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OIG Issues Favorable Advisory Opinion Regarding a Pay-for-Performance Compensation Plan

On July, 25, 2011, the U.S. Department of Health and Human Services, Office of the Inspector General (OIG) issued a favorable advisory opinion regarding an arrangement under which a company (Requestor), who provides administrative services to the State’s Medicaid program, will disburse pay-for-performance payments to physicians and dentists participating in the state’s Medical Home Program.

The Medical Home Program is the state’s enhanced primary care case management and disease management program for a number of Medicaid beneficiaries. Requestor, through a competitive bidding process, was awarded the contract to administer the disease management program on behalf of the state. The program includes a pay-for-performance program whereby Requestor is required to disburse checks, drawn from Requestor’s own bank account, to physicians and dentists who participate in the program. The payments are funded by the state’s Medicaid program, and Requestor has no discretion to revise the amount of the payments. Furthermore, the state clearly identifies itself as the payment source to the providers, as well as indicates that the Requestor is the administrator of the pay-for-performance program.

The OIG started its analysis by emphasizing that the advisory opinion only addresses the narrow question of whether Requestor’s disbursement of pay-for-performance program payments to physicians and dentists on behalf of the state implicates the anti-kickback statute. The OIG concluded that the arrangement did not implicate the anti-kickback statute and cited four reasons for its conclusion:

    1. The payments are funded by the state’s Medicaid Program and not by Requestor;

    2. Requestor is merely acting as an agent of the state and has no discretion or control over the payments issued to the physicians and dentists;

    3. Reasonable steps have been taken by the parties to lessen any misimpressions that Requestor is paying the providers for Medicaid referrals because the state indicates on the check that Requestor is the administrator of the program;

    4. The state supervises all disbursements and is able to audit Requestor’s performance.

For more information on compliance with the anti-kickback statute, pay-for-performance contracts or other Medicare or health care regulations, please contact a Wachler & Associates attorney at 248-544-0888.

OIG Advisory Opinion 11-10:

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