OIG opinion OKs hospital subsidy of liability insurance

The government took patient access to care into account.

By Tanya Albert, AMNews staff. Feb. 14, 2005.

For the second time in less than six months, the Dept. of Health and Human Services' Office of Inspector General has issued an advisory opinion stating that a hospital could subsidize physicians' medical liability insurance without facing prosecution under portions of the Social Security Act that address kickbacks.

The most recent case involves two neurosurgeons whose insurance carrier did not renew their policies. To the best of the hospital's knowledge, the cancellation had nothing to do with the physicians' claim history or quality of care.

It has not been uncommon in recent years for medical liability insurance companies to choose not to renew policies for physicians in high-risk specialties such as neurosurgery.

Citing the high cost of tail coverage and new policies, the two doctors announced that they would retire -- a step that would force patients in the community to travel 45 miles to receive care from a neurosurgeon.

In an effort to avoid this situation, the hospital paid for the physicians' tail coverage with the old insurer. It also covered 75% of the cost increase between the new and old insurance.

In a 10-page letter posted in January, the inspector general said it recognized that patients in the community would suffer if the two physicians no longer practiced there. Consequently, even though the arrangement could violate the anti-kickback statute, the OIG said it would not punish the hospital or the physicians for the arrangement. The OIG noted that the arrangement is temporary and in response to an urgent situation, is structured to prevent a significant financial windfall for the physicians, requires the physicians provide certain services, and covers services at sites other than the hospital.