Liability premium subsidies: Act with care

Because there is no clear OIG directive, physicians are encouraged to seek legal help before making any arrangements for a hospital to cover these costs.

By Tanya Albert, amednews staff. Feb. 10, 2003.

The government hasn't given physicians struggling to pay for medical liability insurance the green light to enter into arrangements in which hospitals pay their premiums. But it hasn't given doctors the red light, either.

Instead, the Dept. of Health and Human Services Office of Inspector General is telling physicians and hospitals to proceed with caution.

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Topic: Liability crisis

With physicians in some states finding liability insurance increasingly difficult to afford, some hospitals have discussed the idea of helping to pay premiums so that they won't be left without doctors on their medical staffs.

But if physicians and hospitals are thinking about such an arrangement, they have to consider whether it would violate anti-kickback statutes or the physician self-referral laws commonly known as Stark II.

The medical liability crisis prompted a hospital group to ask the OIG about the legality of paying doctors' premiums. The chain has physicians on medical staffs in four states hit hard by rising medical liability insurance premiums -- West Virginia, Nevada, Florida and Texas. The hospital group's name was not disclosed in OIG materials.

In a Jan. 15 response letter, OIG Chief Counsel Lewis Morris said the office historically had been concerned that "malpractice premium subsidies paid to, or on behalf of, potential referral sources, including hospital medical staff, may be suspect under the anti-kickback statutes."

But the letter also noted that the OIG had made exceptions in the past, including a safe harbor for medical liability premium subsidies to physicians providing obstetrical care in primary care shortages areas. And depending on the circumstances, premium subsidies could fall under the employee- or physician-recruitment safe harbors, Morris wrote.

Also, just because an arrangement doesn't fit in a safe harbor, it isn't automatically a violation of the Stark II or anti-kickback statutes, he noted.

"We are aware of the current disruption in the medical malpractice liability insurance markets in some states," Morris wrote. "In particular, we appreciate the potential serious effects on federal health care beneficiaries' access to, and on the quality of, medical care if physicians curtail or cease practicing as a result of increased costs or [decreased] access to malpractice insurance."

The letter stated that the OIG would take those facts into consideration when evaluating temporary financial arrangements aimed at keeping doctors available to treat patients.

But lawyers and others in the health profession who have been left to interpret the letter wish that it was more strongly worded.

"I don't know that it will have any effect," said Larry Matheis, Nevada State Medical Assn. executive director. "The spirit of the letter misses the seriousness of the liability problem in the country. It seems to discourage the alternative at a time when people are looking for alternatives."

Also, the fact that it is a letter, rather than an OIG advisory opinion, gives it less weight.

The document doesn't give hospitals and physicians the go-ahead to make these arrangements, said Lee A. Spangler, assistant general counsel for the Texas Medical Assn. "The OIG doesn't have regulatory authority over everything to do with anti-kickback and Stark," he said.

The OIG has limited jurisdiction over the anti-kickback and Stark II statutes, Morris acknowledged in the letter. The Justice Dept. has independent jurisdiction over the anti-kickback statute, and the Centers for Medicare & Medicaid Services has primary jurisdiction over the Stark II statute, he said.

Taking precautions

The OIG, though, was encouraged by several points that the hospital chain included in its proposed contract with physicians. The hospital group appeared to take precautions to not violate anti-kickback or Stark II laws, Morris noted.

For example, the proposed arrangements would:

Be offered on an interim basis for a fixed period that could be extended if the medical liability insurance crisis continues.
Be available only to active medical staff members or physicians joining the medical staff who are new to the locality or have been practicing for less than a year.
Not be tied to volume or value of referrals or other generated business.
Require physicians receiving assistance to continue to pay as much as they are currently paying for liability insurance, so essentially the hospital would help cover premium increases.
Require physicians to provide services for the hospital and to give up certain litigation rights. These services and relinquished rights would be equal to the fair market value of the premium assistance.
Be available to the physician regardless of the location at which the doctor provided services. This means that the liability insurance would cover care the physician offered at other hospitals.

The TMA's Spangler said physicians who were considering an arrangement with a hospital should visit an attorney to get an analysis of whether the agreement would violate any federal laws.

"It's going to come down to a personal decision of how much risk you are going to take," he said.