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OIG Adds New Anti-kickback Safe Harbors, Expands CMP Exceptions
December 21, 2016

On December 7, 2016, the Office of Inspector General U.S. Department of Health and Human Services (the OIG) published in the Federal Register a final rule (Final Rule) that, among other things, adds three new safe harbors to the Anti-Kickback Statute, and expands the exceptions to the definition of "remuneration" that is prohibited under the Civil Monetary Penalties (CMP) statutes and regulations.  This is the first time in over nine years that the OIG has added a new safe harbor to the Anti-Kickback Statute.  Among the new safe harbors is protection for certain types of free or discounted transportation offered to patients of health care providers. The rule is effective January 6, 2017.

THE ANTI-KICKBACK STATUTE

The Anti-Kickback Statute (AKS) generally prohibits providing anything of value for, or to induce, referrals of patients of Federal health care programs, such as Medicare and Medicaid.  The AKS can trigger significant civil monetary penalties, imprisonment, exclusion from participation in federal health programs, and liability under the False Claims Act.  Activities that satisfy the requirements of an AKS safe harbor are protected from prosecution under the AKS[1].

New Safe Harbors

The Final Rule's new safe harbors protect the following arrangements from AKS liability: (1) certain free or discounted local patient transportation; (2) arrangements between federally qualified health centers (FQHCs) and Medicare Advantage Organizations (MAOs); and (3) discounts to beneficiaries under the Medicare Coverage Gap Discount Program.

1.  Free or Discounted Local Transportation For "Established Patients"

The Final Rule's most notable addition to the AKS safe harbors protects free or discounted local transportation offered by health care providers to Federal health care program beneficiaries.  Specifically, the safe harbor protects transportation both to a provider or supplier of services and back to a patient's home or to another health care provider, as long as all conditions of the safe harbor are met.

A key restriction under the safe harbor is that it only applies to transportation of "established patients" of a provider, which includes patients who have selected and initiated contact with the provider to schedule an appointment, or who have previously attended an appointment with the provider.  Only established patients may be transported by a provider to its facilities, and providers may only transport patients to another provider who are established patients of that other provider.

The safe harbor applies only to "eligible entities," which is defined to exclude entities that do not directly render healthcare services to patients, such as health plans, MA organizations, MCOs, accountable care organizations, and pharmacies.  The transportation provided "cannot take the form of air, luxury, or ambulance-level service."  Protected transportation is also limited by distance.  For providers in rural areas transportation may not exceed 50 miles one way, and for all other providers there is a 25 mile limit.  Further restrictions are that the availability of the transportation is set forth in a policy which is applied uniformly and consistently, neither the entity nor the driver markets or advertises the transportation services, and drivers are not paid on a per-beneficiary-transported basis.

The safe harbor also protects a shuttle service operated by a provider, which is defined as a vehicle that runs as a set route and a set schedule. The shuttle service need not be limited to established patients, but the service may not be advertised, and no stops on the route may be more than 50 miles from the provider for rural providers, or 25 miles from the provider, for all other providers.

Despite the limited nature of the safe harbor, it is a welcome addition to the AKS safe harbors.  Previously, providers looking to shelter free or discounted local transportation arrangements from AKS liability had to rely on OIG advisory opinions that, while helpful, were limited to the specific facts addressed in the opinion, protected only the provider or supplier who requested the opinion, and could take months and sometimes even years to obtain.  By clarifying for the first time how to shield such arrangements from the AKS, the Final Rule creates an avenue for structuring a free patient transportation program that does not run afoul of the AKS. 

It is also important to note that there is a CMP statute that prohibits remuneration to patients that is likely to influence their choice of provider, which could be implicated by free transportation.  However, transportation that is protected by an AKS safe harbor does not violate the CMP statute.

2.  Payments Between FQHCs & MAOs

Another new safe harbor protects certain remuneration between MAOs and FQHCs pursuant to written agreements.  To qualify for the safe harbor, such agreements must "provide for a level and amount of payment to the FQHC that is not less than what the MA organization would make for such services if the services had been furnished by an entity other than a FQHC."  And while the new safe harbor sets only a minimum payment level (not a maximum), it does not protect any remuneration between FQHCs and MAOs that is unrelated to MA plan enrollees being treated at the FQHC.  For example, the provision of free space would not qualify for protection, nor would financial support from the MAO to the FQHC for conducting outreach activities, purchasing health information technology, or funding infrastructure costs, as these items are not related to FQHC treatment.

3.  Medicare Coverage Gap Discount Program

 A third new safe harbor is quite limited, as it only applies to discounts by manufacturers on drugs furnished to beneficiaries under the Medicare Coverage Gap Discount Program (MCCDP).  The safe harbor requires full compliance with all requirements of the MCCDP.  The Final Rule clarifies that minor, technical instances of non-compliance should not preclude safe harbor protection, such as missing a payment deadline by one day.  However, the Final Rule also states that manufacturers that knowingly and willfully provide discounts without complying with the requirements of the MCCDP could be subject to sanctions (unless such discounts are protected by another safe harbor).

Amended and Expanded Existing Safe Harbors

 The Final Rule adds two types of arrangements to the existing safe harbor for cost-sharing waivers or reductions, and makes a technical correction to the safe harbor for referral services.

1.  Cost-Sharing Waivers or Reductions

The Final Rule expands the safe harbor for waivers or reductions in patient copayments, coinsurance, or deductibles (cost-sharing) which previously only protected cost-sharing amounts owed for hospital inpatient services.  The safe harbor now protects (1) reductions in cost-sharing by pharmacies for financially needy beneficiaries, where the waiver reduction is not offered as part of an advertisement or solicitation, and (2) waivers in cost-sharing for State- or municipality-owned emergency ambulance services.  The OIG also expanded the scope of the safe harbor to include all Federal health care programs patients.

2.  Referral Services

The Final Rule makes an important, though technical, correction to the safe harbor for referral services.  The existing safe harbor was amended to clarify that the safe harbor is unavailable for any payments to a referral service that are based on the volume or value of referrals to, or business otherwise generated by, either party for the other party.  This amendment corrects a change to the regulation made in 1999, which unintentionally implied that the safe harbor excluded only those payments based on the volume or value of referrals to, or increased business for, the referral service

 CIVIL MONETARY PENALTIES REGULATION

 The CMP statute and regulations prohibit remuneration to beneficiaries that is likely to influence the beneficiaries to obtain health care services from a particular provider.  However, the CMP statute and regulations define the term "remuneration" to exclude certain types of beneficiaries.

New Exceptions to the Remuneration Prohibition for Beneficiary Inducements

 The Final Rule adds the following five new regulatory exceptions[2] to the definition of remuneration.

1.  Reduced copayments by hospitals to patients for certain outpatient department services.  The exception incorporates an existing statutory exception.

2.  Remuneration that both promotes access to care for beneficiaries and poses a low risk of harm to patients and Federal health care programs.  The exception provides that its requirements are met if the items and services (i) are unlikely to interfere with or skew clinical decision making; (ii) are unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (iii) do not raise patient safety or quality of care conclusions.

3.  Coupons, rebates, or other retailer reward programs that are offered on equal terms to the general public and are not tied to the provision of other services reimbursed by Medicare or Medicaid.  For purposes of this exception, a "retailer" is an entity that sells items, not services, directly to consumers.  This exception incorporates a pre-existing statutory exception to the CMP prohibition.

4.  Offers or transfers to beneficiaries items and services for free or less than fair market value, where (i) the items or services are neither advertised nor tied to the provision of other items or services reimbursed by certain Federal or State health care programs; (ii) a reasonable connection exists between the items or services and the medical care of the individual; and (iii) a good faith determination has been made that the individual is in financial need.  Again, this exception incorporates an existing statutory exception.

5.  Copayment waivers by a Medicare Part D Plan sponsor for the first fill of generic drugs.

 Gainsharing Arrangements

 The CMP statute also prohibits hospitals and critical access hospitals from knowingly compensating a physician as an inducement to "reduce or limit services" to Medicare or Medicaid beneficiaries under the physician's direct care.  The OIG had previously announced its intent to interpret the phrase "reduce or limit services" to apply to more than just medically necessary services.  However, the Medicare and CHIP Reauthorization Act of 2015 (MACRA) amended the CMP statute to apply only to medically necessary services.  Therefore, the OIG did not implement its proposed, narrower interpretation of "reduce or limit services."

CONCLUSION

 As a whole, the Final Rule represents some movement toward achieving the OIG's stated goal of giving healthcare providers more options to achieve improved efficiency and access to quality care while protecting programs and patients from fraud and abuse.  However, the new safe harbors and CMP exceptions, while helpful, include numerous restrictions and requirements that will likely limit their usefulness in structuring protected arrangements.

For additional information, please contact David Henninger, Charles Oppenheim, Brad Tully or Kevin Royer in Los Angeles at 310.551.8111; James Segroves in Washington, D.C. at 202.580.7710; Ben Durie  in San Francisco at 415.875.8502; or Amy Joseph in Boston at 617.532.2702.

[1] The safe harbor regulations are found at 42 C.F.R. Section 1001.952.

[2] The CMP exceptions may be found at 42 C.F.R. Section 1003.101.

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