Leonard: Proposed rule expands safe harbors under federal Anti-Kickback Statute

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By Ashley N. Leonard

leonard-ashley-otm.jpg Leonard

Arguably among the most regulated fields in the country, the health care industry and its many providers face the daily challenge of providing quality patient care while complying with numerous rules and regulations. This includes compliance with requirements for licensure and certification, patient privacy, reporting obligations and, very importantly, fraud and abuse. Among the many fraud and abuse rules and regulations sits one very complex rule known as the Anti-Kickback Statute. Codified at 42 U.S.C. §1320a-7b, the Anti-Kickback Statute is a criminal statute that prohibits the giving or receiving of (or offer to give or receive) anything of value (defined as “remuneration” under the statute) in an effort to induce or reward the referral of federal health care program business. Violations of the Anti-Kickback Statute are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal and state health care programs.

Recognizing that certain payment and business relationships may be capable of violating the Anti-Kickback Statute but, if structured appropriately, pose a low risk to federal and state health care programs, the statute provides certain safe harbors that act as exceptions to the general rule. Historically, these safe harbors have allowed physicians and health care providers the ability to establish and maintain bona fide business relationships with other providers and entities without expressly violating the Anti-Kickback Statute. Such relationships, however, are constantly evolving due to the changing health care landscape. Consequently, the law must adapt and incorporate these changes into the protections it provides.

The United States Department of Health and Human Services Office of Inspector General recently published a proposed rule seeking to add new safe harbors to the Anti-Kickback Statute, as well as amend certain existing safe harbors within the rule. HHS-OIG also proposed to amend the definition of “remuneration” under the Civil Monetary Penalty rules by adding certain statutory exceptions to the definition. The information below briefly highlights some of the complex changes to the Anti-Kickback Statute and Civil Monetary Penalty rules contained in the proposed rule, which can be found in its entirety at 79 Fed. Reg. 59717 (Oct. 3, 2014).

Among the identified changes, HHS-OIG proposed a technical correction to the existing safe harbor for referral services that would revert to the language contained in the safe harbor found in the 1999 final rule. The goal is 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.” This language can be found at 64 FR 63518, 63526 (Nov. 19, 1999).

The proposed rule also adds a protection for certain cost-sharing waivers, including pharmacy waivers of cost-sharing for financially needy Medicare Part D beneficiaries, and waivers of cost-sharing for emergency ambulance services furnished by state- or municipality-owned ambulance services. Additionally, the proposed rule incorporates a protection for discounts by manufacturers on drugs furnished to beneficiaries under the Medicare Coverage Gap Discount Program. It also adds a protection for free or discounted local transportation services that meet specified criteria, such as the transportation services being available only to established patients and determined in a manner unrelated to the past or anticipated volume or value of federal health care program business, among other conditions.

Further, because individuals enrolled in a Medicare Advantage plan may receive services from a federally qualified health center that has a written agreement with the Medicare Advantage plan, the proposed rule seeks to incorporate an additional requirement for these agreements. Specifically, HHS-OIG proposed that the written agreement between the two entities specifically provide that the Medicare Advantage 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. Additionally, a new safe harbor is proposed that would protect any remuneration between a FQHC (or an entity controlled by a FQHC) and a Medicare Advantage organization pursuant to a written agreement that meets the statutory requirements.

Among the changes to the Civil Monetary Penalty rules, HHS-OIG proposed amending the definition of “remuneration” by adding certain exceptions to the definition and identifying specific activities that do not constitute remuneration under the rule. For example, the proposed rule identifies certain coupons, rebates or other rewards from a retailer that do not constitute remuneration if specific requirements are met. An additional proposed exception includes 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. Further proposed exceptions to the definition of remuneration include remuneration that promotes access to care and poses a low risk of harm to federal and state health care programs, as well as an exception which would allow for waivers of cost-sharing for the first fill of a generic drug.

Lastly, recognizing that health care payment and delivery systems are changing and moving toward greater emphasis on accountability for high quality care at a lower cost, HHS-OIG seeks to codify the Gainsharing Civil Monetary Penalty and add a definition for “hospital” to the proposed section. Gainsharing prohibits a hospital from knowingly paying a physician to induce the physician to reduce or limit services provided to Medicare or Medicaid beneficiaries under the physician’s direct care. Understanding that certain gainsharing arrangements are beneficial to the health care system and patient care, HHS-OIG solicits comments on a number of items related to the gainsharing prohibition. HHS-OIG’s goal for the proposed rule is to protect federal and state health care programs and beneficiaries from undue risk of harm associated with referral payments, while also encouraging beneficial arrangements that improve the efficient and effective delivery of health care and support the best interests of patients. All comments on the proposed rule must be received by the Office of Inspector General no later than Dec. 2, 2014.•


Ashley N. Leonard is an associate in the health care & life sciences practice group at Plews Shadley Racher & Braun LLP. She focuses her practice on transactional and regulatory health care matters where she counsels health care providers on regulatory compliance, the licensure and certification process, Medicare reimbursement and general corporate matters. Leonard can be reached at 317-637-0700 or [email protected]. The opinions expressed are those of the author.

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