OIG Proposes Changes to Safe Harbors Under The Anti-Kickback Statute and Civil Monetary Penalty Law


On October 3, the U.S. Department of Health and Human Services Office of the Inspector General ("OIG") proposed a new rule affecting safe harbors and other provisions that currently exist under the Anti-Kickback Statute ("AKS") and Civil Monetary Penalty ("CMP") Law. The OIG is seeking public comments to the proposals, which are due December 2, 2014.

Anti-Kickback Statute Safe Harbor Changes

The AKS (42 USC 1320a-7b(b)) broadly prohibits remuneration intended to induce or reward the referral of business for ordering or purchasing items or services payable in whole or in part under a Federal or State health care program. The regulatory safe harbors established by OIG outline business arrangements that are beneficial or innocuous arrangements that might be subject to scrutiny under the AKS, but that would be protected if all of the requirements of the safe harbor are met. As a result, health care providers and other businesses often voluntarily work to meet all of the requirements of an applicable safe harbor.

With the proposed rule, OIG is establishing safe harbors for the arrangements discussed below. For the most part, the proposed safe harbors have been established in previous years by the Medicare Modernization Act or the Affordable Care Act or in the case of the proposal for safe harbors related to ambulance services and local transportation services, respond to business issues that OIG frequently has addressed in advisory opinions.

  • Free or discounted local transportation services offered to federal health care program beneficiaries, provided the service is:
    • Offered only to "established" patients to obtain "medically necessary items and services"
    • Limited to 25 miles or less from patient to provider
    • Limited to non-luxury, non-ambulance service
    • Offered by “eligible entities”, excluding entities that primarily supply health care items (for example, durable medical equipment suppliers and pharmaceutical companies) or laboratories, and
    • Not marketed or advertised.
  • Pharmacy waivers of cost-sharing for Medicare Part D beneficiaries, if the waiver is:
    • Not advertised
    • Not routine, and
    • Preceded by a determination of financial need (unless the beneficiary is subsidy-eligible).
  • Waivers of cost-sharing for emergency ambulance services furnished by State or municipality-owned ambulance service providers, if:
    • The service is paid under a fee-for-service system
    • The waiver is offered uniformly and is borne by the provider, and
    • The service is not considered free services paid by a government entity.
  • Payments from Medicare Advantage organizations to federally qualified health centers.
  • Drug Manufacturers discounts offered to beneficiaries under the Medicare Coverage Gap Discount Program.

Civil Monetary Penalty Law Regulatory Changes

The CMP Law (42 USC 1320a-7a(a)(5)) prohibits remuneration to Medicare beneficiaries and State health care program beneficiaries (as defined in 42 USC 1128(h)) that is likely to influence the beneficiary to order or receive from a particular provider or supplier any item or services payable by Medicare or a State health care program. With the proposed rule, OIG would amend the definition of "remuneration" under the CMP Law in order to add exceptions to what constitutes remuneration, as well as incorporate a new provision addressing gainsharing.

Similar to many of the changes proposed for the AKS safe harbors, the proposed changes for the regulations under the CMP Law stem from statutory changes, such as programs under the Affordable Care Act.

Amended Definition of Remuneration Under The CMP Law

The definition of "remuneration" would be amended to exclude the following items or services offered to government beneficiaries for free or less than fair market value:

  • "Retailer Rewards," meaning coupons, rebates, or other rewards from a retailer that are transferred on equal terms available to the general public, regardless of health care plans, and the offer is not tied to the provision of other items or services reimbursed in whole or in part by the program under Medicare or a state health care program. This exception was created under the Affordable Care Act, and would now be included in the CMP Law's implementing regulations.
  • Free or discounted items or services offered to financially-needy persons if:
    • The items or services are not cash or instruments convertible to cash;
    • There is no advertising or solicitation of the offer;
    • The offer is not tied to the provision of other items or services reimbursed in whole or in part by other health care programs;
    • There is a reasonable connection between the items or services and the medical care of the individual; and
    • The person provides the items or services after determining in good faith that the individual is in financial need.
  • Items or services which promote access to care and pose low risk to patients and Federal health care programs.

There is already a statutory exception for this, but the OIG is now seeking comments to its proposed definitions to key terms in the exception. First, OIG would define "promotes access to care" to mean that remuneration provided improves a particular beneficiary's ability to obtain medically necessary health care items and services (as opposed to programs offering remuneration of some kind that would be geared toward an entire patient population). Second, OIG would define "low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs" to mean that the remuneration (1) is unlikely to interfere with or skew clinical decisions; (2) is unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (3) does not raise patient safety or quality of care concerns.

  • Prescription drug program sponsor's waiver of the patient's cost-sharing obligation for first fill of a generic drug that is covered by a Medicare Part D or Medicare Advantage plan. In order to offer this to eligible beneficiaries, the plan sponsors would be required to disclose the incentive program in their submission to CMS. Because CMS already allows this, OIG indicated that, although its own regulations would not be effective until the effective date of a subsequent final rule, OIG intends to exercise enforcement discretion for plans that comply with CMS requirements for these waivers in the meantime.

The proposed rule would also codify in CMP regulations the exception to the definition of “remuneration” added by the Balanced Budget Act of 1997, allowing reductions in copayment amounts for covered hospital outpatient department services.

Prohibition Against Gainsharing Under The CMP

OIG proposes to adopt a regulation implementing the long-standing CMP statutory prohibition against hospitals and critical access hospitals knowingly paying physicians in order to induce them to reduce or limit Medicare or Medicaid services to people under the physicians' care (referred to sometimes as "gainsharing"). Over the years, the OIG has approved 16 gainsharing programs through advisory opinions and recognizes that there are instances when gainsharing can be beneficial to both patients, healthcare providers and Federal health care programs.

In addition, the OIG is seeking comments regarding how to define "reduce or limit services" under the new regulation. The proposed regulation largely tracks the statutory provision, but OIG would like to develop a definition that would help identify the line between inappropriate limitations on beneficiary care (such as paying physicians for discharging people from hospitals sooner) versus other limitations or service reductions that are appropriate and consistent with the evolving public policy goals of reducing health care costs while continuing to deliver high quality care.

The proposal is published at 79 Fed. Reg. 59717, October 3, 2014, with comments accepted through December 2, 2014. For more information about this or other OIG actions under these laws, please contact: Katea Ravega at (317) 399-2849 / katea.ravega@quarles.com; or Lisa Lyons at (414) 277-5679 / lisa.lyons@quarles.com; or Alyce Katayama at (414) 277-5823/ alyce.katayama@quarles.com.

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