February 22, 2019

February 21, 2019

Subscribe to Latest Legal News and Analysis

February 20, 2019

Subscribe to Latest Legal News and Analysis

February 19, 2019

Subscribe to Latest Legal News and Analysis

New HHS Kickback Safe Harbors Are Subject To Many Conditions

Last week, the Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”) published two new rules in the Federal Register (81 Fed. Reg. 88368 (Dec. 7, 2016)) that create new safe harbors that prevent certain actions taken by healthcare providers from being treated as kickbacks. The new rule relates to sections of the Affordable Care Act.

Two laws—the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) and the Stark Law (42 U.S.C. § 1395nn)—have served to deter fraudulent activity, including kickbacks, associated with the provision of services under government healthcare programs. The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving anything with value to generate (or reward) referrals or to otherwise produce government healthcare business.  The Stark Law bars doctors from referring Medicare patients for certain services to entities with which the doctor (or a family member) has an economic relationship (and for the entity to submit Medicare claims resulting from the prohibited referral), unless exceptions apply.  The laws have historically contained various voluntary safe harbors or mandatory exceptions that shield individuals from liability, if they are in compliance.  Anti-Kickback Statute violators are subject to both criminal and civil penalties, while the Stark Law is civil in nature.  Violators of either law could be subject to False Claims Act liability.

The new safe harbors somewhat loosen the anti-fraud provisions that could make certain qui tam lawsuits under the False Claims Act more challenging, however providers must meet many criteria to qualify for the safe harbors, and significant conduct still constitutes an illegal kickback. The categories of services encompassed by the new safe harbors are summarized thusly:

  • Pharmacy cost-sharing for needy beneficiaries: This new safe harbor allows for pharmacies to waive costs typically paid by Medicare Part D beneficiaries provided that “(1) [t]he waiver or reduction is not advertised or part of a solicitation; (2) the pharmacy does not routinely waive or reduce the cost-sharing; and (3) before waiving or reducing the costsharing, the pharmacy either determines in good faith that the beneficiary is in financial need or the pharmacy fails to collect the cost-sharing amount after making a reasonable effort to do so.” If all three of these conditions are not met, pharmacies could still be subject to penalties.

  • Cost-sharing for certain emergency ambulance services: This new safe harbor allows for ambulance service providers to waive costs typically paid by Medicare beneficiaries so long as (1) the provider is owned and operated by a state, state political subdivision, or tribal healthcare program; (2) the provider is reimbursed under a federal fee-for-service system; (3) the service at issue is an emergency response (as defined by 42 C.F.R. 414.605); (4) the cost-reduction or waiver is offered on a uniform basis; and (5) the provider does not later claim the cost-reduction or waiver as a bad debt. If all five of these criteria are not met, ambulance service providers could still face penalties.

  • Certain free or discounted local transportation services: This new safe harbor allows for free or discounted transportation services (excluding air, ambulance, or luxury transportation), subject to a number of qualifications. Transportation providers must (1) set forth the program in a policy and apply it uniformly; (2) not determine the scope of the service based on past or anticipated business; (3) not advertise the service, nor may drivers market healthcare products or services; (4) not pay drivers per-beneficiary-transported; (5) and not shift costs to the government or individual payers. Transportation services can only be provided to established patients of either the entity providing the transportation or the entity to or from which the patient is being transported, and the maximum distance from the patient to the provider is 25 miles (50 miles in certain rural areas). Service providers out of compliance with these requirements could still be subject to penalties.

  • Payments between Medicate Advantage (MAs) organizations and federally qualified health centers (FQHCs): This new safe harbor allows for payments between MAs and FQHCs made pursuant to a written agreement.

  • Discounts from prescription drug manufacturers to Medicare Coverage Gap Discount Program beneficiaries: This new safe harbor protects discounts made on “applicable drugs” to “applicable beneficiaries” (as defined by section 1860D-14A of the Medicare Coverage Gap Discount Program) so long as manufacturers participate in and fully comply with the Medicare Coverage Discount Program’s requirements. Manufacturers that are not in compliance could still face penalties.

Although the new regulations somewhat relax government anti-fraud policies (on the policy rationale that wider availability of services can lead to better medical outcomes), there remains a wide variety of healthcare-related kickback activity made illegal by the Stark Law and the Anti-Kickback Statute and would remain subject to a qui tam lawsuit brought by a whistleblower under the False Claims Act.

© 2019 by Tycko & Zavareei LLP

TRENDING LEGAL ANALYSIS


About this Author

Andrew J. Silver, Tycko & Zavareei Law Firm, Attorney
Associate

Andrew J. Silver graduated magna cum laude as a member of the Order of the Coif from Boston College Law School in 2012. While in law school, he was selected as an Articles Editor of the Boston College International & Comparative Law Review, for which he previously served as a Staff Writer. In 2007, Mr. Silver graduated from Tufts University with a B.A. in Economics and a concentration in Communication and Media Studies.

Prior to joining Tycko & Zavareei LLP, Mr. Silver worked as a student-attorney at the Boston College Legal Assistance Bureau, practicing housing law, family...

202-973-0900