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OIG Releases Proposed Rule Affecting Anti-Kickback Statute Safe Harbors

The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently published a proposed rule that affects providers and suppliers seeking to comply with the federal Anti-Kickback Statute (AKS) and Civil Monetary Penalty (CMP) provisions. The proposed rule alters existing safe harbors, codifies statutory changes, and adds new protections for arrangements that the OIG believes present low risk to federal health care programs.

The AKS provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce or reward the referral of business reimbursable under Federal health care programs. The law prohibits all types of remuneration, including kickbacks, bribes, and rebates. Due to the extremely broad reach of the statute, Congress authorized the OIG to develop safe harbor regulations that protect industry payment and business practices that, if structured properly, would not be treated as criminal offenses under the AKS even though they may induce referrals of business under the Federal health care programs. In authorizing these safe harbors, Congress intended that the safe harbor regulations be updated periodically to reflect changes in business practices and technology in the health care industry. The proposed rule will also codify statutory changes emanating from the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and the Affordable Care Act of 2010.

Specifically, the proposed rule applies to safe harbors or exceptions related to 1) referral services, 2) cost-sharing waivers, 3) agreements between Medicare Advantage (MA) plans and Federally Qualified Health Centers (FQHCs), 4) the Medicare Coverage Gap Discount Program, and 5) free or discounted local transportation services.

Referral Services – The proposed rule makes a technical correction to the safe harbor for referral services. As currently written, the safe harbor’s language resulted in an unintended ambiguity that some viewed to permit referral services to adjust their fees based on the volume of referrals made to a provider. The proposed rule alters the language to now prohibit payments based on the volume or value of referrals to, or other business generated by, either party for the other party. The rule clarifies that referral services cannot adjust fees based on the volume of business generated for a health care entity.

Cost-Sharing Waivers – The OIG has longstanding guidance that demonstrates the potential abuse of cost-sharing waivers in the context of the AKS. Waivers of cost-sharing also implicate the CMP prohibition against beneficiary inducements. The proposed rule seeks to except from liability arrangements that meet requirements relating to (1) certain waivers or reductions by pharmacies of any cost-sharing imposed under Medicare Part D, and (2) emergency ambulance services owned and operated by a State, a political subdivision of a State, or a federally recognized Indian tribe. Accordingly, the emergency ambulance safe harbor will not apply to contracts with private outside ambulance providers or suppliers. Also, in order to meet the safe harbor for waivers or reductions of cost-sharing under Medicare Part D, a pharmacy must demonstrate that (1) the waiver is not advertised or part of a solicitation, (2) the pharmacy does not routinely waive the cost sharing, and (3) before waiving the cost sharing, the pharmacy determines in good faith that the beneficiary has a financial need or the pharmacy fails to collect the cost-sharing amount after making reasonable effort to do so. However, if the waiver is made on behalf of a subsidy-eligible individual, requirements (2) and (3) will not apply.

FQHCs and MA Organizations – The Medicare Modernization Act amended the AKS to protect any remuneration between a Federally Qualified Health Center (FQHC) and an Medicare Advantage (MA) organization pursuant to a written agreement. The amended law requires that the written agreement between the two entities specifically provide that the MA organization will pay the contracting FQHC no less than the level and amount of payment that the plan would make for the same services if the services were furnished by another type of entity. The proposed rule would incorporate these changes by implementing this exception into the safe harbor regulations pursuant to a new section, 42 CFR 1001.952(z).

Medicare Coverage Gap Discount Program – The proposed rule will protect discounts in the price of applicable drugs furnished to applicable beneficiaries under the Medicare Coverage Gap Discount Program, so long as the manufacturer participates in, and is in full compliance with, the Discount Program. The proposed rule would incorporate by reference certain definitions found in the Medicare Coverage Gap Discount Program law.

Free or Discounted Local Transportation Services
– The new rule proposes to establish a new safe harbor to protect free or discounted local transportation (within 25 miles) services provided to Federal health care program beneficiaries. The proposed rule requires that the transportation services only be offered to established patients, for medically necessary services, and be determined in a manner unrelated to the past or anticipated volume or value of Federal health care program business. The OIG proposes to limit the protection of the safe harbor to an “eligible entity,” which may exclude DME suppliers, pharmaceutical companies, and laboratories. The OIG also expressed concerns and sought comments as to whether the safe harbor should be available to the home health industry. Additionally, the safe harbor will include several restrictions that limit providers’ ability to offer free transportation based on the volume or value of a patient’s anticipated federal health care program business. Further, the safe harbor will not apply to air, luxury, or ambulance level-transportation. Lastly, the transportation services cannot be marketed, cannot involve marketing, and cannot accept per-beneficiary payments for transportation.

Please note that these changes are all a part of the OIG’s “proposed rule,” and therefore are open to provider input via the OIG comment solicitation process. Also, please be aware that the proposed rule includes changes to the OIG’s CMP authorities regarding beneficiary inducements and “gainsharing” that are not addressed in this blog.

Wachler & Associates PC counsels healthcare providers nationwide regarding compliance with the Anti-Kickback State and safe harbors. If you or your healthcare entity seek clarification as to how the OIG’s proposed rule may impact your healthcare entity, or seek assistance in commenting on any of the provisions found in the proposed rule, please contact an experienced healthcare attorney at 248-544-0888 or via email at wapc@wachler.com