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

by K&L Gates LLP

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.


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.


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.


[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. 59,725.

[11] Id.

[12] Id.

[13] Id.

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

[15] 79 Fed. 59,727.

[16] 79 Fed. 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.

© K&L Gates LLP | Attorney Advertising

Written by:

K&L Gates LLP

K&L Gates LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.