On October 3, 2014, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published an unexpected, yet long-awaited, set of proposed rules that would add new anti-kickback law safe harbors, protect additional conduct from enforcement under the civil monetary penalties (CMP) law related to beneficiary inducements and create a new gainsharing CMP regulation. Although the OIG annually solicits proposals for new anti-kickback safe harbors, it has not proposed such broad-reaching changes to the safe harbors and CMP regulations in a number of years. The details of the proposed rules below indicate the OIG may be taking a fresh new look at issues that have frustrated the industry for many years.

Proposed Anti-Kickback Safe Harbors

One of the safe harbors proposed by the OIG would protect certain complimentary local transportation arrangements from enforcement under the anti-kickback law. The OIG previously considered this topic in rulemaking in 2002, but did not propose or finalize any rules at that time. The OIG’s current proposal is limited to free or discounted transportation (excluding air, luxury and ambulance-level transportation) provided by an “eligible entity” to established patients for the purpose of obtaining medically necessary items or services with the following characteristics:

  • The offer for transportation is not determined in a manner related to past or anticipated volume or value of federal healthcare program business;
  • The transportation is not advertised and no marketing occurs during the course of transportation or by the drivers;
  • The drivers or others arranging the transportation are not paid on a per beneficiary basis;
  • The transportation is provided to the established patient (and to a person assisting the patient, if necessary) within the local area to the provider or supplier to which the patient is transported (proposed as no more than 25 miles from the location of the patient); and
  • The eligible entity does not shift the burden of the transportation costs to Medicare, Medicaid, other payors or individuals.

The proposed safe harbor would exclude DME suppliers, pharmaceutical companies, laboratories and potentially home health agencies from the term “eligible entity” based on the OIG’s concern about increased patient-steering risks for these types of organizations. Moreover, the OIG is considering whether to require eligible entities to document beneficiary eligibility for transportation, such as financial need, transportation need or increased risks due to failure to comply with a treatment regimen. The OIG also has not yet decided whether to limit the transportation safe harbor to medical purposes, or permit transportation for other purposes related to healthcare, such as counseling appointments and grocery stores. The preamble discussion also specifically considers whether to permit hospitals to have standard shuttle routes in their communities for all patients, not just established patients.

Additional safe harbors proposed include expansion of the anti-kickback safe harbor for waivers of cost-sharing amounts to incorporate certain waivers or reductions of Medicare Part D cost-sharing amounts offered by pharmacies to financially needy beneficiaries. A beneficiary who qualifies for a Part D subsidy is deemed to meet the financial need criteria under the proposed rule. Note that the proposal and the preamble discussion are limited to waivers by pharmacies and not third parties, such as drug manufacturers. The OIG also proposes to codify a safe harbor for the Medicare Coverage Gap Discount Program in accordance with the related statutes.

In response to numerous advisory opinion requests over the past several years, the proposed rule also would protect from enforcement under the anti-kickback statute waivers of cost-sharing for emergency ambulance services furnished by government-owned or -operated Medicare Part B providers. The safe harbor would be limited to emergency ambulance services. Other minor changes include a correction to the safe harbor for referral services and the incorporation of the statutory exception for certain remuneration between a federally qualified health center and a Medicare Advantage organization.

CMP Proposals

The proposed rule would incorporate additional exceptions to the definition of remuneration under the beneficiary inducement provision of the CMP law that were added under the Affordable Care Act. The proposal regarding arrangements that promote access to care and pose a low risk of harm to Medicare and Medicaid beneficiaries and programs provides little clarity to the existing broad statutory text, and the OIG raised at least five issues with respect to the exception for which it is seeking feedback. The proposal related to retailer rewards, on the other hand, would permit retailers more flexibility to include federal program patients in their normal promotions activities, so long as the promotion is not directly conditioned on the purchase of goods or services reimbursed by the federal programs. The proposed rule also would incorporate the statutory addition of a general financial need-based exception to the definition of remuneration for items or services that have a “reasonable connection” to the patient’s medical care. Finally, the OIG would incorporate the statutory exception for waivers by a Part D prescription drug plan sponsor or Medicare Advantage organization of copayments for the first fill of a covered Part D generic drug.

The OIG also is revisiting the topic of adopting a gainsharing regulation in the proposed rule after its proposal in 1994 was never adopted. The gainsharing provision in the CMP statute is a broad prohibition on hospital incentive plans that encourage physicians to reduce or limit items or services to their patients. Because the statute does not prohibit only reductions or limits in “medically necessary” care, the OIG is requesting comments on how it could interpret the phrase “reduce or limit services” to provide hospitals with greater flexibility under the CMP law to lower costs and improve quality of care. The preamble discussion raises more questions than answers on the gainsharing issue, and providers should take advantage of this opportunity to provide feedback to the OIG that will enable it to create a meaningful gainsharing regulation.

This rulemaking is unique in that the OIG is specifically asking for feedback and ideas on a number of its proposals, and signals the OIG’s willingness to adopt useful exceptions to the beneficiary inducement provision and new anti-kickback safe harbors on topics that often are the subject of advisory opinion requests. Hospitals in particular should consider commenting on the complimentary local transportation safe harbor and the gainsharing CMP regulation.