Health care entities frequently handle patient complaints. In doing so, public relations solutions must often be balanced against the civil monetary penalty provisions prohibiting inducements to beneficiaries of the Medicare program. The Office of Inspector General (OIG) provided some guidance as to this matter in Advisory Opinion 08-07, which was issued on July 7, 2008.

Advisory Opinion 08-07 allowed a healthcare system (System) to provide $10 gift cards to patients who were dissatisfied with the service they received at the System. The System had wanted to establish a program to manage and resolve patient complaints regarding service shortfalls, which included general complaints about service, excessive wait times, cancelled appointments, delayed meals, excessive noise, housekeeping or dietary concerns and equipment problems, such as a television not working or a loss of a personal item.

The System proposed to offer patients who experienced a service shortfall a $10 gift card for certain local vendors, such as restaurants or theater chains. Because of the following protections established in the gift card program, the OIG indicated that, while the System’s arrangement potentially implicates both the civil monetary penalty prohibitions and the Anti-Kickback Statute, the OIG would not impose civil monetary penalty sanctions, nor would it impose administrative sanctions under the Anti-Kickback Statute:

1. Gift cards would not be redeemable for cash or for items or services provided by the System.
2. No gift card would be redeemable at any System vendor, such as pharmacies or durable medical equipment companies.
3. The System established a system tracking the issuance of gift cards to patients for the purpose of ensuring that patients did not receive in excess of $50 in aggregated value in one year.
4. The gift card program would not be advertised.

The OIG concluded that the gift card program would be nominal in value and would not constitute cash or cash equivalents for purposes of its enforcement policy. Advisory Opinion 08-07, as with all OIG Advisory Opinions, cannot be cited as precedential. But it does give guidance as to the OIG’s policy position.

Although Advisory Opinion 08-07 did not address the tax issue, the $10 gift card would not be reportable to the IRS by the healthcare system, as that amount is less than the threshold reportable amount by an entity providing a gift.

For further information, please contact Roy M. Bossen, Doug A. Marshall your regular Hinshaw attorney.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.