Government

Hospital bid to help doctors with liability gets OK

The OIG says the case falls within "safe harbor" for subsidizing liability insurance, but physicians and hospitals hoping for same arrangement should get legal opinions first.

By Tanya Albert amednews correspondent — Posted Oct. 18, 2004

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Doctors considering letting their hospitals pay a portion of their medical liability insurance don't need to automatically rule out the possibility because they fear breaking federal anti-kickback statutes.

But physicians and hospitals entering into such an agreement do need to take caution.

In a September advisory opinion, the government told a medical center in a health professional shortage area that it could subsidize medical liability insurance for four community-based obstetricians even though the arrangement didn't meet all of the requirements usually necessary for a "safe harbor" from legal trouble.

The opinion by the Dept. of Health and Human Services Office of Inspector General comes nearly two years after the agency issued a letter advising a different hospital that an exception could be made for similar circumstances involving physicians in medically underserved areas.

Although the OIG makes it clear that its advisory opinion applies only to the group that asked for it, physicians and hospitals see the decision as a positive sign for others.

"It signals, happily, that the OIG is willing to look carefully at these issues in underserved areas with at-risk populations," said Albert L. Strunk, MD, vice president of fellowship activities for the American College of Obstetricians and Gynecologists. "It is willing to provide reassurance to institutions that have the right intentions."

American Medical Association officials are "pleased to see that the OIG has provided some leeway for these types of arrangements due to the medical liability crisis that threatens us all," said Board of Trustees Chair J. James Rohack, MD. Liability premium assistance from hospitals is legal under both the federal anti-kickback statute, enforced by the OIG, and the Stark II rules regulating self-referrals, enforced by the Centers for Medicare & Medicaid Services, he said.

"We urge both the OIG and CMS to allow broader exceptions under these laws for assistance with medical liability premiums in order to keep physicians caring for patients," Dr. Rohack added.

Preserving access to OB care

The OIG redacted the name of the institution that asked for the opinion and described it only as "a tax-exempt organization" that "operates a hospital and integrated health care delivery system in a largely rural section" of a state.

The hospital has 142 beds and is designated a Level III trauma center, the OIG said. It's in an area designated as having a shortage of health professionals to treat the region's many low-income residents, migrant farm workers and homeless individuals. Medical center officials feared that the four obstetricians who hold staff privileges at the facility would stop delivering babies if their insurance rates continued to rise.

Between 2002 and 2003, each physician saw a $36,000 premium increase.

To prevent the doctors from leaving -- a situation that would result in a 30% decrease in patient access to obstetrical care -- the medical center proposed helping the physicians pay for their insurance for two years.

The hospital would calculate how much more physicians are paying for insurance than they were in 2002. It would then subsidize 50% of that increase. The assistance would be capped at $25,000 per physician per year and would be paid directly to the physician's insurance company.

The doctors must let the medical center know if they receive any reductions in their medical liability insurance rates so that the facility can adjust the subsidy appropriately.

The OIG traditionally has been concerned that liability insurance subsidies could be used to influence referrals but has established a safe harbor for cases in which seven standards are met.

The agreement in this case meets six of the seven rules, including having no requirement that the physicians make referrals to the institution, no tie to the volume or value of services, and no restriction on the doctors' freedom to establish privileges at other hospitals. It doesn't meet a requirement that the physicians practice in a primary care health professional shortage area. Instead, the obstetricians are in shortage areas for "low-income populations," "migrant agricultural workers" and "homeless individuals."

The OIG concluded that the fact that the medical center is not in a primary care health professional shortage area doesn't increase the risk for fraud or abuse.

"First, the insurance subsidies will be provided in response to sharply escalating premiums on a temporary, interim basis for a fixed period," the OIG stated. "Second, the subsidies will not create a windfall for the obstetricians, as the program is structured to cover only part of the obstetricians' increased insurance expenses."

The OIG also said the potential benefits to the community are substantial. "The obstetricians will largely treat underserved obstetrical patients in a rural area," it wrote.

While the opinion is encouraging, it doesn't set a precedent that other physicians and hospitals can point to if they set up a similar arrangement.

"There is a lack of a clear yardstick or guidepost going forward," Dr. Strunk said. "But it would be worse if the OIG was stringent in its opinion and did not make the exception."

Physicians and hospitals considering similar agreements should consult lawyers and put the legal parameters in writing, said Curtis Rooney, senior associate director and counsel for the American Hospital Assn. They should also contact the OIG for an opinion.

"You have to do it, or you are in jeopardy," Rooney said.

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External links

Office of Inspector General opinion on a hospital's proposal to subsidize some doctors' liability insurance, in pdf (link)

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