Benjamin T. Tso is Associate in Holland & Knight's Boston office
On Oct. 11, 2018, the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS) issued OIG Advisory Opinion No. 18-11, in which the OIG addressed whether a health plan's proposal to incentivize Early and Periodic Screening, Diagnostic and Treatment (EPSDT) services qualified under the Eligible Managed Care Organization (EMCO) safe harbor. The EMCO safe harbor was issued in interim final form in late 1999. Since then, this is the first time that the OIG has issued an advisory opinion applying the EMCO safe harbor to address lingering questions about its breadth.
Advisory Opinion No. 18-11 involved a Medicaid managed care organization's (MCO) proposal to pay contracted providers and clinics (network providers). The amount paid to network providers depended on the amount of EPSDT services provided to enrolled Medicaid beneficiaries (enrollees). Network providers qualified for different levels of bonus payments, depending upon their increase in EPSDT services. The OIG explained that the proposed arrangement implicated the Anti-Kickback Statute (AKS) because the arrangement involved paying remuneration in exchange for the referral or increase of healthcare services payable in part by a federal healthcare program.
The OIG applied a three-prong analysis to determine if the MCO qualified under the EMCO safe harbor. The first prong assesses whether the entities in question qualify as an "eligible managed care organization" and "first tier contractor." The OIG found that a full-risk capitated contract between the MCO and Medicaid qualified the MCO as an "eligible managed care organization." Likewise, the network providers qualified as "first tier contractors" as a result of their contract with the MCO to provide items and services. The second prong looks at whether the payments in question provide or arrange for items or services. The OIG found that the EPSDT services qualified as healthcare services because Medicaid required the MCO to provide such services under contract. The last prong looks at whether the proposal meets the definition of arrangements under the EMCO safe harbor. Applying a three-part test, the OIG confirmed the applicability of the EMCO safe harbor.
The first criteria requires that an agreement be written and signed by the parties, specify the items and services covered and be for a period of at least one year. The agreement cannot claim payment either directly or indirectly from a federal healthcare program for the services covered. The MCO certified that it met these requirements and would be financially responsible for the cost of providing the EPSDT services, satisfying the first criteria. The second criteria requires that neither party give nor receive remuneration in return for, or to induce, the provision or acceptance of business (other than business covered by the agreement) for which payment is made in whole or in part by a federal healthcare program on a fee-for-service or cost basis. The OIG found that the proposed arrangement limited the incentive payments to the EPSDT services. Furthermore, the incentive payments would not apply to other lines of federal healthcare program business, satisfying the second criteria. Lastly, the safe harbor requires that neither party to the agreement be able to shift the financial burden of the agreement to the extent that increased payments are claimed from a federal healthcare program. The MCO met the last criteria because Medicaid paid the MCO a capitated payment as payment in full. Although the increase in EPSDT services could cause the MCO's capitated payment rates to increase, the OIG found that it would be consistent with the government's goal of diagnosis and treatment as early as possible.
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