OIG Advisory Opinion Offers a Cautionary Tale on Utilization of Hospital-Employed NPs

Health Highlights

On December 19, 2022, the Office of Inspector General of the U.S. Department of Health & Human Services (OIG) issued an advisory opinion blessing the use of hospital-employed nurse practitioners (NPs) to perform certain functions typically performed by the patient’s attending physician (the Arrangement). Advisory Opinion No. 22-20 (the Opinion) provides insight into the OIG’s views on a common compliance issue that has proven challenging for hospitals and health systems grappling with how to utilize NPs most effectively. Despite its favorable conclusion, the Opinion underscores the potentially significant fraud and abuse risks associated with allowing hospital-employed NPs to furnish services that benefit or alleviate the responsibilities of independent physicians.

Overview of the Arrangement

The Opinion involves an acute-care hospital (the Hospital) that utilizes its employed NPs to assist in rendering certain care to the patients of physicians who opt in to participate in the Arrangement. Notably, the Arrangement only applies to patients who are inpatients or in observation status in two designated medical units, neither of which is a surgery or specialty care unit. Per the Hospital, the participating physicians are predominantly primary care physicians. Each year, the Hospital sends an educational letter to all physicians on its medical staff—both those employed by Hospital affiliates and those in independent practice—informing them of the Arrangement. Physicians are not targeted or selected to participate in the Arrangement based on their volume or value of expected or past referrals.

The tasks performed by the NPs are fairly broad and, in some cases, would otherwise be performed by the participating physicians. Such duties include: (i) initiating plans of care; (ii) implementing applicable care protocols instituted by the Hospital; (iii) rounding; (iv) responding to laboratory or imaging studies; (v) addressing rapid changes in patient condition; (vi) educating and supporting patients and families; (vii) coaching, educating and supporting nurses on the unit; (viii) overseeing and supporting quality improvement projects; and (ix) discharge planning. The Hospital certified to the OIG that all of the duties performed by the NPs are done in collaboration with the treating physician, who must still round daily and maintain the same level of accountability for patient care.

The Hospital also certified that it prohibits physicians participating in the Arrangement from billing for the NPs’ services. Physicians must conduct their own patient assessments and generate their own documentation in order to bill third-party payors, and may not rely on the NPs’ documentation to do so. To that end, none of the services at issue are considered split or shared visits per Medicare guidelines. Finally, the Hospital certified that it pays for all the NPs’ services and does not separately bill any payor, including federal health care programs, for the patient care services provided by the NPs.

OIG’s Rationale

In the first instance, the OIG found that the Arrangement implicates the federal Anti-Kickback Statute (AKS) because it involves the Hospital’s provision of remuneration in the form of NP services to participating physicians, which such remuneration could induce their referral of federal health care program business to the Hospital. Even though the Hospital-employed NPs are not performing any services for which the participating physicians could generate revenue, the NPs perform a variety of tasks that the physicians would otherwise have to conduct as part of their patient care responsibilities. The OIG observed that the Arrangement relieves participating physicians of the need to expend time and resources on performing the NP-assigned functions, potentially freeing up that capacity for the physician to perform other billable services. The OIG emphasized that the NPs’ services might be particularly valuable in instances where a participating physician can only bill Medicare for one evaluation and management service per day, regardless of how many times he or she sees the patient.

Having easily concluded that the Arrangement results in the provision of remuneration to participating physicians, the OIG went on to determine that the Arrangement nevertheless presents minimal risk of fraud and abuse under the AKS and therefore the OIG would not impose administrative sanctions. The most noteworthy factors on which the OIG relied include the following:

  • The Arrangement applies exclusively to two nonsurgical, nonspecialty units at one of the Hospital’s campuses and involves largely primary care physicians. Importantly, the OIG explicitly noted that it might have reached a different conclusion had the NP services been provided on surgical or specialty units where specialist physicians typically make more lucrative referrals.
  • The Arrangement is distinguishable from “suspect arrangements” in which hospitals permit their employed NPs to provide free services on behalf of physicians, for which the physicians may then bill third-party payors. Here, NP services are performed in collaboration with the attending physician, who is still required to round daily and otherwise maintains an active role in the patient’s care. Participating physicians also are only permitted to bill for services where they have documentation supporting personally performed work.
  • The Arrangement appears unlikely to increase costs to federal health care programs, in that the Hospital certified it does not bill any payor for the NPs’ services—even when such services would potentially be separately reimbursable.
  • Having the NPs available in the two medical units at issue could help ensure an appropriate level of care for patients, most or all of whom require ongoing attention throughout the day and real-time responses to changes in their condition. In the OIG’s view, the services performed by the NPs are reasonably designed to allow patients to be evaluated more quickly and effectively so they can receive diagnoses and treatments as soon as practicable.

Practical Takeaways

Hospitals and health systems should take note of this Opinion when making decisions about how their employed advanced practice providers (APPs) will be used within hospital-based service lines, particularly when the APPs work alongside independent physicians. It is worth highlighting that the OIG’s favorable conclusion under the AKS hinged on relatively narrow circumstances (i.e., the provision of nonbillable NP services to primary care physicians’ patients). The Opinion suggests that arrangements that result in the provision of APP support for specialists—particularly cardiologists, orthopedists, critical care medicine physicians and others in a position to refer high-dollar procedures to the hospital—may be more robustly scrutinized from a fraud and abuse standpoint. Further, the Opinion underscores the importance of ensuring that, where hospital-employed APPs perform services for an independent physician’s patients, the physicians remain actively involved in and materially responsible for the patient’s care and only permitted to bill for their own personally performed and documented services.

Perhaps the most noteworthy aspect of the Opinion is the OIG’s sweeping conclusion that an NP’s performance of patient care services may qualify as “remuneration,” even if the physician does not bill for the NP’s work, simply by virtue of the fact that this frees up the physician’s time to focus on other activities. The OIG did not, and lacks the authority to, opine on the Arrangement under the Stark Law. Nevertheless, the fact that APP services of this nature could constitute remuneration has profound implications for technical Stark Law compliance. That is, if a hospital-employed APP’s provision of services to an independent physician’s patients were deemed to create a compensation arrangement with the physician, that arrangement would need to satisfy an applicable Stark Law exception. This may be difficult absent a written agreement pursuant to which the independent physician pays a fair market value fee to the hospital for a proportionate allocation of the APP’s time.

As APPs’ recognized scope of practice and care team role continue to broaden, and as APPs gain the ability to practice independently in an increasing number of states, the enforcement risks associated with utilization of hospital-employed APPs will continue to grow. As such, hospitals and health systems should carefully evaluate the manner in which hospital-employed APPs are used within their service lines with an eye toward this Opinion and implement clear delineations of duty to mitigate any potential risks under the AKS and the Stark Law. Hospitals also should ensure that sound auditing and monitoring mechanisms are in place to avoid any unintended “creep” of hospital-employed APPs’ tasks over time when such APPs are working alongside independent physicians.



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