On 1 October 2014 the Department of Health and Human Services Office of Inspector General (OIG) published a proposed rule1 that would

  • create three new federal anti-kickback law (AKL) regulatory safe harbors and amend two existing safe harbors;
  • implement statutory exceptions to prohibitions in the civil monetary penalties (CMP) statute on providing remuneration to patients; and
  • implement the provision of the CMP statute addressing gainsharing arrangements. 

If finalized, the proposed rule would offer some new protections from enforcement under the AKL and the CMP statute, particularly with respect to items and services offered to patients, and potentially would create new flexibility under the gainsharing CMP for programs designed to improve quality and efficiency of care.

Comments on the proposed rule must be submitted to the OIG by 2 December 2014.

New and amended anti-kickback safe harbors
The federal AKL, 42 U.S.C. § 1320a-7b(b), prohibits any person from knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or reward the referral of patients or the order or purchase of items or services reimbursable under federal healthcare programs. An arrangement is protected from prosecution under the AKL if it satisfies one of several safe harbors under the AKL itself or under implementing regulations at 42 C.F.R. 1001.952.

Cost-sharing waivers. The rule would expand the safe harbor for cost-sharing waivers at 42 C.F.R. 1001.952(k) to include two new types of waivers. First, in accordance with the Medicare Modernization Act of 2003 (MMA), the safe harbor would be extended to waivers of Part D cost-sharing owed by a financially needy patient to a pharmacy under Medicare Part D. Second, the rule would expand the safe harbor to cover cost-sharing owed to state- or municipal-owned ambulance providers under certain specified circumstances.

Medicare advantage organizations and FQHCs. In accordance with the MMA, the proposed rule would create a new safe harbor to protect remuneration paid between a Medicare Advantage organization (MAO) and a federally qualified healthcare center (FQHC) under a written agreement that complies with the statutory requirement that the MAO pay FQHCs for services furnished to MAO enrollees an amount equal to what the MAO would pay other providers.

Medicare coverage gap discounts. In accordance with the Affordable Care Act (ACA), the proposed rule would create a new safe harbor to protect discounts provided by a manufacturer under the Part D Medicare Coverage Gap Discount Program, as long as the manufacturer participates in and meets all applicable requirements of the program.

Free or discounted local transportation. Using its general statutory authority to create new regulatory safe harbors, the OIG proposes to protect certain free or discounted local transportation offered by “eligible entities” to their established patients, regardless of financial need. The safe harbor would not cover transportation offered by suppliers of healthcare items such as pharmaceutical companies or laboratories, though the OIG seeks comment on the proposed exclusion of labs. Nor would the safe harbor cover transportation of more than 25 miles or air, luxury, or ambulance travel. As proposed, the safe harbor would be limited to transportation for the purpose of obtaining healthcare, but the OIG is considering whether transportation for other purposes (e.g., to visit a grocery) should also be protected.

The safe harbor also would include limits consistent with the OIG’s longstanding concerns in this area regarding improper steering of patients and overutilization. For example, the program could not be marketed or advertised, and the offering entity would be required to pay for the free or discounted transportation without shifting the cost to Medicare, Medicaid, or other payers. Likewise, the safe harbor would prohibit providing transportation based on volume or value of federal healthcare program business, for example, by limiting the offer to patients referred by particular providers or suppliers or patients undergoing a certain expensive treatment.

Referral services. Finally, the proposed rule would make a technical change to the safe harbor for referral services at 42 C.F.R. 1001.952(f), to make clear that the safe harbor excludes payments to the referral service that are based on federal program business generated either by the referral service for the participants or vice versa.

Exceptions to civil monetary penalties statute

Under the CMP statute, 42 U.S.C. § 1320a-7a, the federal government may impose civil penalties or federal program exclusion for, among other things, offering “remuneration” to a Medicare or Medicaid beneficiary that the offeror knows or should know is likely to influence the beneficiary’s selection of a provider. The CMP statute includes several exceptions to the definition of “remuneration” that serve as exceptions from penalties under the CMP statute, and the OIG has implemented regulations that repeat and clarify some of these statutory exceptions.

The proposed rule would add five exceptions to the definition of “remuneration” under the CMP regulations, each of which is consistent with an exception previously added to the CMP statute by legislation.

Payments promoting access to care with low risk of harm. The ACA added a statutory CMP exception for any remuneration that “promotes access to care and poses a low risk of harm to patients and Federal healthcare programs.” The rule does not include proposed regulatory text to implement this exception; rather, the OIG seeks comment on how broadly the statutory language should be read, for example, whether “promotes access to care” should be read to mean improving a particular beneficiary’s access or also include broader efforts to help patients get access to care. The OIG would interpret “low risk of harm” to emphasize protection of independent clinical decision-making and quality of care and avoidance of overutilization and patient steering. Finally, the OIG seeks comment on whether this exception should include payments to beneficiaries not otherwise excluded under the CMP.

Retailer reward programs. The ACA added a statutory exception for coupons, rebates, or other rewards that are offered by a retailer to the general public regardless of health insurance status and that are not tied to provision of other items or services reimbursed under federal healthcare programs. The OIG proposes to adopt this language into the CMP regulations with clarification of certain statutory terms in the preamble.

Remuneration for financially needy individuals. The ACA added a third exception for free or discounted items or services given to a recipient who is “in financial need.” Under the statute, the items or services must not be offered as part of an advertisement or solicitation and may not be tied to provision of other federally reimbursable items or services; in addition, there must be a reasonable connection between the items or services and the individual’s medical care, and the offeror must first determine in good faith that the individual is in financial need.

The OIG proposes to adopt the statutory exception, providing interpretation for certain terms in the preamble. Under this preamble guidance, the exclusion would not apply to cash or cash equivalents, and a “reasonable connection” between items or services and an individual’s medical care would mean not only that the items or services are medically appropriate for the individual but also that they are not of “disproportionately large value” compared with the medical benefit. The OIG interprets the statutory “good faith” requirement to include an individualized assessment of each patient’s financial need, using a reasonable set of uniformly applied income guidelines.

Copayment waivers for first fill of generic drugs. The ACA added a CMP exception for waivers by a Part D plan or MAO of copayments owed by enrollees for the first fill of a covered Part D generic drug. The OIG would define a “generic drug” based on the Part D regulations at 42 C.F.R. 423.4, and the CMP exception would apply only if the plan sponsor includes the waiver in the benefit design submitted to CMS. The exception would be effective for coverage years beginning after publication of the final rule, but the OIG states that it will not exercise enforcement against plans that comply with CMS requirements for these waivers in the interim.

Copayment reductions for hospital outpatient services. Consistent with the exception added to the CMP statute by the Balanced Budget Act of 1997 (BBA), the OIG proposes to add an exception to the CMP regulations for copayment reductions for covered outpatient services as permitted under the BBA.

Gainsharing CMP

The proposed rule also would add regulatory text and provide additional interpretation to implement the provision of the CMP statute addressing so-called “gainsharing” arrangements, codified at 42 U.S.C. § 1320a-7a(b). That provision prohibits hospitals from knowingly paying a physician to reduce or limit services provided to Medicare or Medicaid beneficiaries under that physician’s direct care. The OIG published but never finalized a proposed implementing rule in 1994, and has since published a Special Advisory Bulletin to interpret the gainsharing CMP and numerous advisory opinions approving certain gainsharing arrangements with safeguards adequate to protect patients and federal programs.

In the preamble to the proposed rule, the OIG recognizes that efforts to reduce healthcare costs and improve quality of care, including certain gainsharing arrangements, have become more prevalent in recent years. While noting that it is restricted by the language of the CMP statute, the OIG indicates that it is considering a definition of the term “reduce or limit services” that would narrow the application of the gainsharing CMP to allow more efforts to improve quality and efficiency of treatment. The OIG does not propose a definition but seeks comment on a number of considerations related to a possible definition, including

  • whether the OIG should continue to interpret “reduce or limit services” to include items used in providing services;
  • whether a hospital’s decision to standardize certain items or to rely on protocols based on objective quality metrics for certain procedures should be considered “reducing or limiting services”; and
  • whether hospitals or physicians participating in a gainsharing program should be required to notify patients of the program.

If you have any questions about this proposed rule or if you would like assistance in drafting comments on the proposals described above, please do not hesitate to contact any of the lawyers listed as contacts or the Hogan Lovells lawyer with whom you usually work.