OIG Issues Final Rule Revising and Introducing New Safe Harbors Under the Anti-Kickback Statute

In 2014, the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) first announced modifications to existing federal Anti-Kickback Statute (AKS) safe harbors and the beneficiary inducement prohibition in the Civil Monetary Penalty rules (CMP Law). The OIG published a final rule on December 7, 2016. The Final Rule becomes effective on January 6, 2017.

Revisions to Anti-Kickback Statute Safe Harbors

The modifications would codify statutory changes as a result of Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 adding Part D prescription drug benefit in the Medicare program and the creation of Medicare Coverage Gap Discount Program. 

The OIG finalized regulations by adopting all of the previously proposed safe harbors with some modifications suggested by the commenters. The changes to the existing safe harbors and the implementation of new safe harbors impact various providers including physicians and pharmacies. 

The following are some of the more significant changes:

  • A technical correction to the existing safe harbor for referral services
  • protection for certain cost-sharing waivers, including:
    • pharmacy waivers of cost-sharing for financially needy beneficiaries
    • waivers of cost-sharing for emergency ambulance services furnished by State- or municipality-owned ambulance services
  • protection for certain remuneration between Medicare Advantage (MA) organizations and Federally Qualified Health Centers (FQHCs)
  • protection for discounts by manufacturers on drugs furnished to beneficiaries under the Medicare Coverage Gap Discount Program
  • protection for free or discounted local transportation services that meet specified criteria

Referral Services: Specifically, the OIG made a technical correction in the language for referral services at 42 C.F.R. § 1001.952(f) to correct an inadvertent error in an earlier version. The Final Rule returns the safe harbor to the prior language and makes clear that the safe harbor will not shield payments from participants to a referral service based on the volume or value of referrals to, or business otherwise generated by, either party for the other party. 

Cost-Sharing Waivers: The rule expands protection of waivers of cost-sharing obligations for all Federal health care programs, where applicable, as long as the waivers meet all elements of the safe harbor. The definition of cost-sharing now includes coinsurance in addition to copayment and deductibles. However, in the rule the OIG emphasized that while the expansion protects pharmacies it is not applicable, for example, to waivers by physicians for copayments for Part B drugs or a “cost-saving program.”

Cost-Sharing Waivers by Pharmacies: A new safe harbor now permits pharmacies to waive or reduce cost-sharing of a Federal health care beneficiary as long as the following specified conditions are met: (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) the pharmacy determines in good faith that the beneficiary has a financial need. This safe harbor sets forth the conditions pharmacies must satisfy to qualify for protection when waiving copayments; the Final Rule did not mandate or prohibit protocols pharmacies may develop to meet these conditions. 

Ban on Advertising: Consistent with the MMA which requires that the waiver or reduction of any cost-sharing obligation not be offered as part of any advertisement or solicitation, the safe harbor will not protect any programs that are advertised. The OIG emphasized the advertising does not violate the Anti-Kickback statute by itself but would be subject to a case-by-case review. 

Financial Need Assessments: In response to several comments requesting a uniform, objective standard of financial need to use in satisfying the requirement that pharmacies determine in good faith that a beneficiary has a financial need, the OIG declined to mandate a particular method. Instead, it emphasized that providers should make determinations of financial need on a good faith, individualized, case-by-case basis along with a reasonable set of income guidelines uniformly applied in all cases.

Cost-Sharing Waivers for Ambulance Services: The Final Rule establishes a new safe harbor to protect reductions or waivers of cost-sharing obligations for emergency ambulance services under all Federal health care programs so long as the waiver is offered on a uniform basis and the ambulance provider does not claim the amount waived as a bad debt or otherwise shifts the burden to a Federal health care program. The safe harbor only protects ambulance providers and suppliers owned and operated by a State, a political subdivision of a State, or tribal health program, and not cost-sharing by hospital-operated ambulance services.

Federally Qualified Health Centers (FQHCs) and Medicare Advantage (MA) Organizations: The Final Rule adds a new safe harbor that protects remuneration between a FQHC and a MA organization pursuant to a written agreement.

Discounts to Beneficiaries under the Medicare Coverage Gap Discount Program: The Final Rule includes in the safe harbor regulations protection of a discount in the price of an “applicable drug” of a manufacturer that is furnished to an “applicable beneficiary” as defined in the Medicare Coverage Gap Discount Program statute.

Local Transportation: In the Final Rule, a new safe harbor at 42 CFR 1001.952(bb) was established to protect free or discounted local transportation services provided to Federal health care program beneficiaries in order to obtain medically necessary items or services. The rule highlights considerations on the definition of “established patients” and an “eligible entity.” Specifically, after several issues raised by commenters, the OIG changed its position from the proposed rule and permitted a patient to be considered “established” once he or she selects and initiates contact with a provider or supplier to schedule an appointment. The safe harbor is aimed towards free transportation by individuals or entities that primarily provide medical services; it does not protect providers of health care items such as pharmacies, durable medical equipment suppliers, and pharmaceutical and device manufacturers. The safe harbors are voluntary; the Final Rule does not require any individual or entity to offer free or discounted local transportation services. It merely sets forth conditions and limitations on providing such transportation.

Revisions to Civil Monetary Penalty Rules

The definition of “remuneration” under the CMP rules is revised in the Final Rule in accordance with ACA-mandated exceptions. The definition of “remuneration” under the CMP rules now includes coinsurance, as well as copayment and deductible amounts, which is consistent with the definition of remuneration under the CMP statute. The Final Rule creates statutory exemptions for:

  • Copayment reductions for certain hospital outpatient department services
  • certain remuneration that poses a low risk of harm and promotes access to care
  • coupons, rebates, or other retailer reward programs that meet specified requirements
  • certain remuneration to financially needy individuals
  • copayment waivers for the first fill of generic drugs

Promotes Access to Care and Low Risk of Harm: This section is regarded as one of more highly awaited implementations of the ACA’s CMP exceptions as it exempts “any other remuneration which promotes access to care and poses a low risk of harm to patients and Federal health care programs” from the definition of remuneration. This could potentially cover a vast range of programs. Remuneration that poses a low risk of harm to Federal health care program beneficiaries and programs must: (1) be unlikely to interfere with, or skew, clinical decision making; (2) be unlikely to increase costs of care through overutilization or inappropriate utilization; and (3) not raise patient safety or quality-of-care concerns. While the exception does not offer a clear rubric for specific circumstances, the preamble to the Final Rule should be reviewed when trying to determine if a program would qualify under this exception.

Coupons, Rebates, or Other Retailer Rewards Programs: The term “retailer” is an individual or entity that sells items directly to consumers such as independent or small pharmacies, and online retailers, as opposed to health care providers that primarily provide services, such as hospitals and physicians, which are excluded.  Unlike other beneficiary inducements CMP exceptions, this exception does not prohibit advertising or marketing. Retailers can inform physicians directly or through media outlets of the availability of their rewards programs.

So long as the following criteria are met, this new exception should encourage retailers’ to include Federal health care program beneficiaries in their reward programs. The free or less-than-fair-market-value items or services must: (1) consist of coupons, rebates, or other rewards from a retailer; (2) the items or services are offered or transferred on equal terms available to the general public, regardless of health insurance status; and (3) the offer or transfer of the items is not tied to the provision of other items or services.

Financial-Need-Based Exemption: The Final Rule exempts from the definition of remuneration offers or transfers of items or services (excluding cash or instruments that can be converted into cash) for free or less than fair market value if: (1) the items or services are not offered through advertising or solicitation; (2) the offer or transfer is not tied to other reimbursable services and (3) are “reasonably connected” to the individual’s medical care from both medical and financial perspectives; and (4) the offeror or transferor of the items or services “determines in good faith” first that the individual has financial need before offering the items or services.

Waivers of Copayment for the First Fill of a Generic Drug: The Final Rule also exempts from the definition of “remuneration” a waiver by Part D Plan sponsors or MA organizations of the copayment for the first fill of a covered Part D “generic drug.” Sponsors who desire to offer these waivers to enrollees must disclose such waivers in their benefit plan packets that they are required to submit to CMS. This exception will not be available until January 1, 2018.

Copayment reduction for certain hospital Outpatient Department (OPD) services: The Final Rule makes a technical change to the regulation in accordance with the current statutory reference to the meaning of covered outpatient department services.

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