Nursing Home Insurer Discounts Get Federal OK, May Spark Trend

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By James Swann

A nursing home network’s proposal to offer discounts to long-term care insurers wouldn’t lead to improper Medicare and Medicaid inducements and could open the floodgates to similar arrangements.

The proposed arrangement was approved by a Health and Human Services Office of Inspector General advisory opinion released Dec. 15.

“If long-term insurers discover that they can negotiate significant discounts with nursing facilities and leverage those discounts into attracting more policyholders, then we can certainly expect multiple insurers developing networks in multiple parts of the country,” Jesse Witten, a health-care attorney at Drinker Biddle & Reath in Washington, told Bloomberg Law Dec. 15.

The proposed arrangement would create a network of nursing facilities that would offer daily rate discounts to private long-term care insurers as well as the insurers’ policyholders, the advisory opinion ( No. 17-08) said.

The advisory opinion said the proposed arrangement posed a low risk of generating improper beneficiary inducements. The requestor’s name was redacted from the opinion, which is standard procedure for these documents.

The OIG’s approval is significant as the agency has done a deep analysis of the multiple protections built into the proposal and concluded that the benefits to beneficiaries and payers outweigh any risks to federal health-care programs, Judith Waltz, a health-care attorney with Foley & Lardner LLP in San Francisco, told Bloomberg Law Dec. 18.

“It reflects the OIG’s sensitivity to the burden of health-care costs and making the existing fraud and abuse laws work with innovative arrangements when the risks are controllable with various safeguards such as the ones in place here,” Waltz said.

Proposed Discounts

The proposal’s discounts could make patients more likely to patronize in-network nursing homes when they become Medicare or Medicaid beneficiaries, but the OIG approved the discount arrangement anyway, Witten said.

Witten said the proposal had enough safeguards and societal benefits to counter the potential impact on how Medicare and Medicaid coverage is used by beneficiaries.

Those seeking regulatory guidance from this advisory opinion should be aware of other OIG advisory opinions and pronouncements concerning “pull-through,” which is the term the OIG uses to describe an arrangement in which commercial business is discounted in a way that also has the effect of bringing in, or pulling through, Medicare or Medicaid business as well, Witten said.

For example, an advisory opinion from March 2015 (No. 15-04) refers to a laboratory’s proposal to waive certain fees that would pull through federal health-care program business.

Aging Population

As the U.S. population ages, ensuring access to long-term care will continue to be a major issue for the health-care industry, Anna Grizzle, a member of Bass, Berry and Sims PLC’s Nashville, Tenn., office, told Bloomberg Law Dec. 18.

“This positive opinion could lead to other long-term facilities looking to form similar networks to provide this access,” Grizzle said.Providers looking to form these networks should ensure they are structured appropriately to avoid the significant risks that can arise if the OIG believes the arrangement is less about access to quality care and more about influencing federal health-care program beneficiaries, Grizzle said.

To contact the reporter on this story: James Swann in Washington at jswann1@bloomberglaw.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bloomberglaw.com

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