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Healthcare Update: Client Alert



On October 3, 2014 the Department of Health and Human Services, Office of Inspector General (“OIG”), released a proposed rule to add new safe harbors to the Anti-Kickback Statute (“AKS”) and to amend the definition of “remuneration” in the Civil Monetary Penalties (“CMP”) regulations.  The OIG additionally solicited comments on same which must be submitted no later than 5 pm EST on December 2, 2014.  The proposed changes are in response to new statutory exceptions codified as part of the Patient Protection and Affordable Care Act (“PPACA”) and the Medicare Prescription Drug, Improvement, and Modernization Act (“MMA”) as amended by PPACA. While there are a number of new proposals, only the most significant ones are discussed in detail below.

A.  AKS Safe Harbors

     1. Referral Services.  The OIG proposes to make a technical correction to the language of the existing safe harbor for referral services to remove a perceived ambiguity in the language.  Accordingly, §1001.952(f)(2) will read, “Any payment the participant makes to the referral service is assessed equally against and collected equally from all participants and is based only on the cost of operating the referral service, and not on the volume or value of referrals to or business otherwise generated by either party for the other party for which payment may be made in whole or in part under Medicare, Medicaid, or the Federal health care programs.”

     2. Cost Sharing/Co-Insurance Waivers.  As a general rule, the reduction or waiver of Medicare or other Federal health care program cost-sharing amounts (such as copayments or deductibles) can implicate the AKS.  The proposed rule will except certain Part D cost-sharing waivers by pharmacies (not discussed here) and certain cost-sharing waivers by Emergency Ambulance Services.

     The proposed rule would establish an exception allowing ambulances owned by the state or a political subdivision of the state to waive a beneficiary’s co-insurance or deductible for such services in certain circumstances.  Limitations on this exception require that: (1) the ambulance provider or supplier must be the Medicare Part B provider or supplier of the emergency ambulance services. (2), the ambulance provider or supplier must offer the reduction or waiver on a uniform basis without regard to patient-specific factors; and (3) the ambulance provider or supplier could not claim the amount reduced or waived as “bad debt.”  The exception would not include providers of non-emergency transportation services.

3. Local Transportation.  A significant new safe harbor would protect free or discounted local transportation services and remove the previous $50 annual aggregate limitation on transportation services.  Accordingly, OIG proposes to allow providers and suppliers to offer free or discounted local transportation to beneficiaries with certain limitations including:

  • That the transportation only be provided to established patients;
  • DME suppliers, pharmaceutical company and labs could not provide transportation;
  • Transportation services may not be limited to patients referred by particular providers or contingent on patients seeing particular providers or by the type of treatment a patient is receiving;
  • Drivers could not be paid on a per-beneficiary basis; and
  • Referral agreements between the entity providing transportation and the destination provider would be prohibited.

Additionally, OIG is seeking comment on certain parts of this exception including:

  • Whether home health care providers should be able to provide free transportation;
  • Whether entities must maintain documentation on beneficiary eligibility criteria;
  • Whether entities should be limited to providing transportation only for medical purposes or whether entities may provide transportation for other health related purposes;
  • Whether to exclude from protection transportation services that are publicly advertised or marketed to patients or referral sources; and
  • OIG proposes to protect only “local” transportation services and is seeking comments on the appropriate definition of “local.”  For instance, the OIG proposes a 25 mile limit, but recognizes that 25 miles may not be sufficient in rural areas thus proposing a 35 mile radius instead, which in our opinion, may not be sufficient for many rural areas.  The OIG seeks comment on whether a fixed radius is an appropriate measure of “local” or whether a more general approach would be preferable.

B. Civil Monetary Penalties Authorities

The OIG proposes two changes to the CMP laws: (1) to amend in various respects the definition of “remuneration” related to the beneficiary inducements CMP; and (2) to codify amendments enacted by PPACA.

     1. Remuneration.  The proposed rule will codify new exceptions to the definition of “Remuneration” as set forth in PPACA.  The first new exception protects “any other remuneration which promotes access to care and poses a low risk of harm to patients and Federal health care programs.”  OIG states that “promotes access to care” means that the remuneration provided will improve a beneficiary’s, or a class of beneficiaries’, ability to obtain medically necessary healthcare items and services.”

     OIG is soliciting comments allowable incentives, the appropriate extent of this exception and safeguards to ensure that this exception is not abused.  Examples of situations that might be protected under this exception are specialized hospitals providing lodging assistance to patients and their families when necessary in order for the patient to obtain appropriate care, or a provider supplying a patient with blood pressure cuffs or scales in order to record the patient’s blood pressure.

     Second, OIG proposes to except the offer or transfer of items or services for free or at less than fair market value after a determination that the recipient is in financial need and meets certain other criteria provided the transfer meet certain requirements including: (i) the items or services may not be offered as part of any advertisement or solicitation; (ii) the items or services may not be tied to the provision of other services reimbursable by a state or federal healthcare program; (iii) there must be a reasonable connection between the items or services and the medical care of the individual; and (iv) the items or services may be provided only after determining on good faith that the individual is in financial need.

     The OIG is considering what a “reasonable connection with medical care” should entail.  For example, OIG states that the provision of protective helmets to hemophiliac children, or the distribution of pagers to alert patients with chronic medical conditions to take their drugs could be protected, however the provision of the same items in another context might not be reasonably connected with a patient’s care.  Thus, OIG seeks comment on the boundaries of the concept of “medically indicated.”

     Finally the OIG proposes an exception to protect retailer rewards programs such as pharmacy and grocery store rewards cards.

     2. Gainsharing.  The second proposed change to the CMP regulations is to codify the gainsharing CMP in the regulations.  The regulatory text would largely mirror the statutory text. OIG is soliciting comments on whether it should include a definition of the term “reduce or limit services.”  Specifically OIG seeks comment on (i) whether the interpretation that limiting services includes limiting items uses in providing services is appropriate or necessary in this context; (ii) whether a hospital’s decision to  standardize certain items should be deemed to constitute reducing of limiting care; (iii) whether a hospital’s decision to rely on protocols could ever be deemed to constitute reducing or limiting care; (iv) whether a hospital desiring to standardize items or processes as part of a gainsharing program should be required to establish certain thresholds based on historical experience or clinical protocols beyond which participating physician could not share in cost savings; and (v) if OIG decided to define “reduce or limit services” should the regulation include a requirement that the hospital and/or physician participating in a gainsharing program notify potentially affected patients about the program.

If you have questions about this client alert or how it may apply to your business, please contact authors Robert Threlkeld or Elliott Coward, or a member of MMM's Healthcare team.