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OIG Offers Greater Protections for Health Care Providers in New Proposed Rule, Comments Due 12/02/2014

The following article was provided by OAMES Associate Member Dinmore & Shohl LLP, guest authors Jennifer MitchellMatthew Arend and Jenna Moran

On October 3, 2014, the U.S. Department of Health and Human Services of the Office of Inspector General (OIG) issued a Proposed Rule amending both the safe harbors to the anti-kickback statute and the civil monetary penalty (CMP) rules. The Proposed Rule would add new safe harbors, codify revisions to the definition of “remuneration,” and add new regulatory text interpreting the Gainsharing CMP provisions. Taking note of Congress’ intention that the safe harbor regulations be updated periodically to reflect changing business practices and technologies in the health care industry, the Proposed Rule reflects OIG’s desire to protect certain arrangements that it believes enhance effective delivery of health care and provide low risk to the Federal health care programs.

Section 1128B(b) of the Act (42 U.S.C. 1320a-7b(b) (the anti-kickback statute) 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 the Federal health care programs. Violations may also result in the imposition of CMPs under section 1128A(a)(7) of the Act (42 U.S.C. 1320a-7a(a)(7)), program exclusion under section 1128(b)(7) of the Act (42 U.S.C. 1320a-7(b)(7)), and liability under the False Claims Act (31 U.S.C. 3279-33). Due to concerns that some innocuous commercial arrangements would be covered by the statute and thus, potentially subject to criminal prosecution, Congress enacted Section 14 of the Medicare and Medicaid Patient and Program Protection Act of 1987, which requires the promulgation of safe-harbor provisions that specify certain practices that would not be subject to enforcement action under the anti-kickback statute.

The OIG specifically noted that many of the proposed modifications codify statutory changes set forth in the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, the Patient Protection and Affordable Care Act (ACA), and the Balanced Budget Act (BBA) of 1997. Comments on the Proposed Rule are required to be submitted no later than December 2, 2014.

Specifically, the Proposed Rule promulgates the following modifications and additions to the anti-kickback statute safe harbor regulation found at 42 CFR § 1001.952:

  • Referral Services. A technical correction would be added to the existing safe harbor for referral services to clarify that the safe harbor precludes protection for payments from participants to referral services that are based on the volume or value of referrals to, or business otherwise generated by, “either party for the other party”;
  • Part-D Cost-Sharing Waiver by Pharmacies. A safe harbor protection would be established for pharmacies waiving Part D cost-sharing if: (1) the waiver or reduction is not advertised or part of a solicitation, (2) the pharmacy does not routinely waive the cost-sharing, and (3) before waiving, the pharmacy either determines in good faith that the beneficiary has a financial need or the pharmacy fails to collect the cost-sharing amount after making a reasonable effort to do so;
  • Cost-Sharing Waivers for Emergency Ambulance Services. A safe harbor protection would be established for emergency ambulance services who offer uniform reductions or waivers of coinsurance or deductible amounts so long as the ambulance provider or supplier is owned and operated by a State, a political subdivision of a State, or a federally recognized Indian tribe and is the Medicare Part B provider or supplier of the emergency ambulance services. Additionally, a prohibition against claiming the amount reduced or waived as bad debt for payment purposes under Medicare or a State health care program, or otherwise shifting the burden of the reduction or waiver onto other payers.
  • Federally Qualified Health Centers and Medicare Advantage Organizations. A safe harbor protection would be established for any remuneration between a federally qualified health center (FQHC) and a Medicare Advantage (MA) organization pursuant to a written agreement that specifically provides 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;
  • Medicare Coverage Gap Discount Program. A safe harbor protection would be established for discounts in the price of an “applicable drug” (as defined by Section 1860D-14A(g)) of a manufacturer that is furnished to an “applicable beneficiary” (as defined by Section 1860D-14A(g)) under the Medicare Coverage Gap Discount Program as long as the manufacturer participates in, and is in full compliance with all requirements of, the Medicare Coverage Gap Discount Program; and
  • Local Transportation. A safe harbor protection would be established for any “eligible entity” providing free or discounted local transportation services within the local area of the health care provider or supplier to established patients for the purpose of obtaining medically necessary items or services if the following conditions are met:
  1. The availability of the transportation services is not determined in a manner related to the past or anticipated volume or value of Federal health care program business;
  2. The transportation services do not take the form of air, luxury, or ambulance-level transportation;
  3. The transportation services are not marketed or advertised, no marketing of health care items and services occurs during the course of the transportation or at any time by drivers who provide the transportation, and drivers or others arranging for the transportation are not paid on a per-beneficiary transported basis;
  4. The “eligible entity” that makes the transportation available bears the costs of the transportation services and does not shift the burden onto other payers; and
  5. To be deemed “local,” the distance from the patient’s location to the provider or supplier to which the patient would be transported could be no more than 25 miles.

Some of the other key amendments found in the Proposed Rule include:

  • Revised Definition of “Remuneration.” The definition of “remuneration” would be amended by adding exceptions for:

o    Copayment Reductions for Outpatient Department Services. A reduction in the copayment amount for covered outpatient department services under Section 1833(t)(8) would be added.

o    Promoting Access/Low Risk of Harm. This exception would cover any remuneration which promotes access to care by improving a particular beneficiary’s ability to obtain medically necessary health care items and services and poses a low risk of harm to patients. It also would cover Federal health care programs so that it: (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 standards.

o    Retailer Rewards Programs. Rewards pursuant to a retailer rewards program would be permitted if: (1) the free or less-than-fair-market value items or services consist of coupons, rebates, or other rewards from a retailer; (2) the items or services are offered or transferred on equal terms to the public, regardless of health insurance status; and (3) the offer or transfer of the items or services are not tied to the provision of other items or services reimbursed in whole or in part by Medicare or an applicable state health care program.

o    Financial-Need. The offer or transfer of items or services reasonably connected to the medical care of the individual for free or at less than fair market value would be permitted after a good faith determination that: (1) the recipient is in financial need; (2) it is not offered as part of any advertisement or solicitation; and (3) it is not tied to the provision of other reimbursed services.

o    Waivers of Cost-Sharing for the First Fill of Generic Drug. Waivers of any copayment that would otherwise be owed by enrollees in a prescription drug plan under Part D or a MA-PD plan for the first fill of a generic covered Part D drug would be permitted so long as such waivers are included in the benefit design package submitted to CMS. This exception is effective for coverage years that begin after publication of the final rule.

  • Gainsharing. The Proposed Rule codifies and interprets the Gainsharing CMP, set forth in section 1128A(b) of the Social Security Act, which prohibits hospitals and critical access hospitals from knowingly paying a physician to reduce or limit services provided to Medicare or Medicaid beneficiaries who are under the physician’s direct care. OIG proposes to interpret certain provisions in accordance with the observation that not all changes in practice necessarily constitute a reduction of services that would be in violation of the Gainsharing CMP and that some arrangements may offer opportunities for hospitals to reduce costs without causing inappropriate reductions in medical services or rewarding referrals of Federal health care program business.

The OIG is soliciting comments with regards to several considerations which would provide possible expansions to the amendments in the Proposed Rule. These considerations are not currently incorporated into the Proposed Rule but will offer various entities the opportunity to provide comments on these considerations. For example, comments solicited for the “Local Transportation” exception include whether home health care providers should be excluded from the definition of “eligible entity” when they furnish free or discounted local transportation to their referral services and whether one provider or supplier of services should be permitted to provide free or discounted local transportation to the premises of all others.

The Proposed Rule conveys a continued effort by the OIG to strike an appropriate balance between protections for beneficial arrangements and safeguarding against abuse of the Federal health care programs. The Proposed Rule sheds a particularly bright light on the safe harbor protections offered for free or discounted local transportation which has been a frequently visited topic by OIG advisory opinions over the last decade. Health care providers who have any questions on how the Proposed Rule could affect their business should contact Jennifer Orr Mitchell at or Matthew Arend

The full text of the Proposed Rule published in the Federal Register is available here.


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