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OIG Stocking Stuffers: Five New Anti-Kickback Statute Safe Harbors Added

Health Law Alert Sarah E. Coyne, Leah M. McNeely, Samuel A. Magnuson

Did you hear reindeer hooves on the roof? Does the inside of your chimney seem unusually clean? Mystery solved: The OIG gave providers an early holiday present!

Earlier this month, the Department of Health and Human Services Office of Inspector General (OIG) issued a final rule adding five new safe harbors to the federal Anti-Kickback Statute (and making a few revisions to existing safe harbors). For those of you still looking for some light reading while waiting in line for a Hatchimal, the link to the rule is available here: Final Rule. For the rest of you (shout out to the online shoppers!), we've summarized the AKS highlights below. (The rule also amended the civil monetary penalty rules, and our colleagues have already summarized some of those revisions here.)

The New AKS Safe Harbors

As you all know (because we're constantly repeating this, over and over, and wonder why no one wants to talk to us at holiday parties), the Anti-Kickback Statute (AKS) makes it a criminal offense to exchange anything of value with intent to induce or reward the referral of health care program business. The "intent" part, although watered down legislatively over the years, is important because it distinguishes the AKS from its scary strict liability cousin, The Stark Law. (Helpful illustration: At the family holiday gathering, the AKS is the reclusive judgmental professor of quantum physics who dislikes children and requires the host to prepare a special separate entrée and asks how to return his gift, and the Stark Law is the guy who just got out of jail and keeps disappearing into the bathroom to check the contents of the medicine cabinet and who is coincidentally present every time the fancy crystal candlesticks go missing. The family members all approach the host in advance and say "Do NOT make me sit next to that guy." There is hope for a happy holiday with the AKS - the Stark Law means a bad holiday dinner experience for sure.)

The way to protect any business arrangement (involving Medicare or Medicaid beneficiaries) from the AKS with some degree of comfort is to fit into a safe harbor. If your arrangement does not fit into a safe harbor, you still have hope, but you probably will have some tossing and turning before the statutory limitations period finally passes and you know you are in the clear. Thus: Safe harbors are GOOD. We want MORE OF THEM. And yay, we just got more of them!!!!

In fact, effective January 6, 2017, we have FIVE additional AKS safe harbors. Who even NEEDS a Hatchimal? (Side note: One of your authors, the oldest one, had never heard of a Hatchimal until her younger colleagues wrote the first draft of this update. When she googled it and she tried to purchase one on December 21 for her (too old) thirteen year old daughter, her computer literally laughed at her and called her a fool.)

So sit back and take a gulp of hot chocolate (ideally with a splash of something in it) and enjoy the following additional safe harbors for business arrangements involving Medicare or Medicaid beneficiaries:

  1. Free or discounted local transportation services that meet specified criteria;
  2. Pharmacy waivers of cost-sharing under all Federal health care programs;
  3. Waivers of cost-sharing for emergency ambulance services under all Federal health care programs furnished by State- or municipality-owned ambulance services;
  4. Certain remuneration between Medicare Advantage (MA) Organizations and Federally Qualified Health Centers (FQHCs); and
  5. Discounts by manufacturers on drugs furnished to beneficiaries under the Medicare Coverage Gap Discount Program.

What, you do not fully understand these five new safe harbors simply from their confusing titles? Never fear, we have translated them into human-speak below:

Safe Harbor: Free or Discounted Local Transportation

Yay! This safe harbor allows providers to provide free or discounted local transportation services to Medicare or Medicaid beneficiaries, to or from the patient's home, in order to obtain medically necessary items or services. This safe harbor also permits providers to operate shuttle services (a transportation vehicle that operates on a set schedule) under slightly less stringent conditions. That's it. No more to it. HA HA HA DID YOU FORGET THAT WE ARE TALKING ABOUT FEDERAL HEALTH CARE REGULATIONS???? There are about a million (take or give hundreds of thousands) conditions on this safe harbor.

Some of the key ones are that the services may be provided only by "eligible entities" (which excludes durable medical equipment and pharmaceutical companies for the most part) … and get this…. THE TRANSPORTATION CANNOT BE BY AIRPLANE OR LUXURY VEHICLE. (Or ambulance but that is not as funny). So, our provider and supplier friends, you probably do not want to close the deal on that luxury jet you were going to buy and stock with alcohol to pick patients up for their appointments. Here are just a few of the more salient requirements to fit into this safe harbor - NOTE THE POLICY. (Your authors are very good at drafting policies.)

  • The patient must reside within 25 miles of the provider if in an "urban area," or within 50 miles of the provider if in a "rural area";
  • Subject to certain exceptions, the transportation may be provided only to "established patients" (i.e., a patient who has already had or scheduled an appointment with the provider);
  • Providers must have an established policy that is applied uniformly and consistently in determining who is eligible for the transportation on an individual basis;
  • Transportation may not be offered to "recruit" patients, and the decision to offer the transportation may not take into account the volume or value of services payable by Federal health care programs;
  • Other than having the provider's name on the vehicle, the provider may not advertise or publicly market the transportation nor provide any marketing materials during transport to otherwise promote any health care items or services;
  • Transportation may be offered directly or through the use of vouchers without regard to whether the transportation is scheduled ahead of time;
  • Providers cannot pay private transportation companies based on a per-patient basis; and
  • Providers may not shift costs of the transportation to a government or private payor, or individuals.

As mentioned above, the safe harbor also protects certain "shuttle" services, meaning services that run on a set route or schedule, provided the shuttle services comply with the same criteria under the safe harbor, except that:

  • Shuttle services do not require an established patient relationship and may be offered to friends and family; and
  • Shuttle service stops may include non-health related stops like a grocery store.

Safe Harbor: Cost-Sharing Waivers by Pharmacies

There is really no way to make "cost-sharing waivers" funny, we are sorry. You may wish to go obtain refreshments during this segment of this client alert. The basic idea is that you can let patients off the hook for their portion of some costs, without violating the law. Your authors are BIG fans of not violating the law. HUGE.

Consistent with the AKS statutory exemption for pharmacy cost-sharing waivers under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), OIG has now created a regulatory safe harbor that permits pharmacies to reduce or waive cost-sharing amounts if:

  1. The waiver or reduction is not offered as part of an advertisement or solicitation;
  2. The pharmacy does not routinely waive or reduce cost-sharing amounts; and
  3. The pharmacy first determines in good faith that the individual is in financial need, or after reasonable collection efforts have failed.

This safe harbor only applies to pharmacies, but has been expanded to protect cost-sharing waivers under all federal health care programs (including Medicaid). Further, only the first of the three criteria (i.e., prohibition on advertising) applies to subsidy eligible individuals. According to OIG, the terms "advertisement and solicitation" should be interpreted in a manner consistent with common usage in the health care industry. Whether a cost-sharing waiver is "routine" is fact specific, and is not based on a specified number or patient percentage of waivers.

A pharmacy has flexibility in determining the financial need of its patient population under an established policy that is "reasonable and uniformly applied." OIG has also indicated that "reasonable collection efforts" almost certainly require a pharmacy to request payment from a patient before waiving cost-sharing in the absence of financial need.

Safe Harbor: Cost-Sharing Waivers by State-Owned Ambulance Providers

Well … yeah… still true that cost-sharing waivers just are not funny. Now might be a good time for a short nap. Like the cost-sharing waiver safe harbor for pharmacies, a safe harbor now exists for State-owned and operated emergency ambulance service providers to waive cost-sharing amounts under any Federal healthcare programs. To satisfy the safe harbor, such ambulance providers must offer the waivers uniformly, and cannot exclude waiver recipients based on any "patient-specific factors," such as age or financial status. State or municipality owned ambulance providers may only exclude waiver recipients based on residency. They also cannot shift costs of the waiver to any government or private payor, or other individuals.

Safe Harbor: Remuneration between FQHCs and MA Organizations

Are you an FQHC? An MA Plan? If you answered "no" to both questions, SKIP THIS PARAGRAPH. If not, be happy. This safe harbor protects remuneration between a federally qualified health center and a Medicare Advantage organization pursuant to a written agreement. Since enactment of the MMA in 2003, the AKS has exempted from liability certain remuneration between FQHCs and MA Organizations. This safe harbor protects payment for FQHC services that meet the AKS statutory requirements for exemption from liability. The safe harbor does not protect "all remuneration." For example, the safe harbor would not protect the provision of free office space by an FQHC to an MA organization. Nor would it protect sending the MA organization executives into space with Lance Bass from *NSYNC. (Ask your young adult children if you do not get this reference.)

Safe Harbor: Medicare Coverage Gap Discount Program

Everybody loves donuts!!!!! This safe harbor is about the donut hole!!!!! You all clearly remember that the ACA established the Medicare Coverage Discount Program, under which prescription drug manufacturers may enter into agreements with HHS to provide beneficiaries access to discounts on Part D drugs when they fall into the "donut hole." The ACA also amended the AKS to protect such discounts from AKS liability. Consistent with the AKS exemption, this safe harbor protects a discount in a price of an "applicable drug" of a manufacturer furnished to an "applicable beneficiary" under the Medicare Coverage Discount Program, provided the manufacturer complies with all "Program" requirements.

Please note that this same Final Rule adding the new AKS safe harbors also amended the CMP law regarding beneficiary inducements. See OIG’s Final Rule on Revisions to Civil Monetary Penalty Rules Regarding Beneficiary Inducements. Our very sage legal advice is: Do Not Induce Medicare Beneficiaries To Use Your Services. For questions about the new AKS safe harbors, please contact Sarah Coyne at (608) 283-2435/sarah.coyne@quarles.com, Leah McNeely at (608) 283-2412/leah.mcneely@quarles.com, Sam Magnuson at (414) 277-5637/sam.magnuson@quarles.com, or your Quarles & Brady attorney.