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OIG Green Lights Free Hospital NP Services for Referring Physicians

by | Feb 9, 2023 | Compliance-lca, Essential, Lab Compliance Advisor

A new OIG Advisory Opinion sheds some light on how to properly structure these arrangements in a hospital inpatient setting.

Use of nurse practitioners (NPs) and other mid-level practitioners to perform services traditionally provided by a patient’s attending physician can help your lab improve care quality, boost efficiency, and cut costs, particularly when primary care physicians are in short supply. However, it can also get you into trouble under the Anti-Kickback Statute (AKS) and/or Stark Law to the extent it provides a free service or other form of illegal remuneration to a referring physician. New U.S. Department of Health and Human Services Office of Inspector General (OIG) Advisory Opinion 22-20 sheds some light on how to properly structure these arrangements in a hospital inpatient setting. Here’s a look at the Advisory Opinion and what it might portend about the legality of your own NP arrangements.1

The Proposed Arrangement

The requestor in this case, an acute care hospital that provides inpatient and outpatient services, wanted to use NPs on its payroll to provide services to inpatients of physicians in general care units. Some of those NP services are those that physicians participating in the arrangement, most of whom were primary care physicians, might otherwise perform themselves. Examples included in the Advisory Opinion:

    • Responding to lab or imaging studies, such as arranging prompt follow-up testing and attending to abnormal results as needed;

    • Addressing rapid changes in patient condition, including via the ordering of lab tests in real time;

    • Making rounds on assigned units;

    • Educating and supporting patients and families;

    • Promptly initiating plans of care through existing protocols; and

  • Scheduling follow-up testing and appointments as part of discharge planning.

Based on experience, having the NPs readily available in these medical units improves patient care by allowing patients to be evaluated, diagnosed, and treated more quickly and efficiently, the hospital told the OIG. It also noted that the patients the NPs see are under active evaluation and require ongoing medical attention.

OIG Gives the OK Despite Kickback Concerns

Providing these services to the physicians for free means that physicians won’t have to provide those services themselves, the OIG explained. Accordingly, this would constitute remuneration under the AKS. And that remuneration could potentially induce the participating physicians to make referrals to the hospital. However, the Advisory Opinion continued, this arrangement “presents a minimal level of risk of fraud and abuse” under the AKS.

For lab compliance officers, the most useful parts of the Advisory Opinion are the safeguard factors that made the arrangement less of a fraud and abuse risk:

1. General Care Units Only

First, the arrangement is restricted to two non-surgical and non-specialty units at one of the hospital’s campuses. The arrangement might be more problematic if it involved surgical or specialty units “where specialist physicians typically make more lucrative referrals” to the hospital.

2. Mostly Primary Care Physicians

The OIG also saw minimal risk of the hospital’s use of the arrangement to induce referrals. The arrangement doesn’t target any particular referring physicians, the OIG explained. The participants are predominately primary care physicians whose referrals are less lucrative to the hospital than those made by specialists. In addition, the hospital also certified that it doesn’t take into account:

    • Any of the services the NPs provide under the arrangement in providing compensation to the participating physicians outside the arrangement; nor

  • The volume or value of a physician’s past or expected referrals in determining which physicians it offers the opportunity to participate in the arrangement.

3. Adequate Safeguards in Place

The OIG also noted that the arrangement “contains safeguards that lower the risk of fraud and abuse under the” AKS:

    • All NPP duties are carried out “in communication and collaboration” with the participating physician treating the patient;

    • Participating physicians must still round daily and maintain the same accountability for patient care as a physician not participating in the arrangement;

    • The hospital doesn’t make any payments to participating physicians under the arrangement;

    • There are no ancillary agreements to induce or reward referrals; and

  • Participating physicians can only bill for services for which they have documentation showing they actually performed those services and can’t bill for services provided by the NPs.

The Advisory Opinion emphasizes the ban on physicians’ billing for NPs’ services. This safeguard makes the arrangement different from “suspect arrangements” in which hospitals permit the NPs they employ to provide a physician’s patients services at no cost to the physician, and the physician then bills the services the NPs provide to other payors.

4. No Added Cost to Federal Healthcare Programs

The OIG indicated that the arrangement was unlikely to increase federal healthcare program costs since the hospital certified that it doesn’t bill federal healthcare programs or any other payor for the NPs’ services, even when those services would otherwise be separately reimbursable.

5. Enhances Patient Care

Last but not least, the OIG acknowledged that the arrangement may improve patient care, noting that patients in the medical units the arrangement covers “are undergoing active monitoring and evaluation” and “often require ongoing attention throughout the day, including real-time responses to changes” in their condition. Having the NPs available in these units “improves care for patients by allowing them to be evaluated more quickly and efficiently so that they can receive diagnoses and treatments as soon as practicable.”

Significance & Takeaway

Relying on an OIG Advisory Opinion to go forward with an arrangement that may run afoul of the AKS, Stark Law, or other federal fraud laws is a risky proposition when you’re not the recipient of the Advisory Opinion and your specific arrangement wasn’t the one vetted. However, Advisory Opinions are helpful in scoping out how the OIG broadly interprets the laws and what safeguards are necessary to mitigate fraud and abuse concerns.

One of the big takeaways from Advisory Opinion 22-20 is that it runs counter to the OIG’s typical highly skeptical approach to arrangements in which hospitals provide remuneration to referring physicians, including remuneration in the form of free services. It’s the exact same suspicion that the agency exhibits toward labs that provide free in-office phlebotomy services, specimen collection cups, and other services and goods to ordering physicians.

The argument that providing free NP services would bolster care quality was obviously instrumental in this particular case. This is consistent with the OIG’s general move toward value-based care and recent Advisory Opinions green lighting arrangements posing minimal risk of fraud and abuse in the interest of care improvements. Of course, labs have made similar care quality arguments regarding the free services they provide physicians. Assuming that the OIG will now be more amenable to these arrangements would be a serious mistake.

In addition, Advisory Opinion 22-20 is very narrow in its scope, applying only to general care and expressly excluding surgical or specialty care units in which higher-reimbursing services are provided. The Advisory Opinion also addresses the AKS but not the Stark Law. If, as the OIG says, free NP services are remuneration under the AKS, they would likely also be remuneration under Stark.

Result: It might be necessary to structure such arrangements to fit a Stark Law exception. That may make it necessary to require participating physicians who benefit from the free NP services to pay the hospital fair market value compensation for those services.


    1. https://oig.hhs.gov/documents/advisory-opinions/1062/AO-22-20_Ot53Mmd.pdf

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