act) or the civil monetary penalty provision of the Act, as they relate to the federal Anti-Kickback Statute (AKS).

The Arrangement involves the following key facts:

• The Requestor operates as a Medicaid MCO under a particular state’s (the State) Medicaid program, which is administered by the State’s Medicaid Department (Department);
• The Requestor and the State have entered into a full-risk, capitated contract (Contract), under which the Requestor receives per-member per-month payment (Capitation Payment) from the Department;
• Under the Contract, the Requestor accepts the Capitation Payment as payment in full for all items and services provided, including any associated administrative costs;
• The Department uses its Medicaid managed care program to provide the EPSDT benefit;
• The Requestor is required to follow federal and state laws governing the delivery of EPSDT services provided under the Contract, and maintain a tracking system that provides EPSDT related compliance information;
• Additionally, under the Contract, the Requestor is required to provide one EPSDT screening to 75 percent of Enrollees between the ages of 1 and 21 and to 85 percent of Enrollees under the age of 1;
• The Requestor contracts with Network Providers to provide health care items and services, including EPSDT services, to its Enrollees;
• Under the Arrangement, the Requestor would enter into agreements with its Network Providers to pay them per-Enrollee incentive payments (Incentive Payments) if they meet certain benchmarks aimed to increase the amount of EPSDT services provided to Enrollees;
• Network Providers can receive one of three different Incentive Payment levels depending on the percentage increase of EPSDT services provided to the Requestor’s existing Enrollees from one year to the next;
• Under the Contract, the Requestor is responsible for all costs related to the Incentive Payments. The Requestor certified that the Arrangement between the parties would: 1) be in writing and signed; 2) specify the items and services covered; 3) be for a period of at least one year; and 4) specify that the party providing the items or services cannot claim payment in any form from another federal health care program for the items or services covered under the agreement; and
• The Requestor also certified that Incentive Payments would not be provided to Network Providers: 1) to recruit new Medicaid beneficiaries because the Incentive Payments would only be based on increases in EPSDT services to existing Enrollees; or 2) to induce Network Providers to participate in the Requestor’s other lines of federal health care program business, including a plan that provides health coverage under the state Children’s Health Insurance Program and a Medicare Advantage plan.

The OIG found that the Arrangement implicates the AKS because the Requestor proposes to pay remuneration to Network Providers to increase health care services provided to Medicaid beneficiaries, and part of the payment for these services may be made under a federal health care program.  However, the OIG determined that the Arrangement would qualify for protection under the regulatory AKS safe harbor for eligible MCOs (EMCO).  The EMCO safe harbor protects payments between EMCOs and first tier contractors that meet certain requirements.  Specifically, the safe harbor excludes from the definition of remuneration any payments between EMCOs and first tier contractors that provide or arrange for items or services that satisfy the safe harbor requirements.

The OIG conducted a multi-part analysis regarding the Arrangement’s potential for protection under the EMCO safe harbor, based on the reported facts and the Requestor’s certifications.  It found that the Arrangement satisfies the first two requirements under the EMCO safe harbor.  First, the Requestor is an “eligible managed care organization” under the safe harbor because it has a contract under the State’s Medicaid program and arranges for items or services for Enrollees under that contract.  The Network Providers are also “first tier contractors” because they are individuals or entities that have a contract directly with an EMCO, the Requestor, to provide or arrange for items or services.  Second, the OIG found that the Incentive Payments under the Arrangement satisfy the safe harbor’s protected payment criteria.  The Incentive Payments are intended to increase EPSDT services which include health care services that the Requestor must provide under the Contract.  As such, the Incentive Payments are payments to provide or arrange for health care services.

The OIG further concluded that the Arrangement satisfies the EMCO safe harbor’s third requirement which specifies three standards for arrangements.  The Arrangement satisfies the first standard because the agreement between the parties would: 1) be in writing and signed; 2) specify the items and services covered; 3) be for a period of at least one year; and 4) specify that the party providing the items or services cannot claim payment in any form from a federal health care program for the items or services covered under the agreement.  In addition, the Arrangement satisfies the second standard regarding the terms of the agreement because the Incentive Payments would only apply to the provision of Medicaid services to existing Enrollees.  The payments would not constitute the giving or receipt of remuneration in return for, or to induce the provision or acceptance of, business for which payment may be made in whole or in part by a federal health care program on a fee-for-service or cost basis, other than the business covered under the agreement.  Finally, the OIG found that the Arrangement satisfies the third standard because the Requestor would be bearing all of the financial responsibility for costs related to EPSDT services and accepting the Capitated Payments as payments in full.  Therefore, neither party would be inappropriately increasing or shifting costs to federal health care programs during the Incentive Payment year.  As for future costs, the OIG noted that there is a possibility of increased costs for EPSDT services leading to an increase in federal health care program costs through higher Capitated Payment rates and an overall increase in the State’s Medicaid managed care expenditures.  However, the Arrangement would increase the likelihood that Enrollees requiring EPSDT services actually receive them.  The OIG found that this is consistent with the State’s goal of assuring that children receive early detection and care of any health problems.

Ultimately, the OIG concluded that the Arrangement would meet the requirements of the EMCO safe harbor and therefore, would not generate prohibited remuneration under the AKS.  As a result, the OIG would not impose administrative sanctions on the Requestor.

The OIG Advisory Opinion No. 18-11 is available at:

https://oig.hhs.gov/fraud/docs/advisoryopinions/2018/AdvOpn18-11.pdf.