The Department of Health and Human Services Office of Inspector General (OIG) recently issued an advisory opinion that explored the limits of a relatively new safe harbor to the federal Anti-Kickback Statute (AKS)1 that aims to increase treatment quality while reducing costs. The OIG concluded in the Oct. 25, 2023 opinion that a proposed arrangement in which a free hearing aid would be provided along with the purchase of a hearing implant falls outside the 2021 safe harbor for “Care Coordination Arrangements to Improve Quality, Health Outcomes”2 and in fact presents a kickback risk. In the opinion, the OIG expressed “longstanding and continuing concerns regarding the provision of free items or services to Federal health care program beneficiaries because of the harms that could result from providing such free items or services, including steering, unfair competition, improper utilization, and quality and cost concerns.”3 The OIG further concluded that the arrangement could allow it to seek civil monetary penalties (CMP), because the free hearing aids may induce patients to choose these implants.
Background
The OIG issued the advisory opinion in response to a request from a manufacturer of implantable hearing solutions.4 The proposed arrangement offers eligible patients a cochlear implant, which is an electronic device that can help provide a sense of sound to a person who is profoundly deaf or severely hard of hearing, along with a free compatible hearing aid. At the request of the patient’s medical provider, a hospital or an ambulatory surgical center would purchase the cochlear implant for the patient, and the manufacturer would provide a free hearing aid with the cochlear implant. The hearing aids have a value of $1,180 to $2,240. While cochlear implants may be covered by Medicare, hearing aids are not covered.
While a new AKS safe harbor implemented in 2021 protects arrangements that promote “patient engagement and support to improve quality, health outcomes, and efficiency,”5 the value of the hearing aids would exceed the $570 cap allowed by the safe harbor provision. The OIG expressed particular concern that the manufacturer acknowledged that the specific cochlear implant was not, in most cases, more clinically appropriate than competing implants, and that patients may choose these implants because of the free hearing aids instead of for a clinical reason. The OIG reiterated its enduring concerns with the provision of free items or services to beneficiaries given the possibility of improperly steering patients to the manufacturer offering the free items over other manufacturers of equivalent devices, or of favoring larger manufacturers with the financial resources to offer free items.
The OIG further concluded that the arrangement implicates the beneficiary inducements provision in the CMP statute, which imposes civil penalties for offering a beneficiary something of value that is likely to influence the beneficiary’s choice of a product. According to the OIG, the arrangement might lead to a CMP violation because a beneficiary may be influenced by the offer of the free hearing aid to select the manufacturer’s cochlear implant. The exception to CMP liability for promoting access to care would not apply because the hearing aid is not required for the cochlear implant to work. Similarly, the OIG found that the financial need-based exception would not apply since the free items (hearing aids) are tied to the purchase of covered items (implants).
Key Considerations for Healthcare Companies and Providers
- This advisory opinion reaffirms OIG’s long-standing concerns with offering free items to beneficiaries when there are strings attached that might lead to additional billing to federal healthcare programs.
- The opinion also confirms that even if use of a device may be medically indicated for a patient, unless its use is actually necessary for the use of the related, reimbursable device, it will not qualify for the CMP exception for promoting access to care.
Footnotes
