The Office of Inspector General (“OIG”) of the Department of Health and Human Services has issued a final rule¹ (“Final Rule”) adding new safe harbors to the federal anti-kickback statute, amending existing safe harbors, and revising the definition of “remuneration” under the civil monetary penalty (“CMP”) law. These are welcome changes providing greater flexibility to industry participants seeking to navigate the prohibitions of the anti-kickback statute and CMP law.

As described in more detail below, the new regulations, which became effective January 6, 2017: (i) allow providers to subsidize patient travel costs incurred to obtain health care services; (ii) give drug manufacturers more flexibility to offer discounts to patients in the Medicare Part D coverage gap; and (iii) establish new safe harbors for Medicare Advantage Organizations, Federally Qualified Health Centers (“FQHCs”), pharmacies, and emergency ambulance service providers.

The Final Rule also clarifies the definition of “remuneration,” under the CMP law’s beneficiary inducement prohibition. Specifically, the OIG clarified that the following shall not be considered “remuneration”:

• remuneration that “poses a low risk of harm” and “promotes access to care”;
• retail reward programs such as coupons or rebates;
• remuneration to financially needy individuals; and
• copayment waivers for the first fill of generic drugs.

The Final Rule also increased the dollar cap on nominal value gifts.

1. New Anti-Kickback Statute Safe Harbors

Due to the broad language of the anti-kickback statute², in 1987, Congress directed the Secretary of HHS to create safe harbors to specify certain payment and business practices that would not be subject to criminal prosecution under the statute. An arrangement that fits precisely within the requirements of a safe harbor is immune from prosecution.³ The Final Rule creates several new safe harbors, which are each discussed further below.

Free or Discounted Local Transportation

The OIG created a new safe harbor that protects free or discounted local transportation, as well as shuttle services, provided that the programs meet certain requirements.

• Free or discounted local transportation. Eligible entities, such as hospitals and clinics, may now furnish certain free or discounted local transportation to “established patients,” who are covered by federal health care programs, without implicating the anti-kickback statute. The Final Rule adopted a definition of “established patient” that includes those who have initiated contact to schedule an appointment as well those who have already had an appointment with the provider. The new safe harbor protects free or discounted transportation provided by an “eligible entity.” An “eligible entity” is any individual or entity that does not primarily supply health care items, such as durable medical equipment suppliers, pharmaceutical companies, and pharmacies. In commentary to the Final Rule, the OIG clarified that “health plans, MA organizations, MCOs, accountable care organizations (ACOs), clinically integrated networks, and charitable organizations are not among the entities excluded from the definition of eligible entity and thus are eligible to provide transportation.”⁴

In the past, the OIG has scrutinized free transportation arrangements and issued several Advisory Opinions on the subject. The Final Rule incorporates several requirements for safe harbor protection that preclude, or eliminate, the risk factors the OIG has previously identified.⁵ In order to qualify for safe harbor protection, the free or discounted transportation:

• must be set forth in a policy, which is applied consistently by the eligible entity;
• must not be determined in a manner related to the volume or value of federal health care program business;
• must not be publicly marketed or advertised by the eligible entity, and no marketing of health care items and services may occur during the transportation or at any time by the drivers;
• drivers, or others arranging for the transportation, must be not paid on a per-beneficiary-transported basis;
• the transportation is made available for the purpose of obtaining medically necessary items and services;
• the eligible entity does not shift costs of the free or discounted transportation onto federal health care programs, other payors, or individuals; and
• the transportation must not include air, luxury, or ambulance-level transport.

The official commentary indicates that vehicles equipped for wheelchairs (other than ambulances) and third-party transportation, including public transportation, would be protected if they meet the safe harbor criteria.⁶ In addition, the Final Rule defined “local” transportation to include anywhere within 25 miles of the health care provider, or 50 miles if the patient lives in a rural area.

• Shuttle services. A new safe harbor protects “shuttle services” provided by an eligible entity (defined above). “Shuttle service” is a vehicle that runs on a set route on a defined schedule but excludes air, luxury, or ambulance-level transportation. The safe harbor for shuttle services contains its own requirements that must be satisfied, including:
  • The service must not be marketed or advertised (other than posting necessary route and schedule details);
  • No marketing of health care items and services may occur during the transportation or at any time by the drivers;
  • Drivers, or others arranging the transportation, may not be paid on a per-beneficiary-transported basis;
  • The eligible entity may not shift the burden of the shuttle service costs to federal health care programs, other payors, or individuals; and
  • The eligible entity must make the shuttle service available only within 25 miles from any stop on the route to any location where health care items or services are provided. This distance may be up to 50 miles in rural areas.

Medicare Coverage Gap

The Affordable Care Act amended the anti-kickback statute to protect discounts provided by prescription drug manufacturers under the Medicare Coverage Gap Discount Program. The Final Rule incorporates the statutory exception added by the Affordable Care Act into the safe harbor regulations.

Specifically, the OIG added a provision to protect discounts on “applicable drugs” provided to “applicable beneficiaries” under the Medicare Coverage Gap Discount Program.⁷ The terms “applicable drug” and “applicable beneficiaries” are defined in the Affordable Care Act and pertain to drugs that are covered by, and beneficiaries enrolled in, prescription drug plans and Medicare Advantage Prescription Drug (“MA–PD”) plans.⁸ To qualify for safe harbor protection, the drug manufacturer must participate in, and comply with the requirements of, the Medicare Coverage Gap Discount Program.

FQHCs and Medicare Advantage Organizations

In the Final Rule, the OIG incorporates a statutory exception to the anti-kickback statute⁹ into the safe harbor regulations. The safe harbor protects remuneration between a FQHC (or an entity controlled by a FQHC) and a Medicare Advantage organization, if:

• The remuneration is provided in accordance with a written agreement between the FQHC and the Medicare Advantage organization¹⁰; and
• The agreement requires the Medicare Advantage organization to provide a level and amount of payment to the FQHC for FQHC services, which is not less than the level and amount of payment that the Medicare Advantage organization would make for such services if they had been furnished by an entity other than a FQHC. ¹¹

In commentary to the Final Rule, the OIG stated that the safe harbor protects payments related to FQHCs treating Medicare Advantage plan enrollees and “not arrangements unrelated to MA plan enrollees being treated at the FQHC.”¹² The OIG described examples that would not qualify for safe harbor protection, because they are unrelated to FQHC treatment of Medicare Advantage plan enrollees: (i) the provision of free space by the FQHC to the Medicare Advantage organization; and (ii) financial support from the Medicare Advantage organization to the FQHC (for example, for conducting outreach activities, purchasing health information technology, and funding infrastructure costs).¹³

2. Amended Safe Harbors

Safe Harbor for Cost-Sharing Waivers

The OIG revised and expanded the existing safe harbor for cost-sharing waivers, which previously protected the reduction or waiver of a Medicare or state health care program beneficiary’s obligation to pay coinsurance or deductible amounts if certain requirements were satisfied. The safe harbor now applies to all federal health care program cost-sharing amounts, and the OIG clarified that the types of cost sharing that may be waived include copayments in addition to coinsurance and deductibles.¹⁴ In addition, within the existing safe harbor for cost-sharing waivers, the OIG added two provisions that protect specific types of cost-sharing forgiveness:

• Cost-sharing waivers by pharmacies. A pharmacy may reduce or waive cost-sharing amounts imposed under a federal health care program, if it: (i) does not advertise the waiver or reduction; (ii) does not routinely waive or reduce cost-sharing amounts; and (iii) waives the cost-sharing amounts only after determining in good faith that the individual is in financial need, or after failing to collect such cost-sharing amounts after reasonable efforts.
• Cost-sharing waivers for emergency ambulance services. An ambulance provider or supplier owned and operated by a state, state political subdivision, or tribal health program, may waive cost-sharing for emergency ambulance services provided that the provider or supplier: (i) offers the reduction or waiver on a uniform basis; and (ii) does not claim that the reduction or waiver is a bad debt under a federal health care program or otherwise shift the cost burden onto a federal health care program, other payors, or individuals.

Amendment to Referral Services Safe Harbor

The OIG also made a technical correction to the safe harbor for referral services¹⁵ and reverted to language from the 1999 Final Rule¹⁶, which provides that payments from participants to referral services must not be based on the volume or value of referrals to, or other business generated by, “either party for the other party.”

3. CMP Exceptions and Change in Nominal Value Cap

The Final Rule revised the definition of “remuneration,” as the term is used under the CMP law¹⁷, to include several new exceptions. The CMP law prohibits the offering of “remuneration” that is likely to induce or influence federal program beneficiaries to seek or order covered services from a particular practitioner, supplier, or provider. In the Final Rule, the OIG adopts four notable exceptions to the definition of “remuneration” and increases the dollar cap on nominal value gifts.

Remuneration that “Poses a Low Risk of Harm” and “Promotes Access to Care”

The Affordable Care Act amended the CMP law to exclude from the definition of “remuneration” any remuneration that “promotes access to care and poses a low risk of harm to patients and federal health care programs.” In the preamble to the Final Rule the OIG describes its view on what promotes a beneficiary’s access to care and what poses a low risk of harm to beneficiaries and federal health care programs.

An arrangement “promotes access to care” when it “improves a particular beneficiary’s ability to obtain” access to items and services payable by any federal health care program. The OIG adopted its interpretation from its proposed rulemaking that items or services that pose a “low risk of harm” are those that are: (i) unlikely to interfere with, or skew, clinical decision making; (ii) 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 concerns.¹⁸

According to the OIG, examples of items or services that may be considered appropriate beneficiary remuneration that both “pose a low risk of harm” and “promote access to care” include offering the following to federal program beneficiaries:

• the provision of child care during beneficiary appointments;
• free or discounted medications, supplies, or devices;
• technology for reporting health data;
• scales or programmable tools to help with medication dosage or refill reminders;
• telemedicine capabilities; and
• certain incentives for scheduling, in extenuating circumstances (for example, at a dialysis facility, an inducement to one patient to move an appointment in order to promote access by a different patient could be protected by the exception).

The OIG makes clear, however, that providing patients with cash or cash equivalent items, or providing rewards just for accessing care, would not fall within this exception.

Coupons, Rebates, or Other Retailer Reward Programs

The OIG also finalized an exception protecting retail coupons, rebates, and other rewards that are made available to the general public, regardless of health insurance status, as long as they are not tied to the provision of other items or services reimbursable by federal health care programs. In the official commentary, the OIG clarifies that “retailers” includes independent or small pharmacies, online retailers, and entities that sell a single category of items, but do not include individuals or entities that primarily provide services (for example, physicians or hospitals).

Items or Services Reasonably Connected to the Medical Care of Financially Needy Individuals

The OIG also finalized an exception to the CMP law for financially needy patients, exempting offers or transfers of items or services (other than cash or cash equivalents) for free or less than fair market value if: (i) the items or services are not offered as part of an advertisement or solicitation; (ii) the offer or transfer is not tied to other services reimbursable by Medicare or Medicaid; (iii) the items or services are “reasonably connected” to the patient’s medical care; and (iv) the provider in good faith determines that the recipient is financially needy.

The OIG does not define “reasonably connected” but indicates that the medical provider working with the beneficiary is in the best position to make this determination and that the determination must be made on a case-by-case basis. The OIG indicates that examples which could be reasonably connected to the patient’s medical care include the provision of most items connected to the wellness and health needs of patients, such as:

• blood pressure cuffs;
• patient engagement software applications;
• biomonitoring devices, and;
• mobile devices as necessary to meet patients’ various health needs.

Note, however, that this exception will not protect items and services that are “essentially for entertainment or other non-medical purposes.”

Copayment Waivers for the First Fill of Generic Drugs

Effective January 1, 2018, Part D Plan sponsors or Medicare Advantage plans may waive any copayment for the first fill of a covered Part D generic drug. The hope is that this will encourage the use of lower cost generic pharmaceuticals. Part D Plan sponsors or Medicare Advantage plans that choose to take advantage of this exception must disclose thesewaivers in the benefit design package submitted to CMS.

Gifts of Nominal Value to Beneficiaries

The OIG has indicated that gifts of “nominal value” are not required to meet an exception under the beneficiary inducement prohibition (the “nominal value exception”). The OIG has not changed the nominal value exception threshold since 2002. The Final Rule revises the nominal value exception to raise the value limit from $10 to $15 for an individual gift and from $50 to $75 for the aggregate annual per patient limit.

4. Takeaways

The OIG states that the Final Rule “enhances flexibility for providers and others to engage in health care business arrangements to improve efficiency and access to quality care while protecting programs and patients from fraud and abuse.”¹⁹ The new and expanded anti-kickback statute safe harbors offer protection for certain arrangements that may allow providers to better serve patients and improve access to care. The new exceptions to the CMP law will promote the use of generic pharmaceuticals and enable providers to reduce barriers to patient care. At the same time, some of the provisions in the Final Rule may not have gone far enough. For example, the exception for certain remuneration to financially needy individuals does not define “reasonably connected” and may lead to confusion amongst providers. Moreover, the increase to the nominal value exception is modest and still relatively low.

FOOTNOTES

1 81 Fed. Reg. 88368 (Dec. 7, 2016).
2 42 U.S.C. § 1320a-7b(b). The anti-kickback statute prohibits the knowing and willful solicitation, offer, payment or acceptance of any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind: (1) for referring an individual for a service or item covered by a federal health care program, or (2) for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, service or item reimbursable under a federal health care program. Violation of the anti-kickback statute is a felony, punishable by fines of up to $25,000 and up to five years’ imprisonment.
3 However, an arrangement that does not precisely meet the requirements of a safe harbor does not necessarily violate the anti-kickback statute. Instead, the OIG will evaluate the arrangement based on the totality of facts and circumstances.
4 81 Fed. Reg. 88380 (Dec. 7, 2016).
5 For example, in Advisory Opinion No. 15-13, the OIG listed the following risk factors in free transportation arrangements: (i) the free transportation is offered selectively to certain patients based on their diagnoses, treatments, or type of insurance coverage; (ii) the arrangement is marketed or advertised, and marketing of health care items or services occurs during the course of the transportation or at any time by the drivers; (iii) van drivers are paid on a per-patient basis; (iv) the transportation includes air, luxury, or ambulance-level transport; and (v) free transportation is offered to beneficiaries residing outside the facilities’ primary service area.
6 81 Fed. Reg. 88386 (Dec. 7, 2016).
7 Section 3301(d) of the Affordable Care Act.
8 42 U.S.C. §1395w-114A(g)(1)-(2).
9 Section 1128B(b)(3)(H) of the Social Security Act.
10 Section 1853(a)(4) of the Social Security Act.
11 Section 1857(e)(3) of the Social Security Act. This is described at 81 Fed. Reg. 88377 (December 7, 2016).
12 81 Fed. Reg. 88378 (December 7, 2016).
13 Id.
14 42 C.F.R. 1001.952(k).
15 42 C.F.R. 1001.952(f).
16 64 Fed. Reg. 63518, 63526 (Nov. 19, 1999).
17 42 C.F.R. Part 1003.
18 81 Fed. Reg. 88368, 88409 (Dec. 7, 2016).
19 81 Fed. Reg. 88368 (Dec. 7, 2016).