Unfavorable OIG Advisory Opinion on Sign-On Bonuses Shows Limitations to the Employment Safe Harbor

The Office of Inspector General (OIG) for the Department of Health and Human Services’ most recent unfavorable Advisory Opinion is a stern reminder to healthcare organizations to consider the fraud and abuse risks of offering sign-on bonuses and other financial incentives to employees. Typically, sign-on bonuses and other forms of compensation to employees pose little fraud and abuse risk because the federal Anti-Kickback Statute (AKS) has a broad employment safe harbor that applies to any remuneration paid to employees, regardless of the compensation methodology. However, in this Advisory Opinion, the sign-on bonuses operated as advertisements for new patients and not just as a way to entice potential employees to join the organization. The OIG determined that sign-on bonuses structured in this manner do not satisfies the safe harbor and, if the requisite intent was present, would violate the AKS).

The Proposed Arrangement

The requestor operates a home care agency in a state where Medicaid covers in home support services (e.g., personal care, homemaker services, and health maintenance activities) for eligible patients. Patients may select their own in-home caregivers, and many patients select close relatives as their caregivers. The requestor certified that these caregivers often acts as the patients’ guardians, often selecting the patients’ home care agency on their behalf. The requestor proposes to advertise sign-on bonuses to caregivers as a way to compete with other home care agencies offering similar incentives. The sign-on bonuses would not be performance-based, and caregivers would be entitled to the sign-on bonus regardless of whether they ever provided services to anyone other than their relatives.  

Analysis

The proposed sign-on bonuses implicate the AKS because the home care agency would offer the sign-on bonuses in the hopes of convincing caregivers to apply for employment with the agency, while fully aware that the caregivers would likely steer the patients to select the home care agency. The OIG acknowledged that offering sign-on bonuses typically satisfy the employment safe harbor, but the proposed arrangement would create an “inextricable link” between each caregiver’s employment with the home care agency and the referral of their family member. Moreover, the OIG highlighted several additional concerns in its Advisory Opinion:

• Inappropriate Steering. Unlike typical recruitment efforts where the employer solely intends for the sign-on bonus to aid in the recruitment of talented employees, here, the impact of the employer’s efforts is to ultimately recruit new patients. The OIG distinguished this steering risk from sign-on bonuses offered with the hope of future referrals (i.e., sign-on bonuses offered to physicians who presumably would furnish and order reimbursable services and items) from the requestor’s proposed sign-on bonuses which, in most cases, would be based on the guaranteed referral of the employee’s family member.
• Quality of Care Concerns. Offering sign-on bonuses could encourage caregivers to select employment with home care agencies based solely on the financial incentives rather than the quality of the agency and the services it provides. In addition, the funds that home care agencies have are limited. If home care agencies increase spending for sign-on bonuses, they may have fewer financial resources to allot toward training and additional resources necessary to adequately care for their clients.
  Unfair Competition. The OIG noted that the proposed sign-on bonuses could result in the home care agency and its competitors offering increasingly higher sign-on bonuses to attract referrals, leading caregivers to select agencies based on the amount of the sign-on bonuses rather than the quality of the agency. Note that the requestor certified that its competitors were offering similar sign-on bonuses, which likely prompted the requestor to pursue an unfavorable advisory opinion denouncing the practice.

Conclusion

While the OIG has historically applied the employment safe harbor broadly (e.g., favorable Advisory Opinion No. 23-07), this Advisory Opinion operates as a reminder that the employment safe harbor has its limitations. Healthcare organizations, particularly those that rely on sign-on bonuses to recruit family caregivers, should evaluate their practices to ensure they comply with the AKS. 
 

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