As part of their mission and outreach, health care providers ("Provider(s)") often establish patient assistance programs offering free or discounted services or items in an effort to promote preventive health and wellness in their communities (e.g., free health screenings, treatment or testing, pharmaceuticals, accommodations and transportation services) ("Programs"). The goals of such Programs are often to address individual patient need or risk, provide support services to patients and their families and help alleviate community risk for various diseases by offering Programs focused on intervention, screening or other needed services.

However, Providers must be cognizant of various laws, including the Civil Monetary Penalties law ("CMP") and Anti-Kickback Statute, when structuring and offering such Programs. To comply with these laws, a Program should be structured to minimize risk: (i) that the provision of free or discounted items or services could influence Medicare, Medicaid or federal or state health care program ("Federal Health Care Program(s)") beneficiary decision-making; and (ii) of improperly inducing referrals to the Provider. The Office of the Inspector General ("OIG") has issued numerous advisory opinions, commentaries and bulletins with respect to such Programs. OIG generally has concluded that even if an exception under applicable law is not fully met, these Programs provide considerable patient and community benefit and do not create significant risk of violating either the CMP or the Anti-Kickback Statute, if appropriately structured.

Additionally, health care systems often utilize their affiliated foundations to administer or fund these Programs. While a business relationship between a health system and foundation does not automatically raise suspicion under the Anti-Kickback Statute and CMP, OIG appears to more closely scrutinize arrangements where the foundation is affiliated with a health system through its common origins, officers and directors. These arrangements raise concerns that the donation may be designed to generate additional business for the health system that will ultimately be paid by Federal Health Care Programs. OIG also identified the risk that the health system might exert undue influence over the foundation's use of the donated funds. Thus, foundations that are closely aligned with health systems should carefully structure their Programs to comply with both the Anti-Kickback Statute and CMP.

Civil Monetary Penalties Law

The CMP prohibits a person from offering or giving something of value ("remuneration") to a beneficiary that such person knows or should know is likely to influence the beneficiary to order or receive items or services from a particular Provider that may be payable by a Federal Health Care Program. Remuneration is defined to include the waiver of co-insurance and deductible amounts (or any part thereof), as well as transfers of items or services for free or for other than fair market value. When a Provider offers free or discounted services or items to patients, they should be aware that their Programs may give rise to CMP violations. Care should be taken to evaluate all Programs to ensure compliance with the CMP or an applicable exception,1 such as the preventive care exception or nominal value exception.

  • Preventive Care Exception. The preventive care exception to the CMP exempts certain types of incentives from the definition of remuneration. Specifically, a provider is permitted to offer incentives given to individuals to promote the delivery of preventive care services where the delivery of such services is not tied (directly or indirectly) to the provision of other covered services that are reimbursed in whole or in part by a Federal Health Care Program. Examples of permissible incentives include blood sugar screenings, cholesterol tests, medic alert jewelry and certain non-health care items or services.2 Incentives that do not meet the CMP preventive care exception may still be permissible under the CMP if the incentive is for non-covered services. The CMP generally bars incentives to influence the choice of a provider, practitioner or supplier for covered items or services. As a result, remuneration paid to influence the selection of a practitioner for non-covered preventive care services falls outside the scope of the CMP.
  • Nominal Value Exception. Through published guidance, OIG established that incentives of nominal value may be provided to Federal Health Care Program beneficiaries without being subject to civil monetary penalties. Nominal value is interpreted to be no more than $10 per item or $50 in the aggregate on an annual basis to each patient. Therefore, only if the value of an incentive (item or service) costs $10 or less, and the benefit to each patient does not exceed the annual aggregated limit, would the arrangement not be subject to civil monetary penalties.

Anti-Kickback Statute

The Anti-Kickback Statute prohibits an individual from knowingly and willfully offering or paying remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to any person to induce such person to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal Health Care Program. The Anti-Kickback Statute is an intent-based statute, but even if the parties involved do not have the requisite intent, it is prudent to structure a Program in such a manner that the intent of the parties will not be misconstrued by the government. While there are several regulatory and statutory safe harbors that enable Providers to engage in certain activities without violating the Anti-Kickback Statute, there is no safe harbor that specifically permits offering free or discounted items or services to beneficiaries. OIG issued a proposed rule in 2014 that would establish a new Anti-Kickback Statute safe harbor intended to protect free and/or discounted local transportation services; however, this proposed rule has yet to be finalized. Thus, the specific details of any Program should be analyzed during the planning process in order to eliminate or minimize risk of allegations of violating the Anti-Kickback Statute.

Practical Takeaways

In developing any Program, Providers should carefully consider any services or items provided to Federal Health Care Program beneficiaries in order to ensure that any incentives do not violate the CMP or the Anti-Kickback Statute. Each Program should be evaluated independently and tracked to assess and monitor risk level and compliance with federal and state law to avoid being viewed by OIG as an inducement to Federal Health Care Program beneficiaries under the CMP or the Anti-Kickback Statute. Additionally, various innovative models (e.g., accountable care organizations) include CMP waivers, but those waivers are discrete to active participation in such programs and should be analyzed in connection with structuring a Program.