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OIG Sheds Light on Kickback Implications of Online Healthcare Directories

by Glenn S. Demby | Aug 29, 2023 | Essential, National Lab Reporter, OIG-nir

Recent advisory opinion offers insight on how healthcare providers may want to structure arrangements involving online directories.

Digital technology is altering the way people select providers and book medical appointments. One example of this is the emergence of online healthcare directories that offer people direct access to labs and other providers. Although models vary, in some cases, providers pay a fee to be included and perhaps also advertised in the directory. If your lab is currently involved in or thinking about getting involved in such an arrangement, you need to carefully consider the compliance ramifications. The good news is that a new U.S. Health and Human Services Office of Inspector General (OIG) advisory opinion (AO) can help you assess the legal risks and how to manage them.

The Healthcare Marketplace Model

Posted on July 11, OIG Advisory Opinion (AO) 23-04 is an updated version of an AO (AO 19-05) that the OIG issued to the same requestor on September 5, 2019 giving the go-ahead to an online medical directory.^1,2 Although the OIG redacts requestors’ names from all AOs, Zocdoc revealed it was the requestor of AO 19-05 in a press release by the company’s founder and CEO published shortly after the AO came out.³

Zocdoc is a healthcare technology company that operates a Marketplace platform enabling users to search and book appointments with physicians, nurses, and other medical professionals. The company uses a proprietary algorithm that enables personalized searches based on geographic area, services needed, preferred appointment times, insurance status, and other criteria. Users can also create accounts and store their medical and insurance information on Marketplace before appointments to minimize time spent in the office filling out paperwork and to reduce the risk of transcription errors.

Zocdoc isn’t a provider itself. Marketplace users don’t pay fees. Instead, Zocdoc charges providers a fee to participate in the directory based on the bookings they receive from the service. Zocdoc sets the per-booking fee amount in advance based on the valuations provided by a third-party firm. Per-booking fees vary by providers’ medical specialty, geographic location, and other factors. However, users’ insurance status—self-insured, uninsured, commercially insured, or covered by Medicare, Medicaid, or other federal health program—isn’t a factor. Zocdoc also certified to the OIG that fees don’t exceed fair market value for the services involved.

Providers can limit the number of new bookings they receive during a month and thus cap the total per-booking fees for a month at a certain amount, which then resets at the start of the next month. Providers can also tweak, cancel, or add the cap at any time during the month.

The Proposed Arrangement

Having made some changes to Marketplace since 2019, Zocdoc decided to go back to the OIG for an opinion on the legality of the revised arrangement.

Inclusion of Spend-Capped Providers in Search Results

Old Model: Providers that had already reached their spending cap for a month didn’t show up in Marketplace search results through the rest of that month (unless users were current patients).

New Model: Providers who reached their spending cap would no longer be filtered from searches undertaken by “non-commercial” users—those who either identified as federal health program beneficiaries or declined to provide their insurance information. Thus, providers would show up in all non-commercial user searches, regardless of their spending cap status for the month. Non-commercial users would also be able to view and click on the profiles of spend-capped providers, although they wouldn’t be able to book appointments during that month. But they could click a “Notify Me” button to receive updates once the provider had appointments available.

Revised Ordering of Search Results

Old Model: Marketplace used an algorithm based on engagement data and providers’ characteristics to determine which order to list the providers that match a user’s search criteria.

New Model: Zocdoc would measure user engagement in providers subject to a spending cap based on clicks on the provider’s profile and respective “Notify Me” button. A provider’s spend-capped status wouldn’t have a fixed weight relative to the more than 180 different criteria that the algorithm uses to rank search results. However, there was a possibility that the algorithm would deprioritize those providers because users tend to have less engagement with them.

The OIG Okays the Arrangement

The OIG noted that online healthcare directories are a type of advertising activity that raise potential red flags under both:

the Anti-Kickback Statute (AKS), which makes it a crime to “knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, a referral for furnishing or arranging for the furnishing of, any item or service reimbursable under a federal health program”;⁴ and

the Beneficiary Inducements CMP, aka, section 1128A(a)(5) of the Social Security Act, which carries the risk of civil monetary penalties for offering or transferring “remuneration” to a Medicare beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the order or receipt of an item or service covered by Medicare.⁵

Even so, the OIG said it wouldn’t impose any penalties on Zocdoc in regard to the proposed arrangement because of the safeguards in place to prevent abuse, including:

1. Per-Booking Fees Safeguards

OIG concerns about the per-booking fees varying by provider were allayed by Zocdoc’s assurances that the fees would:

be set in advance,

be at fair market value, and

not consider the value of federal health program referrals or business that Marketplace generates for the provider client.

2. Algorithm & Search Results Safeguards

Under the proposed arrangement, the more new patient bookings that Marketplace generates for providers, the more money providers would pay to Zocdoc in per-booking fees. However, the OIG wasn’t perturbed, concluding that the new algorithm would neither filter nor prioritize providers based on:

the amount the provider pays or is willing to pay Zocdoc,

whether the provider has a spending cap,

providers’ historical use, or amount of, the spending cap,

the volume or value of federal health program business that Marketplace generates for providers, or

any other criteria not central to the actual user, as opposed to the provider.

3. Advertising Fee Safeguards

OIG was satisfied that implementation of a bidding process and use of fair market value reports from third parties would ensure that both per-impression and per-click advertising fees would be set at a fair market value rate that wouldn’t factor a user’s insurance status or the volume or value of any business that Marketplace generates for providers or third-party websites.

4. Arm’s-Length Relationship between Zocdoc & Providers

Zocdoc’s status was also a crucial factor in the AO. The OIG stressed that the company is neither a healthcare provider nor supplier; it’s not affiliated with any of Marketplace’s provider clients and it doesn’t expressly recommend any provider’s services to users. According to the OIG, these factors distinguished the proposed arrangement from “white coat marketing” deals which undergo closer scrutiny since they risk providers abusing their special position of trust with patients to recommend healthcare services.¹

5. Federal Health Program Beneficiaries Aren’t Specifically Targeted

Although federal health program beneficiaries can use Marketplace, Zocdoc doesn’t specifically target them, the OIG noted, characterizing the company’s advertising activity as “essentially passive in nature” because it’s up to the beneficiary to initiate contact, as opposed to more targeted forms of advertising, such as “emails, mailings, or text messages.”¹ Moreover, while Zocdoc collects insurance information from users, it uses the information only to make the provider search and appointment process more convenient.

6. No Inducements to Federal Health Program Beneficiaries

Alleviating the OIG’s Beneficiary Inducements CMP concerns is that Zocdoc offers nothing of value to federal health program beneficiaries, other than free access to Marketplace itself.

7. User Transparency

The OIG cites the safeguards implemented by Zocdoc to ensure transparency for users regarding spend-capped providers. Non-commercial users will still be able to search and get profiles of providers who’ve reached their cap along with a clear explanation of why they can’t currently book appointments with them and an opportunity to be notified if they want to schedule appointments with that provider in the future.

Takeaway & Impact on Labs

Participating in online healthcare directories and other arrangements using platforms, apps, and digital technologies that connect other providers to patients exposes providers to liability risk under the AKS, Beneficiary Inducements CMP, and other federal and state fraud and abuse laws. This is particularly true when providers pay fees to participate. While AO 23-04 is encouraging, it is not a blanket endorsement for providers to enter into arrangements involving such products and services. The takeaway is not that the OIG approved the proposed arrangement, but the multitude of safeguards that the online provider had to put into place to secure that approval. Compliance officers may refer to these safeguards to ensure that any digital arrangements in which their own labs are involved are structured in a way likely to withstand regulatory scrutiny.

At the same time, AO 23-04 may not have much direct impact on labs, notes healthcare attorney Danielle Sloane of Nashville firm Bass, Berry & Sims. “First, most laboratory testing still must be ordered by a qualified practitioner—and that practitioner needs to be treating the patient for Medicare and other payers to cover it.”

Sloane also points out that unlike most providers, labs are subject to the Eliminating Kickbacks in Recovery Act of 2018 (EKRA), which expressly bans paying contractors and even employees based on the volume of lab testing they generate for the lab.⁶

This, in combination with a recent case in which an electronic health record (EHR) company paid $45 million to settle False Claims Act-related allegations indicates that labs should still be cautious with such arrangements, Sloane says. In the case, the EHR company, Modernizing Medicine, was accused of steering testing to a lab and receiving payment that varied based on the proportion of testing coming through its EHR that was directed to that lab.⁷

“Labs still need to tread carefully and probably shouldn’t read too much into this advisory opinion,” Sloane says.