OIG Adds New Safe Harbor Protections in 2017

January 24, 2017 | Health Services

In December 2016, the Office of Inspector General (“OIG”) for the U.S. Department of Health and Human Services amended existing safe harbors and issued a number of new safe harbors to   protect certain business practices and arrangements of doctors, hospitals, and pharmacies from sanctions under the anti-kickback statute (42 U.S.C. § 1320a-7b(b)). Additionally, OIG amended the definition of “remuneration” in the regulations implementing the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a)) to provide for a variety of cost saving measures for Medicare and Medicaid beneficiaries. The changes were promulgated in an effort to improve both the efficiency of care delivery and access to quality care for patients by enhancing the ability of providers and other entities to engage in particular health care business arrangements, while simultaneously protecting programs and patients from fraud and abuse.

Amendments to Existing Safe Harbors

Referral Services

The first change promulgated by OIG, involved a technical correction to the safe harbor for referral services (42 CFR § 1001.952(f)), which was amended in subparagraph (2) as follows: “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 any 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 other Federal health care programs.” (Emphasis added).  OIG modified the language in the safe harbor 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.”

Cost-Sharing Waivers

The next amendments promulgated by OIG involved changes and additions to 42 CFR § 1001.952(k) and a technical change to the introductory paragraph. The technical change to the introductory paragraph now excludes from the definition of “remuneration” (as used in section 1128(B) of the Act) any reduction or waiver of a Federal health care program beneficiary’s obligation to pay copayment, coinsurance or deductible amounts as long the entity waiving the amounts satisfies the conditions set forth below.

Cost-Sharing Waivers for Hospitals

The first change promulgated by OIG involved an amendment that allows hospitals to waive certain cost sharing amounts owed to the hospital for inpatient services paid under a Federal health care program through the prospective payment system if the following three standards are met:

(i) the hospital does not later claim the amount reduced or waived as bad debt for payment purposes under a Federal health care program or otherwise shift the burden of the reduction or waiver onto the federal health care program, other payers, or individuals; (ii) the hospital offers to reduce or waive the cost-sharing amounts without regard to reason for admission, the length of the stay of the beneficiary, or the diagnostic group for which the claim for reimbursement is filed; and (iii) the hospital’s offer to reduce or waive the cost sharing amounts is not made as part of a price reduction agreement between a hospital and a third-party payer unless the agreement is part of a contract for the furnishing of items or services to a beneficiary of a Medicare supplement policy issued under the terms of section 1882(t)(1) of the Act. (42 CFR § 1001.952(k)(1))

Cost-Sharing Waivers for Federally Qualified Health Care Centers or Facilities

OIG’s next change amended the language of subparagraph (2). The amendment allows a FQHC or other health care facility to reduce or waive cost-sharing amounts owed by an individual who qualifies for subsidized services, for items or services for which payment may be made in whole or in part by a Federal health care program. This change was added to expand the scope of subparagraph (2) to include any payments which may be made under a Federal health care program and not only those payable under part B of Medicare. (42 CFR § 1001.952(k)(2))

Cost-Sharing Waivers for Pharmacies

OIG has also added new subparagraphs to this section to extend the cost-sharing waiver protections to pharmacies and ambulance providers or suppliers owned or operated by the State, a political subdivision of the state, or a tribal health care program.

Pharmacies may now waive or reduce cost-sharing amounts owed to a pharmacy for cost-sharing imposed under a Federal health care program if the pharmacy waives the cost-sharing amounts on an unadvertised and unsolicited, non-routine basis after an individualized determination of financial need or after a failure to collect such amounts after reasonable collection efforts. (42 CFR § 1001.952(k)(3))

Cost-Sharing Waivers for Providers or Suppliers of Ambulance Services

The final addition to this section, subparagraph (4), extended the cost-sharing waiver exceptions to emergency ambulance services owned or operated by a State, a political subdivision of the State, or a tribal health care program. Under the new amendment, ambulance suppliers or providers may now reduce or waive cost-sharing amounts owed to the provider or supplier for emergency ambulance services which are paid by a Federal health care program under a fee-for-service payment system if the following conditions are met:

(1) the ambulance provider or supplier is owned or operated by a State, a political subdivision of a State, or a tribal health care program; (2) the ambulance provider or supplier is involved in an emergency response; (3) the waiver or reduction is offered on a uniform basis to all of its residents (or tribal members) or to all individuals transported; and (4) the ambulance provider or supplier does not later claim the amount reduced or waived as a bad debt for payment purposes under a Federal health care program or otherwise shift the burden or reduction onto a Federal health care program, other payers, or individuals. (42 CFR § 1001.952(k)(4))

New Safe Harbor Provisions

In addition to the numerous amendments and additions to the existing safe harbors, OIG has also added a number of new safe harbors to 42 CFR § 1001.952. The new provisions were added to exclude certain arrangements by health care providers and suppliers from the definition of remuneration.

Remuneration between Federally Qualified Health Centers and Medicare Advantage Organizations

The first safe harbor added excludes from the definition of “remuneration,” any remuneration between FQHCs and Medicare Advantage organizations (“MAO”). To receive protection under this safe harbor, the FQHC and MAO must enter into a written agreement that provides for a level and amount of payment to the FQHC for services, which is at least equal to the amount of payment the MAO organization would make for such services if they were provided by a non-FQHC entity. However, this protection only extends to those payments made to a FQHC for the treatment of MAO plan enrollees. (42 CFR § 1001.952(z))

Medicare Coverage Gap Discount Program

The next safe harbor added by OIG, excludes certain discounts on drugs from being considered remuneration when given to a beneficiary under the Medicare Coverage Gap Discount Program. To qualify for protection under this safe harbor the following requirements must be met:

(1) the discounted drug must be considered an “applicable drug” set forth in section 1860(D)-14A(g) of the Act; (2) the beneficiary who receives the discount must be considered an “applicable beneficiary” set forth in section 1860(D)-14A(g) of the Act; and (3) the drug manufacturer must participate in and be in compliance with, the requirements of the Medicare Coverage Gap Discount Program. (42 CFR § 1001.952(aa))

Local Transportation Services

The final safe harbor promulgated by OIG excludes from the definition of “remuneration” free and discounted local transportation services provided by an “eligible entity” to its “established patients,” as both are defined in the safe harbor, for medically necessary items or services, if the following requirements are met:

(i) the availability of the free or discounted local transportation services is: (A) set forth in a policy, which is applied uniformly and consistently and; (B) not determined in a manner related to the past or anticipated volume or value of Federal health care program business; (ii) the free or discounted local transportation services are not air, luxury, or ambulance-level transportation; (iii) the eligible entity does not publicly market or advertise the free or discounted local transportation services, no marketing of health care items and services occurs during the course of transportation or at any time by drivers who provide the transportation, and the drivers or other arranging for the transportation are not paid on a per-beneficiary basis; (iv) the eligible entity makes the free or discounted transportation available only to an individual who is: (1) an established patient of the eligible entity providing the free or discounted transportation, if the eligible entity is a provider or supplier of health care services; and (2) an established patient of the provider or supplier to or from which the individual is being transported; and (3) the individual is within 25 miles of the health care provider or supplier to or from which the patient would be transported, or within 50 miles if the patients resides in a rural area, as defined in the safe harbor, for the purpose of obtaining medically necessary items and services; and (v) the eligible entity that makes the transportation available bears the costs of the free or discounted local transportation services and does not shift the burden of those costs onto any federal health care program, other payers or individuals. (42 CFR § 1001.952(bb))

A health care provider or supplier may also provide a shuttle service if it meets the same conditions as set forth above, and if the “eligible entity makes the shuttle service available only within the eligible entity’s local area, meaning there are no more than 25 miles from any stop on the route to any stop at a location where health care items or services are provided, except that if a stop on the route is in a rural area, the distance may be up to 50 miles between that stop and all providers and suppliers on the route.” Additionally, eligible entities are also permitted to give transportation vouchers in lieu of providing transportation.

New Exceptions to Remuneration under the Civil Monetary Penalties Law  (“CMPL”)

In addition to the new safe harbor amendments and additions, OIG has also amended the definition of “remuneration” in the CMPL by revising the introductory text and paragraph (3) of the definition contained in 42 CFR § 1003.101 and by adding new subparagraphs to  to that definition.  The new changes except certain waivers, deductions, and transfers of items for free or for other than fair market value from being considered “remuneration” as defined in the CMPL.

Definition of Remuneration

The first change to this section amended the introductory language in the definition of “remuneration.” The amended language reads as follows: “Remuneration, for the purposes of §1003.1000(a) of this part, is consistent with the definition in section 1128A(i)(6) of the Act and includes the waiver of copayment, coinsurance and deductible amounts (or any part thereof) and transfers of items or services for free or for other than fair market value.” The amended definition excludes the below from the definition of remuneration.

Differentials in Coinsurance and Deductible Amounts

The first change amended subparagraph (3) to exclude from the definition of remuneration, “differentials in coinsurance and deductible amounts as part of a benefit plan design to whom claims are presented,” so long as the differentials are disclosed in writing to all beneficiaries, third party payers and providers.

Copayment Reductions for Hospitals

The next change added subparagraph (5), which excludes from the definition of remuneration, “a reduction in the copayment amount for covered OPD services under section 1833(t)(8)(B) of the Act.” Under this subparagraph, hospitals are now permitted to give reductions in copayment amounts for certain outpatient department services.

Items or Services

The next change added subparagraph (6), which excludes from the definition of remuneration, “Any items or services that improve a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid, and pose a low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs by—”

(i) being unlikely to interfere with, or skew, clinical decision making; (ii) being unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (iii) not raising patient safety or quality-of-care concerns.

Transfer of Items or Services for Free or Less than Fair Market Value from a Retailer

The next change added subparagraph (7), which allows retailers to provide certain items for free or for less than fair market value. Retailers are permitted to do this if the items or services are provided in the form of a coupon, rebate, or other reward from the retailer, the items or services are offered to the general public regardless of an individual’s health insurance status, and the offer or transfer of the items or services is not tied to the provision of other items or services reimbursed by Medicare or Medicaid. To be considered a retailer and thus protected under this exception, the entity providing the items or services for free or less than fair market value must sell items directly to consumers and must not primarily provide services to beneficiaries.

Financial Need Exception

An change added  subparagraph (8), which permits a person or entity to offer items or services for less than fair market value if: (i) the items or services are not offered through an advertisement or solicitation or tied to the provision of other items or services reimbursed by Medicare or State health care programs; (ii) are reasonably connected to the medical care of an individual and; (iii) the person providing the items or services determines in good faith that the individual receiving the items or services are in financial need.

Part D Sponsor Waivers

The final exception added subparagraph (9), which excludes from the definition of remuneration, “waivers by a Part D Plan sponsor of any copayment for the first fill of a covered Part D drug or an authorized generic drug for individuals enrolled in the Part D Plan, as long as such waivers are included in the benefit design package submitted to CMS.” This exception was included as a means of encouraging the use of lower cost generic drugs and is only applied to Part D sponsors offering such waivers.

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