Proposed Updates to the Civil Monetary Penalties Law for Health Care Providers

by K&L Gates LLP
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On October 3, 2014, the Office of Inspector General of the Department of Health and Human Services (“OIG”) published a proposed rule and request for comments (“Proposed Rule”) that would amend certain rules under the Civil Monetary Penalty Law (“CMP Law”).[1] The CMP Law, among other things, prohibits anyone from knowingly giving anything of value to a beneficiary of a federal health care program that is likely to influence the individual to choose a particular provider for an item or service paid for by the federal health care program. In addition, the CMP Law prohibits a hospital from knowingly paying a physician as an inducement to reduce or limit the services provided to a beneficiary of a federal health care program, a practice commonly referred to as “gainsharing.” Comments to the Proposed Rule are due by December 2, 2014. Note that the Proposed Rule would also amend the Anti-Kickback Statute (“AKS”) safe harbors. These changes are the subject of another K&L Gates Alert.

Gainsharing

The current CMP law prohibition on gainsharing prevents hospitals from making direct or indirect payments to a physician as an inducement to reduce or limit services to Medicare or Medicaid beneficiaries who are under the physician’s direct care.[2] While the term is not defined by statute, the OIG has interpreted gainsharing broadly to encompass any arrangement in which a hospital and a physician share the cost savings resulting from the physician’s efforts.[3] This covers even payments related to reducing medically unnecessary services.

The current prohibition is out of step with the overarching movement towards increasing quality of care while decreasing costs, including governmental initiatives with accountable care organizations and shared savings programs. OIG commentary appears to acknowledge this, and to recognize that hospitals often have legitimate interests in enlisting physicians in their cost-containment efforts.

Of particular note, the Proposed Rule commentary explicitly states that, “we recognize that a change in practice does not necessarily constitute a limitation or reduction of services, but may in fact constitute an improvement in patient care or a reduction in cost without reducing patient care or diminishing its quality.”[4] The OIG stated that, “pending further notice... gainsharing arrangements are not an enforcement priority for OIG unless the arrangement lacks sufficient patient and program safeguards.”[5]

Accordingly, the OIG is soliciting comments on a narrower interpretation of the phrase “reduce or limit services.” This change would likely mean that fewer arrangements would constitute prohibited gainsharing in the first place. While it declined to propose a definition, the OIG is soliciting comments regarding what safeguards would allow greater flexibility while also ensuring “that the goal of the statute is met: to prevent hospitals from discharging patients too soon or to take other action that inappropriately limits a beneficiary’s care.”[6]

The Proposed Rule requests comments on the following questions in particular:

  • Should the gainsharing prohibition apply to payments that reduce or limit use of items as well as those that reduce or limit services?
  • Should a hospital’s decision to standardize certain items (e.g., a certain brand of surgical instrument) constitute a reduction or limitation in care? Does it matter if the physician is still free to use a non-standardized item for a particular patient?
  • Should a hospital’s decision to rely on objective measures for certain procedures (e.g., a protocol calling for discontinuance of a prophylactic antibiotic after a specified length of time) constitute a reduction or limitation in care?  Should the hospital be required to track quality data to ensure that such protocols do not inadvertently lead to reductions in care?
  • Should hospitals and physicians participating in a permitted gainsharing program be required to notify potentially affected patients about the arrangement?[7]

In essence, the OIG is attempting to strike a balance between protecting patients and federal health care programs on the one hand, while permitting properly designed gainsharing programs on the other. Hospitals and physicians should consider submitting comments to help shape this exception, given the increasing prevalence of shared savings programs and co-management agreements. CMS should also consider parallel changes to the Stark Law, given that certain activity that may now be allowed under the CMP law would still need an exception under the Stark Law.[8]

Inducements to Beneficiaries

In the Patient Protection and Affordable Care Act, Congress amended the definition of “remuneration” to create new exceptions to the prohibition on providing inducements to beneficiaries.[9] In other words, Congress granted providers greater flexibility in furnishing certain items and services to beneficiaries, as long as the requirements of the applicable exception are satisfied. The Proposed Rule codifies and seeks to provide greater clarity to these exceptions.

The first exception allows health care providers to give beneficiaries “any other remuneration which promotes access to care and poses a low risk of harm to patients and Federal health care programs.”[10] Given this broad language and its limited application in Advisory Opinions to date, clarifications are a helpful step forward, and providers should comment on any example they think should be covered.

  • The OIG proposed interpreting “access to care” to mean that the incentive “improves a particular beneficiary’s ability to obtain medically necessary health care items and services.”[11] Specifically, the OIG sought comment on whether “access to care” should be more broadly interpreted in light of new “integrated care arrangements that depend, in part, on patient engagement.”[12] Additionally, the OIG sought comment on whether promoting “access to care” should apply only to a defined beneficiary or to the population generally, and whether “access to care” should encompass non clinical services which could reasonably relate to a patient’s medical care (e.g., social services).
  • The OIG proposed interpreting “low risk of harm” to patients and health care programs as remuneration that “(1) is unlikely to interfere with, or skew, clinical decision-making; (2) is unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (3) does not raise patient-safety or quality-of-care concerns.”[13]
  • The OIG stressed that arrangements must both promote “access to care” and pose a “low risk of harm” to qualify for this exception. Examples of incentives which the OIG has already determined meet both requirements include:
    • Lodging assistance in particularized scenarios when such assistance is necessary for a patient to overcome logistical hurdles to obtaining care; and
    • Providing monitoring equipment (e.g., blood pressure cuffs or scales) to patients who could benefit from close monitoring.[14]
  • The OIG stated, however, that it remains concerned about providers attempting to use this exception to offer valuable gifts in connection with marketing or as a reward for treatment compliance. At the same time, the OIG recognized that incentives to encourage patients to fully participate in prescribed treatment, to achieve appropriate treatment milestones, or to follow up with medically necessary appointments have the potential to lower health care costs without compromising quality. Thus, the OIG sought comment on whether some such incentives should be permitted and, if so, what limitations and safeguards should be required.
  • In light of the myriad potential scenarios that could fall under this exception, the OIG requested examples of other programs that promote both “access to care” and are a “low risk of harm” so that it can consider such scenarios in drafting the regulations.

The second exception sets forth the requirements for a permissible retailer rewards program that can be made available to beneficiaries of federal health care programs.

  • This exception addresses coupons, rebates, or other rewards from a retailer. The OIG proposed defining “retailer” as “an entity that sells items directly to consumers.”[15] This definition would not include service providers such as hospitals or physicians.  The OIG solicited comment about whether entities that sell items requiring a prescription (e.g., medical equipment stores) should also be considered “retailers.”
  • The second requirement of this exception is that “the items or services are offered or transferred on equal terms available to the general public,” without regard to insurance status.[16] For example, a reward targeted only to incentivize customers to switch prescriptions would probably not meet this requirement, but a coupon with a general reward mailed indiscriminately to every customer in a certain geographic area would likely be acceptable.
  • The coupon, rebate or reward may not be tied to the provision of other items or services reimbursed in whole or in part by a federal health care program. The OIG noted that a retailer’s loyalty program must meet this criterion in both the manner of earning the reward and the manner of redeeming it.

The third exception permits items or services to be provided at no cost or for less than fair market value based on a determination that the recipient is in financial need, assuming the following requirements are also met:

  • The items or services may not include cash or cash equivalents. 
  • The items or services may not be offered as part of an advertisement or solicitation.
  • The items and services may not be tied to provision of other reimbursable services, yet there must also be a “reasonable connection” between the items or services and the individual’s medical care. The OIG noted that assessing whether a ”reasonable connection” exists requires consideration of both medical and financial factors—i.e., the government will look for a link to a medical condition, as well as the relative value of the item or service. While the OIG requested comments on further defining these concepts, it also helpfully identified the following examples of arrangements it would likely view favorably under this exception:
    • Protective helmets and safety equipment provided to children with hemophilia;
    • Pagers distributed to patients with chronic conditions to remind them to take their medications;
    • Free blood pressure checks offered to patients with high blood pressure;
    • Free nutritional supplements given to malnourished dialysis patients; and
    • Air conditioners provided to patients with asthma.
  • Finally, the provider must make a good-faith determination of the patient’s financial need, which would generally require a “reasonable set of income guidelines, uniformly applied.”[17]

The fourth exception would permit waivers of the copayment on the first fill of a generic drug under a Medicare Advantage or Medicare Part D plan.[18] Sponsors offering such waivers would have to disclose the incentive program in their benefit plan package submissions to CMS.

Recommendations

Providers should review the Proposed Rule and determine whether it provides enough flexibility to allow them to accomplish their quality and efficiency goals. It may be particularly advantageous to comment on the proposed interpretation of “any other remuneration which promotes access to care and poses a low risk of harm to patients and Federal health care programs” and to send the OIG examples of how providers might use this exception to help their patients. In addition, hospitals should consider whether the proposed new flexibility in the OIG’s interpretation of gainsharing would allow them to better align practitioner incentives with hospital efficiency initiatives. The OIG appears receptive to ideas that present a low risk of fraud and abuse while promising a high level of return in terms of quality and cost savings.

Notes:

[1] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to Safe Harbors Under the Anti-Kickback Statute, and Civil Monetary Penalty Rules Regarding Beneficiary Inducements and Gainsharing: Proposed Rule, 79 Fed. Reg. 59,717 (Oct. 3, 2014).

[2] 42 U.S.C. § 1320a-7a.

[3] OIG, Special Advisory Bulletin: Gainsharing Arrangements and CMPs for Hospital Payments to Physicians to Reduce or Limit Services to Beneficiaries (July 8, 1999).

[4] 79 Fed. Reg. at 59,730.

[5] Id. at 59,729, FN 15.

[6] Id.

[7] 79 Fed. Reg. at 59,731.

[8] 42 U.S.C. § 1395nn.

[9] Pub. Law 111-148 (Mar. 23, 2010) at § 6402(d)(2)(B).

[10] 79 Fed. Reg.at 59,725.

[11] Id.

[12] Id.

[13] Id.

[14] See OIG Advisory Ops. 11–01 and 11-16.

[15] 79 Fed. Reg.at 59,727.

[16] 79 Fed. Reg.at 59,726.

[17] Id.

[18] Id.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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