March 2, 2021

Volume XI, Number 61


March 02, 2021

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March 01, 2021

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Office of Inspector General (OIG) Proposes Expanding Anti-Kickback Statute Safe Harbors and Revising Civil Monetary Penalty Regulations

On October 2, 2014, the Office of Inspector General of the U.S. Department of Health and Human Services (OIG) published a proposed rule containing revisions to both the Anti-Kickback Statute (AKS) safe harbors and the civil monetary penalty (CMP) rules.  The proposed rule was published in the October 3, 2014, Federal Register with a comment period ending December 2, 2014.  Interested stakeholders are encouraged to submit comments on the proposed rule given that there are not often windows of opportunity to provide feedback to the agency on these types of proposals.

Federal Anti-Kickback Statute

The proposed revisions and additions to the safe harbor regulations would implement provisions from the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) as well as the Affordable Care Act (ACA).  Following is a brief summary of each proposal.

Referral Services: The OIG proposes to make a technical correction to the safe harbor for referral services.  The OIG explains there was an inadvertent error in a 2002 revision, such that the regulation currently prohibits basing a participant’s fee on the volume or value of any referrals or business otherwise generated by either party for the referral service.  The safe harbor would return to the language in place as of the 1999 revision, and state that any payment to the referral service by participants must not be based on the volume or value of any referrals to or business otherwise generated by either party for the other party.

Part D Cost-Sharing Waivers by Pharmacies: A new subsection to the safe harbor relating to waiver of beneficiary coinsurance/deductible amounts would implement Section 1128B(b)(3)(G) of the Social Security Act (Act)—as added by the MMA—to protect waivers or reductions by pharmacies of Part D cost-sharing obligations.  To meet the safe harbor, pharmacies would be required to satisfy three criteria set forth in Section 1128A(i)(6)(A) of the Act: (1) the waiver/reduction is not advertised or part of a solicitation; (2) the pharmacy does not routinely waive cost-sharing; and (3) before waiving a cost-sharing obligation, the pharmacy determines in good faith that either the beneficiary has a financial need or the pharmacy fails to collect cost-sharing amounts after making a reasonable effort to do so.  Only the first criterion would apply if the reduction/waiver is made on behalf of a subsidy-eligible individual.  Notably, the OIG also requests comments on whether to extend the safe harbor at 42 C.F.R. § 1001.952(k) to all federal health care programs, as the safe harbor currently applies only to Medicare and state health care programs.

Cost-Sharing Waivers for Emergency Ambulance Services: In response to a continuing number of advisory opinion requests on the subject, the OIG proposes to create another new section of the safe harbor for waiver of beneficiary coinsurance/deductible amounts to include waivers and reductions for “emergency ambulance services” furnished by a Medicare Part B ambulance provider or supplier owned or operated by a state, a political subdivision of a state or a federally recognized Indian tribe.  Ambulance providers would be required to offer the reduction/waiver on a uniform basis, without regard to patient-specific factors.  The OIG explains that items and services provided free of charge by a government entity are not generally reimbursable under Medicare, but notes that the Centers for Medicare & Medicaid Services (CMS) has confirmed that it does not interpret the reduction/waiver of charges by an ambulance provider or supplier to mean that the government entity is providing free services.  Providers would be prohibited from claiming the reduction or waiver amount as bad debt.

Federally Qualified Health Centers and Medicare Advantage Organizations: The OIG proposes to add a new safe harbor to implement Section 237 of the MMA, which created a statutory exception to the AKS for any remuneration between a federally qualified health center and a Medicare Advantage organization (MAO) pursuant to a written agreement.

Medicare Coverage Gap Discount Program: Section 3301(d) of the ACA amended the AKS to create a statutory exception for discounts under the Medicare Coverage Gap Discount Program.  The Medicare Coverage Gap Discount Program provides beneficiaries with discounts on covered Part D drugs while they are in the coverage gap or “donut hole.”  The new safe harbor would therefore protect discounts for “applicable drugs” furnished to an “applicable beneficiary,” as those terms are defined in the Medicare Coverage Gap Discount Program statute.

Local Transportation: The OIG proposes a new safe harbor to protect free or discounted local transportation services provided to federal health care program beneficiaries, noting its concern that previous policies have been overly restrictive in the context of complimentary local transportation.  The proposed safe harbor is narrow, applying where services are provided to established patients by “eligible entities” and otherwise meet various safeguards, including prohibiting air, luxury or ambulance transportation, prohibitions on marketing the services and prohibiting transports in excess of 25 miles.

In addition, the commentary indicates that the OIG is not using this proposed safe harbor as an opportunity to depart from the $10 per item / $50 per year limit on determining remuneration deemed not to constitute inducement in other contexts, as described in the OIG’s 2002 Special Advisory Bulletin: Offering Gifts And Other Inducements To Beneficiaries.  The term “eligible entities” excludes entities that primarily supply health care items (for example, durable medical equipment suppliers and pharmaceutical companies) or laboratories.  The OIG also solicits comments regarding whether certain other categories of providers, such as home health agencies, should be excluded and whether the exclusion should be partial or complete.  For example, the OIG is considering “excluding home health care providers from safe harbor protection when they furnish free or discounted local transportation to their referral sources (but not excluding them from protection when they provide such transportation to non-referral sources, such as pharmacies).”  The safe harbor would also not apply where services are made available only to patients referred by specific providers or to patients seeking a certain type of treatment.  The OIG solicits comments on a number of specific topics relating to the parameters of the proposed safe harbor.

Civil Monetary Penalty Authorities

The OIG also proposes a number of changes to the beneficiary inducement provisions of the CMP laws.  According to the OIG, “these exceptions are intended to protect certain arrangements that offer beneficiaries incentives to engage in their wellness or treatment regimens or that improve or increase beneficiary access to care, including better care coordination.”

Beneficiary Inducements CMP: First, the OIG would codify in regulations the exception to the definition of “remuneration” added by Section 4523 of the Balanced Budget Act of 1997, which concerns reductions in copayment amounts for covered hospital outpatient department services pursuant to Section 1833(t)(8)(b) of the Act.

Separately, the OIG seeks to develop regulations—or, in one case, seeks guidance from interested stakeholders—to implement the ACA-mandated exceptions to the definition of “remuneration” in the CMP laws.  Specifically, these exceptions would encompass the following:

  • Promotes Access to Care and Low Risk of Harm: Although the OIG does not propose a regulation for this ACA exception, it does set forth proposed definitions of the two-prong requirement that the remuneration “promote access to care” and have a “low risk of harm,” and requests comments from stakeholders as well as assistance in developing regulatory language.  The OIG is considering interpreting “promotes access to care” as “improv[ing] a particular beneficiary’s ability to obtain medically necessary health care items and services.”  The OIG does not appear to be married to this interpretation and inquires whether the phrase should be construed more broadly, including whether “care” means non-clinical care.  Further, the OIG is considering whether to apply this standard to a particular beneficiary versus a defined beneficiary population.  Remuneration would be deemed to pose a “low risk of harm” if it (1) is unlikely to interfere with or skew clinical decision-making; (2) is unlikely to increase costs through overutilization or inappropriate utilization; and (3) does not raise patient-safety or quality-of-care concerns.  The OIG seeks comments on types of incentives that should be permitted under this exception.  Further, there are limited waivers in place for arrangements under programs such as the Bundled Payment for Care Initiative (BPCI).  However, the OIG recognizes that certain arrangements under the BPCI may not fit into the current waiver, or that applicable waivers may not be in place for other similar programs.  The OIG requests comments on whether it should use this exception to cover remuneration to patients provided under these types of programs that is not already protected.

  • Retailer Rewards Program: The OIG observes that many retailer rewards programs currently exclude federal health care program beneficiaries, and therefore proposes to implement the exception added by Section 6402(d)(2)(B) of the ACA to protect remuneration from these programs.  The reward may be a coupon (“something authorizing a discount on merchandise or services”), a rebate (“a return on part of a payment”) or other rewards (“primarily … free items or services, such as store merchandise, gasoline, frequent flyer miles, etc.”).  “Retailer” does not include individuals or entities that primarily provide services, e.g., hospitals and physicians.  Additionally, the item or service must be “offered or transferred on equal terms to the public, regardless of health insurance status.”  In essence, retailers cannot discriminate against, or cherry pick, patients based on health insurance status.  Finally, the offer or transfer of the item or service cannot be tied to the provision of other items or services reimbursed in whole or in part by Medicare or an applicable state health care program. This restriction applies to the manner in which the reward is both earned and redeemed.  By way of example, the OIG explains that it would not be appropriate for a retailer to allow customers to redeem points only for cost-sharing on prescription drugs.

  • Financial-Need-Based Exception: This exception to the definition of “remuneration” concerns the offer or transfer of items or services (not including cash or instruments convertible to cash) for free or less than fair market value after a determination that the individual is in financial need.  As an initial matter, the items or services cannot be offered through any type of advertisement/solicitation, cannot be tied to other reimbursable services and must have a “reasonable connection” to the individual’s medical care from both a medical and a financial perspective.  If all of these criteria are met, the proposed regulation would require a provider to conduct a good-faith, individualized assessment of a patient’s financial need, and the OIG provides examples of measures to be used for such assessments.

  • Waivers of Cost-Sharing for the First Fill of a Generic Drug: Under this exception, a Part D Plan Sponsor or MAO offering an MA-PD plan may waive copayments for the first fill of a covered Part D “generic drug,” as that term is defined in Part D regulations.  CMS has previously permitted these waivers in Part D and MA plan benefit designs, so the OIG will not exercise its enforcement authority for these waivers in the interim period.

Gainsharing: The OIG proposes to adopt a regulation implementing the gainsharing CMP in Section 1128A(b)(1) of the Act.  The gainsharing CMP prohibits a hospital from knowingly paying a physician to induce the physician to reduce or limit the services provided to Medicare or Medicaid beneficiaries under the physician’s direct care.  The OIG states that this prohibition is not limited to reductions or limitations of medically necessary items or services.  Because of the statute’s broad language and OIG’s interpretation, it may be implicated by many programs aimed at improving quality and reducing costs.  The OIG notes that these programs can be beneficial and that it has approved 16 arrangements through the advisory opinion process.  Nonetheless, the OIG does not have the authority to issue regulatory exceptions to the statutory prohibition to permit gainsharing arrangements it believes are beneficial and pose a low risk of abuse.

In lieu of an exception, the OIG proposes to adopt a narrow interpretation of the phrase “reduce or limit services” in an effort to recognize changing dynamics in health care delivery and efforts to implement protocols that improve patient care and reduce costs without reducing patient care or quality.  The OIG does not propose specific regulatory language, but instead requests comments on a number of features that will inform its interpretation of the phrase “reduce or limit services,” including: whether “services” includes items used in providing the services; the appropriateness of standardization of items (e.g., medical instruments, devices, drugs, etc.); reliance on protocols based on objective quality measures; use of thresholds, based on historical experience or clinical protocols, beyond which participating physicians could not share in cost savings; and patient notification.

© 2020 McDermott Will & EmeryNational Law Review, Volume IV, Number 280



About this Author

Jason B. Caron, health care attorney with McDermott Will & Emery law firm

Jason B. Caron is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office. 

Joan Polacheck, Health Care industry Lawyer, McDermott Will Emery, Chicago Law Firm

Joan Polacheck is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office. She represents a broad range of health care industry clients, including hospitals, suppliers, and drug and device companies.