The Department of Health and Human Services Office of Inspector General (“OIG”) recently issued a proposed rule that adds to and amends the Anti-Kickback Statute safe harbors and provides guidance regarding the Civil Monetary Penalty rules for beneficiary inducements and gainsharing (“Proposed Rule”).1 The Proposed Rule addresses several issues regarding the way providers interact with each other and patients to improve health care quality and outcomes. 

Proposed Anti-Kickback Statute Safe Harbors

The federal Anti-Kickback Statute (“AKS”) makes it a criminal act to knowingly and willfully offer, pay, solicit or receive remuneration in exchange for referrals of items or services reimbursable by federal health care programs.  The AKS has statutory exceptions and regulatory safe harbors that, if followed, outline certain activities and arrangements that will be deemed to not violate the AKS.

New Safe Harbors

Local Transportation. The Proposed Rule establishes a new safe harbor intended to protect free and/or discounted local transportation services that are  provided to federal health care program beneficiaries. OIG notes that free local transportation may exceed the prior “nominal value” standards of $10 per item and $50 aggregate per year in items or services that could be provided to federal health care program beneficiaries.  OIG is seeking extensive comments regarding the proposed new safe harbor.  Preliminarily, the requirements for the safe harbor are:

  • The free or discounted transportation would only be available to established patients;
  • Air, luxury (e.g., limousine) and ambulance transportation would not be protected by the safe harbor;
  • Transportation services that are publicly advertised or marketed would be excluded from safe harbor protection;
  • Drivers and others involved in arranging the transportation services cannot be compensated on a per-beneficiary transported basis;
  • Health care items and services cannot be marketed during the course of the transportation;
  • Transportation will only be protected if it is for the patient and, if needed, a family member; and
  • Transportation must be 25 miles or less to be considered local.

Federally Qualified Health Centers and Medicare Advantage Organizations.  OIG proposed the incorporation of the recent AKS statutory exception relating to federally qualified health centers and Medicare Advantage plans into the AKS safe harbor regulations. This exception and new regulatory safe harbors protect “any remuneration between a federally qualified health center (or an entity controlled by such a health center) and a Medicare Advantage organization pursuant to a written agreement” that meets certain requirements.

Medicare Coverage Gap Discount Program.  The Affordable Care Act (“ACA”) added new protections for discounts provided pursuant to the Medicare Coverage Gap Discount Program.  OIG now proposes to codify the self-implementing exception into AKS regulations.The proposed safe harbor protects discounts on the price of a manufacturer’s “applicable drugs” when provided to an “applicable beneficiary” under the Medicare Coverage Gap Discount Program.

Amended Safe Harbors

Referral Services.  The referral services safe harbor allows certain payments between an individual or entity and a referral service as long as certain conditions are met.  OIG proposed a correction to this safe harbor that resolves a technical error in the current referral services safe harbor.  OIG proposes that the safe harbor will not protect payments from participants to referral services that are based on the volume or value of referrals to or business otherwise generated by either party for the other party.  Currently, the safe harbor language states, “…based on the cost of operating the referral service, and not on the volume or value of any referrals to or business otherwise generated by the participants for the referral service…”

Cost-Sharing Waivers.  The waiver of beneficiary coinsurance and deductible amounts safe harbor allows for the reduction or waiver of Medicare or state health care program beneficiaries’ obligations to pay coinsurance or deductible amounts as long as certain conditions are met.  The Proposed Rule suggests the addition of two new protections within the safe harbor for waivers of beneficiary coinsurance and deductible amounts5 for certain cost-sharing waivers that are deemed to pose a low risk of harm.  These protections are for Medicare Part D cost-sharing waivers by pharmacies and cost-sharing waivers for emergency ambulance services.  OIG is also considering expanding this safe harbor to protect waivers under all federal health care programs, not simply Medicare and Medicaid beneficiary waivers.

Civil Monetary Penalty Rules

In addition to the amendments of the AKS safe harbor regulations, the Proposed Rule intends to codify amendments to the Civil Monetary Penalty Statute (“CMP”) that were enacted in the ACA.  Currently, the CMP proscribes the offer of remuneration that an entity knows or should know is likely to influence another individual to choose a certain provider.  Also, the CMP prohibits payments from hospitals to physicians to induce the reduction or limitation of services.

Beneficiary Inducements.  The ACA amended the definition of “remuneration” by allowing four exceptions for certain beneficiary inducements prohibited by the CMP.  The Proposed Rule elaborates on the ACA language and sets forth additional interpretations and requirements for these CMP remuneration exceptions.  The four ACA exceptions are:

  • Any remuneration that promotes access to care and poses a low risk of harm to patients and federal health care programs;6
  • The offer or transfer of coupons, rebates or other rewards from a retailer if the program meets certain requirements;
  • The transfer of items or services by a person that are not offered as part of an advertisement or solicitation, that are not tied to the provision of other items or services reimbursed under a federal health care program, for which there is a reasonable connection between the items or services and the medical care of the individual and for which the person providing the items or services determines in good faith that the individual is in financial need; and
  • Waivers of cost-sharing for the first fill of a generic drug for Medicare Part D beneficiaries.

The Proposed Rule seeks many comments regarding OIG’s tentative interpretations of various definitions, including:  what items and services “promote access to care”; the types of care and services that should be included in “access to care”; what constitutes a “low risk of harm”; whether the provision of transportation and lodging would per se be conditioned on the patient’s use of other services from the provider; and standards for determining if an individual is in financial need.

The Proposed Rule also makes clear that, for purposes of beneficiary inducements, the CMP incorporates relevant AKS exceptions and safe harbors, such as cost???sharing waivers.  However, the AKS does not contain a parallel provision.  Therefore, the exceptions to potentially improper remuneration described above pertain only to the civil liability under the CMP and do not apply to criminal risk and AKS.

Gainsharing.  The CMP also prohibits a hospital from knowingly making a payment to a physician or other provider as an inducement to reduce or limit services provided to patients.  Currently, this technically applies to all services, not just unnecessary services.   The Proposed Rule addresses revisions to interpretations of this concept of “gainsharing.”  Due to the evolving changes in the practice of medicine, as well as increased collaboration amongst providers, OIG is now considering a more narrow interpretation of the phrase “reduce or limit services.”

Because OIG does not have the legal authority to amend the CMP, the Proposed Rule addresses interpretations only.  As such, OIG cannot alter the definition of “services” to include only those that are medically necessary; however, OIG is specifically seeking comments regarding narrower interpretations of the phrase “reduce or limit services.” This interpretation would help to ensure that the CMP is interpreted in a manner that reflects today’s changing health care landscape and allow providers increased opportunity and accountability to provide higher quality health care at lower costs.

Practical Takeaways

The Proposed Rule, if implemented as currently structured, has the potential to significantly affect the current practices of hospitals and other health care providers.  Once the Proposed Rule is finalized, health care providers may have greater latitude to create patient transportation programs that provide certain health care incentives and assistance programs with federal health care program beneficiaries.  Hospitals may also have more flexibility to enter into certain cost savings arrangements with physicians in an effort to better manage the health of the population and create financial efficiencies in certain spending categories that do not involve medically necessary patient care.

By recognizing that the measures of health care quality and success are changing, OIG has proposed additional AKS safe harbor regulations and CMP interpretations that may allow health care providers greater flexibility when working to improve population and patient health management.

Comments on the Proposed Rule are due December 2, 2014 at 5:00 PM EST.  Comments may be submitted electronically, via mail or by hand delivery.