Final OIG Rule on New Safe Harbors to Anti-Kickback Statute and Amendments to Civil Monetary Penalty Rules

By December 12, 2016No Comments

On December 7, 2016, the HHS Office of the Inspector General (OIG) finalized new safe harbors to the federal anti-kickback statute (AKS) and amendments to the civil monetary penalty (CMP) rules.¹  Set forth below is an overview of the most significant elements of the OIG’s final rule.

I. New AKS Safe Harbors

The AKS criminalizes the knowing and willful offer, payment, solicitation or receipt of remuneration to induce (or reward) the referral of federal health care program business.²  The AKS contains several statutory exceptions, and the OIG has promulgated regulatory safe harbors that exclude certain practices from the definition of “remuneration” even though they may induce referrals of federal health care program business.  In its December 7, 2016 final rule, OIG incorporated into its safe harbor regulations certain statutory exceptions, including exceptions permitting (i) cost-sharing waivers and (ii) certain remuneration between Medicare Advantage (MA) organizations and federally qualified health centers (FQHCs).  Additionally, the OIG added new safe harbors, including a safe harbor to protect free or discounted local transportation offered to federal healthcare program beneficiaries.  Each of these safe harbors is discussed further below.

A. Cost-Sharing Waivers

The OIG’s final rule incorporates into the AKS regulations a statutory exception that protects a pharmacy’s waiver or reduction of any cost-sharing amount under Medicare Part D if a three-part test (Waiver Test) is met.³  The Waiver Test has three elements:

  1. The waiver must not be offered as part of any advertisement or solicitation;
  2. The pharmacy must not routinely waive coinsurance or deductible amounts; and
  3. The pharmacy must waive the coinsurance and deductible amount only after determining in good faith that the individual is in financial need or after failing to collect the cost-sharing amounts after making reasonable collection efforts.4

If the enrollee is eligible for the Part D low-income subsidy, then the only element of the Waiver Test that must be met is that the waiver must not be advertised.5

In its proposed rule released October 3, 2014, the OIG proposed that the safe harbor would apply to cost-sharing waivers under Medicare Part D only, pursuant to the statutory exception.6 After receiving comments on the scope of the safe harbor, however, the OIG expanded the safe harbor to protect cost-sharing waivers under Medicaid, in addition to Medicare Part D.7

B. FQHCs and MA Organizations

The final rule also incorporates a statutory exception protecting remuneration between a FQHC and MA organization pursuant to a written agreement.8 The OIG noted in the preamble to its final rule that, pursuant to the Medicare Modernization Act of 2003, any agreement between a FQHC and MA organization must require the MA organization to pay the same amount to the FQHC that it pays to other entities for similar services. 9  The OIG also clarified that the safe harbor protects only payments related to FQHCs treating MA plan enrollees, not arrangements unrelated to the treatment of MA plan enrollees at FQHCs.10 For example, if an FQHC were to provide free conference room space to an MA organization for sales presentations to potential enrollees, or if an MA organization were to provide financial support to an FQHC, the arrangement would not be protected.  In both of these examples, the remuneration would not be for the treatment of MA enrollees, so it would fall outside the safe harbor. 11

C. Local Transportation

The OIG finalized a new safe harbor for free or discounted local transportation services provided to federal health care program beneficiaries.12 For an entity to receive protection under the safe harbor, the availability of the transportation services must be set forth in a policy that is applied consistently, and may not be determined based on past or anticipated volume of federal health care program business.  The entity also may not advertise or market the services.

Individuals or entities that primarily supply health care items (including durable medical equipment (DME) suppliers and pharmaceutical companies) are excluded from the protection of the local transportation safe harbor.13 The OIG had solicited comments on whether home health agencies and laboratories should also be excluded from safe harbor protection because they might be more likely to offer transportation in return for referrals. 14 The OIG ultimately decided not to exclude home health agencies and laboratories from protection. 15

The local transportation safe harbor applies only if the free or discounted transportation is made available to an “established patient” of both the entity providing the transportation and the provider or supplier to or from which the individual is being transported. 16 The OIG stated in the preamble to its final rule that a patient can be “established” after she selects and initiates contact with a provider or supplier to schedule an appointment. 17 Further, the transportation must be “for the purpose of obtaining medically necessary items and services”; the OIG declined to include in the safe harbor transportation for other purposes that relate to the patient’s health care. 18

In interpreting “local” transportation, the OIG decided to establish separate distance limits for rural areas and urban areas. 19 The final rule defines “local” as within a 25-mile distance for patients in an urban area, and within a 50-mile distance for patients in a rural area.

II. Amendments to CMP Rules

The CMP statute makes it illegal to offer or transfer remuneration to any Medicare or Medicaid beneficiary if the offeror knows or should know that the remuneration is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for items or services payable by Medicare or Medicaid.20 Remuneration is defined broadly, to include “waiver[s] of coinsurance and deductible amounts, and transfers of items or services for free or for other than fair market value.” 21 To alleviate some of the harsh effects of this blanket prohibition, Congress created a statutory exception for remuneration that “promotes access to care and poses a low risk of harm to patients and Federal health care programs” in the Accountable Care Act of 2010.  In the final rule, the OIG clarifies the meaning of the operative terms “promotes access to care” and “low risk of harm” in the statutory exception, after having solicited comments on both terms.

A. Promotes Access to Care

The OIG had originally proposed to interpret the phrase “promotes access to care” to mean that the remuneration “improves a particular beneficiary’s ability to obtain medically necessary health care items and services.” 22 Upon recognizing that some services payable by Medicare and Medicaid are not strictly medical, the OIG revised the standard to remove the “medically necessary” limitation, so that the exception encompasses remuneration that “improves a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid.” 23

The OIG had solicited comments on whether it should interpret “promotes access” broadly to include encouraging patients to access care, supporting or helping patients to access care, or making access to care more convenient.24 The OIG ultimately declined to adopt a broader interpretation, but noted that remuneration that helps patients access care or makes access to care more convenient often will meet the standard. 25 By contrast, remuneration that is structured as a reward for accessing care, or inducement to seek care, is not covered by the safe harbor.  Accordingly, the OIG noted that providing rewards (e.g., movie tickets) to patients for complying with a treatment plan does not fit within the exception. But remuneration that helps a patient comply with a treatment plan by, for example, removing certain barriers (e.g., reimbursing parking expenses or providing free child care) could promote access to care.

The OIG further noted that, under its 2002 Special Advisory Bulletin, items of nominal value do not require an exception.26 In the preamble to its final rule, the OIG announced an increase in the limits for inexpensive gifts, based on inflation, from $10 to $15 for an individual gift and $50 to $75 in the aggregate annually per patient.

B. Low Risk of Harm

The OIG finalized its proposed interpretation of “low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs” to include remuneration that:

  • Would be unlikely to interfere with, or skew, clinical decision making;
  • Would be unlikely to increase costs to the programs or its beneficiaries; and
  • Does not raise patient safety or quality-of-care concerns.27

The OIG acknowledged that a program that promotes access to care may result in an increase of some costs (such as short-term costs), but a decrease in other costs (such as overall health care costs).28 Therefore, with respect to the second condition, the OIG clarified it is not requiring the remuneration to be unlikely to increase costs at all, but instead unlikely to increase costs through overutilization or inappropriate utilization.

1 See 81 Fed. Reg. 88,368 (Dec. 7, 2016).
2 Soc. Sec. Act § 1128B(b).
3 Id. at § 1128B(b)(3)(G); 81 Fed. Reg. at 88,408.
4 Soc. Sec. Act. § 1128A(i)(6)(A); 81 Fed. Reg. at 88,408.
5 Soc. Sec. Act § 1128B(b)(3)(G); 81 Fed. Reg. at 88,408.
6 79 Fed. Reg. 59,717, 59,720 (Oct. 3, 2014).
7 81 Fed. Reg. at 88,371.
8 Soc. Sec. Act § 1128B(b)(3)(H); 81 Fed. Reg. at 88,408.
9 81 Fed. Reg. 88,377.
10 Id. at 88,378.
11 Id. at 88,377-78.
12 Id. at 88,408-09.
13 Id. at 88,409.
14 79 Fed. Reg. at 59,722.
15 81 Fed. Reg. at 88,381.
16 Id. at 88,408.
17 Id. at 88,382.
18 Id. at 88,384.
19 Id. at 88,387.
20 Soc. Sec. Act § 1128A(a)(1)(5).
21 Id. at § 1128A(i)(6).
22 79 Fed. Reg. at 59,725.
23 81 Fed. Reg. at 88,391, 88,409.
24 79 Fed. Reg. at 59,725.
25 81 Fed. Reg. at 88,392-94.
26 Id. at 88,394; see also OIG Special Advisory Bulletin: Offering Gifts and Other Inducements to Beneficiaries (August 2002).
27 Id. at 88,409.
28 Id. at 88,396.

For more information about the OIG’s final rule on revisions to the AKS safe harbors and CMP rules, please contact Mark Fitzgerald at Mark.Fitzgerald@PowersLaw.com or Shuchi Parikh at Shuchi.Parikh@PowersLaw.com, or the Powers attorney with whom you work regularly.


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