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Office of Inspector General (OIG) posts Advisory Opinion (AO) on proposed referrals incentive program offered by a continuing care retirement community
June 1, 2010
Health Law Alert
Author(s): Carolyn Jacoby Gabbay

On May 27, 2010, the Office of Inspector General (OIG) posted Advisory Opinion 10-05 allowing a proposed program of referral incentives for residents and certain employees who introduce new residential candidates to the independent living component of the sponsoring continuing care retirement community (CCRC). While Advisory Opinions are not legal precedent, Advisory Opinion 10-05 does provide informative insights into the OIG’s analytic thinking and can afford useful guidance to senior living organizations that are interested in offering a rewards program to support its marketing program in a competitive environment.

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Factual background

CCRCs provide a continuum of living arrangements, ranging from independent living and graduating to assistive living and skilled nursing care. The requestor in this case operated a number of CCRCs, with independent living comprising the large majority of its senior living venues. In fact, the requestor had a 10:1 ratio of independent living residents to skilled nursing residents. Additionally, a substantial number of the requestor’s skilled nursing residents were admitted from outside the CCRC population. Moreover, an actuarial study showed that two-thirds of the CCRC’s independent living residents were not expected to become residents in the skilled facility and those that did would have resided at the independent living level for several years.

Under the program presented in the request that the OIG reviewed, residents and certain CCRC employees who successfully referred a candidate to the independent living component of the CCRC could earn referral rewards. The employees who could earn rewards under the requestor’s program were not physicians or other health care professionals who are in a position to make direct recommendations about health services or medical decision-making.

The referral incentives that residents and eligible employees could earn were:

  • Gift Cards: Current residents and eligible employees who submit to the CCRC the contact information of a candidate who is eligible to enter into a continuing care contract and who tours the community within 90 days of the referral could earn a pre-paid gift card. The referrer does not need to engage in any other promotional activity.
  • Credits/Rewards for Independent Living Referrals: If the referred candidate moves into the independent living level of the CCRC within 12 months after the tour, a referring current resident receives a 1-time credit toward his/her monthly CCRC fee and a referring non-clinical employee receives a 1-time bonus compensation check.

Importantly, no payment is made in either situation if the resident moves into the assistive living or skilled nursing venue of the CCRC. The focus of the rewards program that the OIG reviewed was to recruit prospective residents who would not need assistive or skilled care.

While the target population for recruitment to a CCRC is, of course, a senior population that includes federal health care program beneficiaries, and while federal program reimbursement is available for skilled care and for some assistive living services, independent living services themselves are not federally reimbursed. In addition, the requestor did not participate in any federal health care program, nor did it provide any health care services to residents at the independent living level (i.e., the requestor did not provide physician services, ancillary services such as therapies, hospice, or medical equipment or other federally reimbursed goods or services). Independent living residents would access such services independently from outside providers/suppliers.

Legal analysis

In AO 10-05, the OIG addressed the straightforward legal question of whether residents and employees who would receive the referral incentive under the requestor’s program would be “arranging for” or “recommending” the purchase or order of items or services payable by a federal health care program within the meaning of the federal anti-kickback statute and regulations. The OIG concluded that, on the facts presented, the requestor’s program would not implicate an anti-kickback violation.

The OIG considered the fact that, while services for assistive living and skilled nursing services might be reimbursable under federal health care programs, services at the independent living level were not reimbursed under federal health care programs. While residents would have access at the CCRC to care levels in which they could receive federally reimbursed health care services, they might not ever need them. Indeed, under the facts demonstrated by the requestor, most independent living residents would not actually end up needing those services and, if they did, that need could be many years after they began residing at the CCRC. As a result, it would be substantially speculative and outside the control of the referring current resident or employee as to whether this turned out to be the case.

The OIG also noted that the decision to enter a CCRC facility at the independent living level is an overall lifestyle decision. While the availability of future nursing services could be a factor in a prospect’s decision, many other factors about the CCRC that were unrelated to future health care needs would also be influential in the decision process, such as the quality of residential accommodations, proximity to local amenities, the companionship of friends already residing in the community, and the costs of non-health care facilities and services.

In summary, among the key factors that the OIG considered influential in concluding that the requestor’s program would not implicate an anti-kickback violation included the following:

  • The introduction for which a referral reward could be earned would only be of a candidate for independent living, not assistive or skilled care.
  • Employees who would be eligible to earn incentive compensation for making a qualified referral were not health care providers and were not in a position to influence medical decision-making by the candidate. They would typically be friends of the prospective community member.
  • There was a limited chance at the requestor’s CCRC that an independent living resident would transition to a level of care in which Medicare/Medicaid covered services would be provided and, if the resident does, that would occur many years the future.
  • The requestor did not provide Medicare/Medicaid covered services (such as physician services, ancillary therapies, home health or hospice care) to residents of its independent living facility.
  • The requestor’s arrangement will have no impact on any health care professional’s decision to order health care items or services or to refer a patient to a particular practitioner, provider, or supplier.

To access the full text of the Advisory Opinion 10-05 go to: http://oig.hhs.gov/fraud/docs/advisoryopinions/2010/
AdvOpn10-05.pdf


The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.