Avoiding Risk in Covering Co-Payments for Outgoing Patients’ Meds

While attending the Florida Compliance and Privacy Consortium meeting, I was asked an excellent question. What if a patient who is ready for discharge from the hospital will require some ongoing prescription medications?

Say that the patient’s financial condition is such that they feel they cannot afford the drugs. Is it permissible for the hospital to pay the patient’s co-pay for the essential medication?

A few weeks ago, I explained why I think it is almost always permissible for a hospital to pay a skilled nursing facility (SNF) to accept the patient. I think the analysis here is quite similar.

The first question is whether the pharmacy is independent of the hospital. There is no doubt that the risk is materially lower making a payment to an outside pharmacy than if it is the hospital’s pharmacy waiving the patient’s co-payment. 

The main legal issue associated with a co-payment waiver is the concern that it might incentivize overutilization of a service. The risk is that a healthcare organization might waive the co-payment so that the patient will purchase the service from the healthcare organization. When a hospital is making a payment to an independent pharmacy for the patient’s co-payment, the hospital is not getting any obvious referral from the transaction.

I recognize that someone could argue that perhaps it makes the patient more likely to come back to that hospital in the future, but the link is definitely somewhat tenuous. And given the quality issues associated with ensuring that the patient receives medication, I think there are strong legal arguments to justify the payment. In fact, it may even fit within the value-based care safe harbors. 

When the pharmacy is owned by the hospital, the analysis is more complicated. In that case, there is an argument that the hospital pharmacy is obtaining the direct financial benefit in the form of the drug reimbursement. I do not believe that this creates an absolute barrier to the arrangement, but it certainly heightens my anxiety.

One action that would dramatically lower the risk would be to apply rigorous scrutiny of the patient’s ability to pay. The more that the program is geared exclusively towards assisting those with financial need, the lower the risk, under the law.

The key point is that the rationale behind a co-payment waiver is integral to determining its legality. Waiving a co-payment because of a patient complaint, patient financial hardship, or other similar reason will often be permissible. By contrast, if the motivation is to encourage utilization, that is when the risk of possible incarceration arises. And I don’t know about you, but there aren’t too many people I want to be stuck in a cell with.

I could come up with a few, but you don’t get to choose your prison bunkmate.   

As long as the payment isn’t likely to induce a patient to use your hospital again, and isn’t intended to influence from whom they will receive services, it is consistent with the law.

In many circumstances, it will be possible to provide patients with assistance that will reduce readmissions and help get, or keep, the patient healthy.