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OIG Says Municipal RFP Goes Too Far

In a bit of a pendulum swing from earlier opinions, the Office of Inspector General (OIG) on Nov. 27, 2013, posted Advisory Opinion 13-18 disapproving a municipal request for proposals (RFP) arrangement for an exclusive ambulance contract. The OIG found that certain provisions of the proposed arrangement could violate the federal anti-kickback statute (AKS). This advisory opinion is a reminder that ambulance services and municipalities need to be mindful to avoid potential inducements in RFPs and contracts—particularly ones that call for free or discounted items to be provided by the ambulance company to the municipality as a condition of being awarded the agreement.

The city’s RFP


The ambulance provider requesting this opinion was bidding on a city’s RFP for the provision of emergency ambulance services. But in addition to ambulance services, the RFP required the successful bidder to provide the following to the city:


• Free emergency ambulance services to individuals insured by the city’s insurance plans


• Two free automated external defbrillators (AEDs), two pulse oximeters and complete suction units under a lease not to exceed $1 for the contract term


• Free EMS training and classes for city personnel


• 20% discounts on emergency ambulance services provided to uninsured senior citizens


• Replenishment of disposable medical supplies used by city frst responders during delivery of care prior to the patient’s transfer to the ambulance


With respect to these items, the OIG noted that “[t]he items and services that the city would require the successful bidder to provide at no charge or pursuant to a nominal value lease—the services, the equipment, and the training—are particularly suspect,” since the city would otherwise have to pay for these things. The OIG went on to state that offering such things in exchange for the opportunity to be the city’s exclusive supplier “would ft squarely within the language of the anti-kickback statute.” So the OIG made it clear that if the provider were to furnish certain items for free or at a nominal rate, the provider and the city were at risk of violating the AKS.


The provider’s RFP response


In its RFP response, the provider agreed to replenish the city’s disposable medical supplies. However, the provider noted exceptions for the other items. Specifcally it responded that it would:


• Not provide free ambulance services, but would agree to bill the city directly for the fair market value of emergency ambulance services provided to city-insured individuals;


• Not lease the equipment below cost or provide it free of charge and would instead consider donating the equipment to the city as a charitable donation, subject to approval of the compliance offcer;


• Not provide free training, but noted that one of its affliates offers annual free EMS classes open for anyone to attend; and


• Not provide the uninsured discounts, but would instead continue its practice of offering charity care to uninsured patients based on individualized determinations of fnancial need.


The OIG found that billing the city directly for city-insured individuals, offering the city’s personnel an opportunity to participate in free public EMS classes run independently of the city’s RFP, offering charity care based on individualized determinations of fnancial need, and the replenishment of disposable supplies for the city posed minimal risks under the AKS. In other words, the ambulance provider could furnish those things if there was no intent to induce the referral of Medicare or other federal healthcare business.


The remaining concern for the OIG was the provider’s proposal to donate certain equipment to the city. The OIG said that in the absence of established, objective criteria and other safeguards against potential fraud and abuse, there is “signifcant risk that donation of the equipment by the requestor would be tied to the contract award under the RFP.” Thus, the OIG could not conclude here that the “donation” would pose a minimal risk under the AKS.


OIG’s conclusions


Ultimately, the OIG thought that most of the ambulance provider’s proposed responses to the RFP demands mitigated AKS concerns. But since the OIG considered the proposed arrangement as a whole, it could not conclude that the arrangement would present a minimal risk of fraud and abuse under the AKS. This means that the city and the ambulance provider risked violating the AKS if they entered the arrangement with the donation.


The facts of this advisory opinion clearly show that a municipality asked for a signifcant amount of free or highly discounted items and services from its prospective ambulance service as a condition of being awarded an exclusive ambulance contract. Yet, one ambulance service obviously expressed concerns about some of the provisions of the RFP and refused to include some of those free or discounted items and services in its bid, claiming that doing so could potentially violate the AKS. This advisory opinion bears out those concerns, and validates that the ambulance service did the right thing in refusing to offer all of the free items and services that the municipality was seeking in its RFP.


Of course, it is entirely possible that the ambulance service in question purposefully sought out a negative advisory opinion from the OIG to provide it with cover in its negotiations with the municipality. Negative OIG advisory opinions aren’t always a bad thing. As an example: Advisory Opinion 99-2 disapproved discounted rates in facility contracts, but can be used as a rationale for obtaining higher payments from nursing homes and hospitals.


The opinion also sends a clear message to the ambulance industry that requests for free or discounted services, training, equipment and supplies in RFPs (or other arrangements) are inherently suspect under the AKS. The OIG has permitted providers to reimburse municipalities for things such as the fair market value of costs incurred for dispatching. But there is a fne line between compensating a municipality for legitimate costs incurred, and potentially inducing a municipality to refer Medicare business. This opinion gives good examples of what types of items the OIG is taking a hard look at.


Ambulance providers should carefully review this opinion and keep it in mind when responding to municipal RFPs or when entering contractual arrangements. It is important to engage legal counsel whenever your agency is being asked to provide things such as training, supplies and equipment to ensure that your service does not risk violating the AKS, which carries steep penalties.