OIG Again Concludes That Online Health Care Provider Marketplace Does Not Violate Fraud and Abuse Laws

OIG’s latest opinion, which the agency publicly released on July 11, 2023, focuses on proposed changes to the company’s marketplace that would impact which health care providers appear in search results and the order in which they appear. Notably, the opinion illustrates that algorithmic health care technology should be evaluated for compliance with federal fraud and abuse laws, including the Anti-Kickback Statute (AKS) and the Civil Monetary Penalty Law prohibition on inducements to beneficiaries of Medicare, Medicaid, and other state health care programs (the Beneficiary Inducements CMP).

OIG’s First Review of the Zocdoc Business Model

When OIG publicly releases an advisory opinion, it redacts the name of the requester. Such was the case with Advisory Opinion No. 19-04, published on September 10, 2019. However, shortly following that opinion’s release, the founder and CEO of health care technology company Zocdoc announced that his company was the requester, hailing the opinion as a “victory for all patients.”

Through its website and mobile apps, Zocdoc operates a platform that allows users to search for and book appointments with various types of health care providers, such as physicians and dentists, at no cost (the Marketplace). To monetize the Marketplace, the company initially charged participating providers a flat, monthly subscription fee. But, as Zocdoc’s CEO explained, this original fee model created a “financial barrier to entry” for many providers. To eliminate that barrier, the company undertook a state-by-state overhaul of its fee model to include the following components, as OIG analyzed in its 2019 Advisory Opinion:

• Per-Booking Marketplace Fees: As part of a pilot program in certain states, Zocdoc charged providers a lower annual subscription fee plus a per-booking fee for each appointment that a self-identified new patient booked.
• Per-Click Marketplace Fees: As an alternative to the Per-Booking Marketplace Fee model, Zocdoc planned to offer providers in some states a lower annual subscription fee plus a per-click fee for each time a user clicked on a provider’s profile.
• Per-Impression Advertising Fee: In addition to provider subscription fees, Zocdoc charged providers on a per “impression” basis for individualized banner advertisements that would appear alongside Marketplace search results. An “impression” referred to each time a user viewed a page on the Marketplace that contained the provider’s ad.
• Per-Click Advertising Fee: In lieu of a Per-Impression Advertising Fee, Zocdoc proposed to charge providers in some states a per-click fee based on a user clicking on a provider’s paid ad.

The challenge Zocdoc faced was how to integrate Marketplace users who were beneficiaries of Medicare, Medicaid, and other federal health care programs into its new fee models. To avoid running afoul of federal fraud and abuse laws, the company had disabled the Marketplace’s booking functionality for self-identified beneficiaries of federal health care programs except in those states where providers paid a flat subscription fee. Additionally, Zocdoc had blocked providers’ paid ads from being visible to self-identified federal health care program beneficiaries and had refrained from posting provider ads on third-party websites. Seeking to remove these restrictions without triggering a fraud and abuse violation, Zocdoc submitted its first advisory opinion request.

Upon review, OIG determined that Zocdoc’s business model would implicate the AKS, which prohibits the knowing and willful provision of remuneration to induce or reward patient referrals or the generation of business involving any item or service payable by a federal health care program. To the extent federal health care program beneficiaries had the option to schedule visits with providers on the Marketplace, Zocdoc would be “arranging” for federally reimbursable items or services in exchange for payments from providers. Moreover, through its Marketplace search results and paid provider ads, Zocdoc would be engaging in advertising activities meant to “induce” the use of federally reimbursable items or services.

Although OIG concluded that Zocdoc’s financial arrangements with providers did not qualify for safe harbor protection under the AKS, the agency nevertheless determined that the company’s proposed business model expansion did not warrant any AKS enforcement challenge for several reasons:

• Under either the Per-Booking Marketplace Fee or Per-Click Marketplace Fee model, the fees would: (1) be at rates set in advance; (2) be within fair market value; and (3) not be based on the volume or value of federally reimbursable items or services. Moreover, while more clicks or new-patient bookings would generate additional provider fees, the additional payments would not result in Zocdoc prioritizing providers paying those higher aggregate amounts in the Marketplace search results. Similarly, the Per-Impression Advertising Fees and Per-Click Advertising Fees would be within fair market value and would not consider the volume or value of federally reimbursable items or services.
• Zocdoc itself was not a provider or supplier of health care items or services. Thus, the risk that the company would exercise “undue influence when recommending healthcare-related items or services” was not present.
• The purchasable banner ads would be “passive in nature,” viewable only on the Marketplace or third-party websites that users visited, and not directly targeted to federal health care program beneficiaries.
• The Marketplace and third-party website ads would market particular providers but not specific items or services. Further, the Marketplace search engine would rely on an algorithm that filtered and prioritized providers according to user-specified criteria and user-centric metrics, such as provider cancellation rates. Zocdoc would not manipulate the algorithm based on financial or other non-user-centric criteria.
• The Marketplace would be open to all, regardless of insurance status. Although Zocdoc would collect user insurance information, the information would be used only to match users with providers who accept the user’s insurance and to allow users to store their information in advance of their scheduled appointments.
• Other than a convenient user experience, Zocdoc would not provide anything of value to federal health care program beneficiaries.

OIG also considered the Beneficiary Inducements CMP, which prohibits knowingly providing remuneration to a Medicare or state health care program beneficiary that is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for reimbursable items or services. In contrast to the AKS, OIG concluded that Zocdoc’s proposed business model did not implicate the Beneficiary Inducements CMP. Although the Marketplace would offer beneficiaries convenience in viewing providers’ available appointment times and booking appointments, access to the Marketplace, by itself, was not likely to influence a beneficiary’s decision to obtain items or services from any specific provider.

Updates to the Zocdoc Business Model

Following publication of the 2019 Advisory Opinion, Zocdoc opted to transition to the Per-Booking Marketplace Fee model exclusively. In its rollout, however, the company removed the annual subscription charge and added a spending cap feature. It also proposed to modify certain functionalities of the Marketplace related to the provider spending caps. Before making those functionality changes, Zocdoc once again sought guidance on the fraud and abuse implications from OIG, which reexamined the company’s overall business model in Advisory Opinion No. 23-04.

Provider Spending Caps

As in its initial iteration, the revised Per-Booking Marketplace Fee is payable to Zocdoc only for Marketplace bookings by a new patient. Thus, the more appointments a provider books with new patients on the Marketplace, the more that provider must pay in fees. However, in a change to the fee model that OIG did not discuss in the 2019 Advisory Opinion, OIG noted in Advisory Opinion No. 23-04 that Zocdoc now allows providers to limit the number of monthly new-patient appointment bookings they receive and thereby minimize the total monthly Per-Booking Marketplace Fees they pay.  

Once a provider reaches the self-selected monthly cap amount on Per-Booking Marketplace Fees, the provider no longer appears in Marketplace search results through the end of the month. A self-identified new patient likewise cannot book an appointment with a provider while the spending cap is in place.

The Marketplace Algorithm

As OIG acknowledged in the 2019 Advisory Opinion, the Marketplace generates provider search results via a proprietary algorithm that identifies providers based on user-specified and other user-centric information. Moreover, within the search results, providers are listed in an order that most closely matches user preferences.

For providers who are not subject to a Per-Booking Marketplace Fee spending cap, Zocdoc measures user preferences based on appointment bookings and clicks on provider profiles. From this user engagement data, the algorithm uses machine learning to identify preferred provider characteristics (e.g., geographic location or star ratings) and ranks providers accordingly. However, the algorithm does not measure user preferences for specific providers.

OIG outlined the process with an example:

[I]f Users engage more with Providers who are located within 5 miles of the Users, and Dr. A has appointments available at an office location within 5 miles of a particular User running a search, Dr. A would appear higher in Marketplace Results than Providers located farther than 5 miles from the User. However, if a week later, Dr. A has appointments available only at a second office location located farther than 5 miles from that User, then in a new Marketplace search the second week, Dr. A would appear lower in Marketplace Results than Providers located within 5 miles of the User.

Thus, as OIG explained, “it is the Provider characteristic — geographic proximity [in this example] — that informs the future search results, not the identity of the specific Provider.”

Proposed Functionality Changes to the Marketplace

In connection with the spending cap on Per-Booking Marketplace Fees, Zocdoc proposed to implement the following functionality changes to the Marketplace:   

• Inclusion of Spend-Capped Providers in Search Results: For users who self-identify as federal health care program beneficiaries or who do not provide insurance information, spend-capped providers would appear in search results when they otherwise meet the applicable search criteria. The users could view and click on the profiles of spend-capped providers but would not be able to make an appointment if they self-identify as a new patient. An icon and disclosure language would appear next to a spend-capped provider’s name with further information explaining the provider’s unavailability. Additionally, a “notify me” button feature would allow the users to receive updates once a provider has available appointments on the Marketplace.
• Ordering of Search Results: In arranging provider search results on the Marketplace, the algorithm would consider how frequently users engage with spend-capped providers, based on clicks on their profiles and the “notify me” button. Although a provider’s spend-capped status would not have a fixed weight relative to the more than 180 different criteria that the algorithm uses to rank search results, it is possible that the algorithm could deprioritize spend-capped providers because, for example, users engage less with those providers.

OIG’s Analysis

In its evaluation of Zocdoc’s updated business model, OIG again concluded that the arrangement would implicate the AKS but not prompt an enforcement challenge. The agency largely reiterated the same factors from the first Advisory Opinion as to why the arrangement posed a low risk of fraud and abuse.

Additionally, OIG noted other safeguards not discussed in its earlier opinion, including with respect to Zocdoc’s proposed Marketplace functionality changes, that supported a favorable determination:

• Zocdoc’s inclusion of spend-capped providers in Marketplace search results for self-identified federal health care program beneficiaries and users not providing insurance information would ensure these users have the opportunity to view providers with whom they may choose to schedule an appointment, even if the provider was not accepting new-patient bookings at the time of the search. Further, the disclosure information, along with the notification feature, that would appear alongside a spend-capped provider’s name in the search results would foster transparency and reduce the risk that the Marketplace might “inappropriately steer” the users to certain providers.
• The Marketplace algorithm would not filter or prioritize providers in search results based on: (1) the amount providers pay or are willing to pay in Per-Booking Marketplace Fees; (2) whether providers are spending capped; (3) providers’ historical use of spending caps (or the amount of the spending cap); (4) the volume or value of any federal health care program business generated for providers through the Marketplace; or (5) any other non-user-centric criteria.

On this last point, OIG noted Zocdoc’s acknowledgment of the possibility that the Marketplace algorithm might deprioritize spend-capped providers, to the extent user engagement with spend-capped providers is an algorithm consideration. The agency cautioned that this outcome would be “inconsistent” with Zocdoc’s certification that it would not prioritize Marketplace results based on the amount providers pay or are willing to pay to participate on the Marketplace or whether providers have a spending cap.

In a reversal from the 2019 Advisory Opinion, OIG determined that Zocdoc’s updated business model implicated the Beneficiary Inducements CMP because federal health care program beneficiaries received remuneration in the form of access to the Marketplace at no charge and that access may influence provider selection. Nevertheless, for the reasons it offered in its AKS analysis, the agency explained it would not impose sanctions under the Beneficiary Inducements CMP.  

Key Takeaways

Advisory Opinion No. 23-04 is a reminder that online platforms, apps, and other digital technologies that connect health care providers and patients potentially fall within the scope of federal fraud and abuse laws, including the AKS and the Beneficiary Inducements CMP. Proprietors of these technologies should pay careful attention to business model monetization and consider whether any participation or advertising fees charged to providers contain safeguards similar to those approved by OIG.

As we discussed in a prior alert, at a time when generative artificial intelligence is making major breakthroughs in the health care industry, digital health technology providers should closely scrutinize the regulatory implications of their technology algorithms. If an algorithm is designed or operationalized in a manner that could be characterized as biased or favorable toward certain health care providers with whom the technology proprietor has a financial relationship, an unlawful kickback relationship could be inferred. Likewise, an algorithm that steers patients to select providers could be indicative of an unlawful inducement that skews patient decision-making.