The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently issued an advisory opinion approving an arrangement whereby a licensed entity providing services under a state program for at-risk mothers and children (State Program) would provide diapers and play yards to program participants who are Medicaid beneficiaries. The advisory opinion analyzed the arrangement under the beneficiary inducement provision of the civil monetary penalties law and the federal anti-kickback statute.

The arrangement potentially implicated each of these laws because the State Program is available to mothers and infants who are Medicaid beneficiaries and the entity receives reimbursement for its services, including up to 10 visits to each State Program participant, from the Medicaid program. The OIG straightforwardly concluded that the provision of diapers would not implicate the beneficiary inducement provision or the federal anti-kickback law because the diapers would not be considered “remuneration” under these laws. While the statutory definition of remuneration is broad and includes “transfers of items or services for free or for other than a fair market value,” the OIG has previously interpreted the definition to exclude items that are nominal in value, meaning no more than $10 per item and $50 in the aggregate annually. In this instance, the provider certified that the diapers have a value of less than $5 per pack and because each State Program participant is limited to 10 free packs, the aggregate threshold is also met.

On the other hand, the OIG concluded that the play yards exceed the per item nominal value threshold because they are valued at $50 each. Nonetheless, the OIG determined that the provision of the play yards qualified for protection under the preventive care exception to the beneficiary inducement provision. The preventive care exception protects incentives that promote the delivery of preventive care when the delivery of those services is not tied (directly or indirectly) to the provision of other services reimbursed by Medicare or Medicaid and when the incentives are not disproportionally large to the value of the preventive care services. The regulations defining preventive care include prenatal services and post-natal well-baby visits that are reimbursed by Medicaid. The OIG concluded that both the diapers and the play yards satisfied the preventive care exception because they promoted the delivery of the State Program services, which are specifically included in the definition of preventive care. In concluding that the value of the play yards was not disproportionally large to the value of the services provided by the State Program, the OIG noted that a beneficiary is required to complete all 10 visits before receiving the play yard. The OIG also determined that while the preventive care services provided under the State Program supplement other medical care paid by Medicaid and received by State Program participants, the State Program services are not tied to the provision of this other medical care.

The beneficiary inducement provision and anti-kickback law continue to be hurdles for providers and other entities in the healthcare industry that desire to provide a community benefit through seemingly benevolent means.