HHS warns that premium-assistance charities must be independent

Federal officials are renewing strong warnings to hospitals and drug companies not to use charities as fronts to illegally funnel money to patients.

The separate warnings this week from HHS Secretary Kathleen Sebelius and HHS' inspector general come as drugmakers and hospitals express interest in donating money to patients to help buy healthcare goods and services they couldn't otherwise afford, even with help from the healthcare reform law.

Regulators say such programs, veiled in an aura of helping needy patients with copayments and insurance premiums, instead could potentially be set up as vehicles to enrich the corporate donors themselves.

Drug companies, for example, could donate money to charities whose programs support only the donor company's drugs, which could steer patients toward brand-name treatments instead of cheaper alternatives favored by insurers and Medicare. And more-expensive hospitals could arrange for charities to buy insurance plans that limit patients to care primarily at the donor hospital's facilities, especially when they're already sick and in need of care.

“It is a conflict of interest for hospitals and drug companies to pay patients' premiums and cost-sharing for the sole purpose of increasing utilization of their services and products,” Karen Ignagni, CEO of the trade group America's Health Insurance Plans, has said.

Hospitals and insurers, however, say they want to find ways to help patients access life-saving treatments they would otherwise have trouble affording, even with help from the reform law. In both cases, federal officials have said charitable foundations can shield corporate donors from legal trouble, assuming that the charity is truly independent and that the donations come without conditions.

The battle over patient-assistance programs has been unfolding in several corners of the healthcare world for the better part of a year. The issue involves a wide range of stakeholders causing federal officials to issue seemingly conflicting guidelines, though the agencies insists their statements have been consistent.

On Wednesday, HHS' Office of the Inspector General issued a 15-page update to decade-old rules on drug companies' donations to premium-assistance charities. The new rules noted that the agency is devoting increased attention to the charities, based on unsettling practices and trends OIG has seen in the industry.

“OIG continues to believe that properly structured, independent charity patient assistance programs provide a valuable resource to financially needy patients,” officials wrote. “We also believe that independent charity patient assistance programs raise serious risks of fraud, waste and abuse if they are not sufficiently independent from donors.”

Meanwhile, Sebelius on Wednesday answered a call for clearer rules from the American Hospital Association and the Catholic Health Association by saying that she believes the existing guidance is sufficient.

The existing rules say insurance companies are encouraged to reject checks from healthcare providers to pay for patients' insurance premiums and copayments, except in cases where the checks come from an independent charity or a federal organization such as the Ryan White HIV/AIDS Program.

“As a general matter, such payments are not prohibited by HHS' rules to the extent that they are provided in a manner consistent with the Feb. 7, 2014 FAQ (PDF),” she wrote.

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