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HHS Finalizes Highly Anticipated Final Rules Amending Anti-Kickback Statute and Stark Law Regulations, Part II: Beneficiary Inducement

While health care entities often want to provide free or discounted items or services to patients (e.g., free transportation, co-payment waivers, free supplies), these free or discounted items or services pose risk under both the federal Anti-Kickback Statute (AKS) and the civil monetary penalty rules regarding beneficiary inducements (Beneficiary Inducements CMP), so minimizing risk when providing such items or services is important.  Fortunately, as announced last week, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a final rule making sweeping changes to the regulations implementing the AKS and the Beneficiary Inducements CMP, many of which will result in greater flexibility and reduced administrative burdens for the health care industry. 

As discussed in a previous post covering the proposed rule, the most notable beneficiary inducement-related change is the addition of a safe harbor to protect patient engagement tools and support services furnished by participants in a value-based arrangement to patients in a target population.  Because this new safe harbor applies only in the value-based enterprise (VBE) context and imposes numerous requirements, it may ultimately have limited utility, but only time will tell.  The OIG also finalized a new safe harbor for remuneration provided in connection with certain payment and care delivery models, codified an existing statutory safe harbor for Accountable Care Organization (ACO) beneficiary incentives, and amended the safe harbor for local transportation.  Because one of the exceptions to the Beneficiary Inducements CMP is an exclusion of practices protected by AKS safe harbors, these changes to the AKS regulations also offer protection under the Beneficiary Inducements CMP.

Patient Engagement and Support Safe Harbor

The new safe harbor for patient engagement and support arrangements allows certain health care entities to provide patients in a target patient population of a VBE with certain tools and supports in order to improve quality, health outcomes, and efficiency.  For example, this safe harbor may be used to protect digital health technology used for monitoring purposes if all requirements are met.

Unfortunately for some health care entities looking to take advantage of this safe harbor, it is limited to entities participating in a VBE, which, broadly speaking, is as an arrangement comprised of two or more entities that are collaborating to achieve at least one value-based purpose – improving the quality of care for a target patient population, appropriately reducing the costs to payors, or transitioning from fee-for-service payment mechanisms to value-base care payment mechanisms.  (The OIG’s definition for value-based arrangements are fairly complex; stay tuned for our next blog in this series for a deeper dive in the value-based terminology.)

Moreover, this safe harbor includes intricate and often technical requirements, such as the following:

  • The tool or support must be provided directly to patients by a VBE participant or an agent acting on behalf of the VBE participant. While the proposed rule dictated that the tools or supports must be provided directly by a VBE participant to the patient, or their caregiver, family member, or other person acting on their behalf,  under the final regulations a third party agent can also furnish the tools or supports on behalf of the VBE participant.
  • The patient engagement tool or support must be an in-kind item, good, or service that has a direct connection to the coordination and management of care of the target patient population. While in the proposed rule the OIG considered allowing cash and cash equivalents such as gift cards, only in-kind items, goods, or services – and not cash or cash equivalents - qualify for safe harbor protection.  Note that under certain circumstances cash and cash equivalents furnished to patients may still pose low regulatory risks in certain circumstances. The OIG has issued a handful of favorable advisory opinions (e.g., OIG Advisory Opinion No. 12-21 and OIG Advisory Opinion No. 08-14) finding that gift cards and cash equivalents to patients can serve as useful patient incentives and may pose low risks of fraud and abuse.
  • The tool or support must be recommended by the patient’s licensed health care professional. Moreover, the tool or support must advance one or more of five goals:
    1. Adherence to a treatment regimen determined by the patient’s licensed health care professional;
    2. Adherence to a drug regimen determined by the patient’s licensed health care professional;
    3. Adherence to a follow-up care plan established by the patient’s licensed health care professional;
    4. Prevention or management of a disease or condition as directed by the patient’s licensed health care professional; or
    5. Patient safety.
  • The patient engagement tool or support cannot be funded directly or indirectly by a person or entity that is not a VBE participant in the applicable VBE.  The final rule strengthened the limitations of this provision to make clear that no funding can come from certain entities specifically excluded from the OIG’s definition of VBE participant, which includes pharmaceutical manufacturers, laboratories, and pharmacy benefit managers.
  • Tools or supports must not exceed a $500 annual per patient cap. The aggregate value of the tools and supports furnished to a VBE recipient cannot exceed $500 annually, adjusted for inflation.  OIG believes that the bright-line guidance provided by the cap will be beneficial to all stakeholders.  In comments to the final rule, OIG acknowledged that, in some instances, patients under financial stress may need tools or support exceeding the cap and opined that those arrangements should be evaluated under other safe harbors or a prospective advisory opinion. 
  • VBE participants must retain records related to the tools and support. VBE participants must retain for six years and make available all materials and records sufficient to establish that the patient engagement tools and support were distributed in compliance with this safe harbor.  
  • The availability of the tool or support is not determined in a manner that takes into account the patient’s type of insurance coverage. OIG believes this provision will protect against a VBE participant’s cherry-picking of patients (or avoiding high-cost patients) based on the level of insurance reimbursement for products or services. 

While the safe harbor imposes onerous recordkeeping requirements, the OIG did decline to include a number of requirements deemed to be duplicative or unnecessarily burdensome, such as having VBE participants certify that tools or support are not duplicative or compelling VBE participants to retrieve items from patients who are no longer participating in the VBE.

The patient engagement and support safe harbor makes sense for providers and patients and is long overdue.  However, the administrative burdens inherent in designing a tool or support that meets all requirements of the safe harbor may be daunting for smaller, non-institutional providers.  The extent to which federal health care program beneficiaries will benefit from the structure of this safe harbor thus remains to be seen. 

CMS-Sponsored Model Arrangements and CMS-Sponsored Model Patient Incentives Safe Harbor

This new safe harbor permits remuneration between parties to arrangements tested or expanded on by the CMS Innovation Center and the Medicare Shared Savings Program (collectively, “CMS-sponsored models”).  CMS-sponsored model participants and their agents may provide remuneration (e.g., distribution of capitated payments, shared savings or losses distributions, or incentives) to patients covered by the CMS-sponsored model that tie directly to the patient’s health care.  The OIG clarified that this new safe harbor does not supersede existing waivers for CMS-sponsored models.  This safe harbor is intended to reduce the need for individual fraud and abuse waivers. 

The OIG defined the scope of the safe harbor by refining certain proposed definitions included therein. A CMS-sponsored model patient incentive must be furnished by a CMS-sponsored model participant (or by its agent), unless otherwise specified by the participation documentation.  The OIG specifically declined to expand this safe harbor to models other than those tested or expanded upon by the Innovation Center or under the Medicare Shared Savings Program.   The OIG reasoned that the safe harbor, as proposed, is flexible but low-risk because CMS includes program integrity safeguards in Medicare Shared Savings Program and Innovation Center models that would not apply in other contexts.  Further, the OIG clarified that CMS defines in the participation documentation the scope of the model or program the arrangements and incentives permitted thereunder, and the entities that may provide an incentive. 

The safe harbor also includes the following requirements:

  • The remuneration must have a direct connection to the patient’s care, unless CMS says otherwise via the participation documentation, and it cannot result in the provision of medically unnecessary services or the reduction of medically necessary care or induce referrals of patients outside the CMS-sponsored model. 
  • The parties must make materials and records available to the Secretary upon request and satisfy programmatic requirements imposed by CMS.
  • Remuneration provided to CMS-sponsored model participants receives safe harbor protection for as long as the CMS-sponsored model remains in effect or as defined by the participation documentation (which is a clarification the OIG provided in the final rule).   

Accountable Care Organization (ACO) Beneficiary Incentive Program Safe Harbor

This safe harbor codifies in the regulations an existing statutory exception for incentive payments made by an Accountable Care Organization (ACO) operating CMS-approved beneficiary incentive programs under the Medicare Shared Savings Program that are designed to encourage ACO beneficiaries to obtain medically necessary primary care services.  The regulatory language is nearly identical to the statutory language.

Local Transportation Safe Harbor

Implemented in 2016, this relatively new safe harbor allows eligible entities, which is broadly defined to include any individuals or entities except for entities that primarily supply health care items (e.g., pharmacies and durable medical equipment suppliers), to provide free or discounted local transportation to federal health care program beneficiaries to enable the provision of medically necessary items or services.  The current version of the safe harbor allows for local transportation of up to 25 miles in urban areas and 50 miles in rural areas, but the OIG modified the distance limitation to 75 miles in rural areas in recognition of the fact that many residents in rural areas need to travel more than 50 miles to obtain medically necessary services.  The OIG maintained a bright-line mileage standard despite considerations raised by commenters about access to care for Tribal, rural, and underserved communities.  The OIG felt that imposing a recommended patient need standard for exceptions to the 75-mile limit would be administratively burdensome and would result in exceptions swallowing the rule. 

The OIG removed any mileage limitation for a patient transported from an inpatient facility from which the patient is discharged, or following hospital observation for at least 24 hours, to the patient’s residence in either an urban or rural setting.  “Residence” includes custodial care facilities and homeless shelters.  The mileage limitation (25 miles in an urban setting, 75 miles in a rural setting) remains in place for patients discharged from the emergency department or following a procedure at an ambulatory surgery center. 

The OIG also declined to extend the safe harbor to transporting a patient to any location of their choice or to another provider or facility, or to protect patient transport for non-medical purposes.  The OIG reminded stakeholders that an arrangement that does not satisfy all conditions of the local transportation safe harbor does not necessarily violate the AKS and that stakeholders may always seek OIG advisory opinions as to the propriety of a proposed transportation arrangement.  The OIG also noted that transport to another health care facility for post-acute care treatment could be protected under the new patient engagement and support safe harbor.   

This post is our second in a series covering historic changes to the regulations interpreting the AKS, the Beneficiary Inducement CMP, and the Physician Self-Referral Law (commonly known as the Stark Law). Stay tuned for more installments in this blog series, which will cover: (i) new AKS safe harbors and Stark Law exceptions for value-based arrangements; (ii) a new AKS safe harbor and Stark Law exception for cybersecurity donations and changes to the existing safe harbor and exception for electronic health records; (iii) new Stark Law exceptions and clarification and guidance on key Stark Law terminology and requirements.

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Karen S. Lovitch

Chair, Health Law Practice & Co-Chair, Health Care Enforcement Defense Practice

Karen advises industry clients on regulatory, transactional, operational, and enforcement matters. She has deep experience handling FCA investigations and qui tam litigation for laboratories and diagnostics companies.
Rachel Yount is a Mintz attorney who focuses her practice on health care industry transactions. Her clients include hospitals, health systems and plans, physician organizations, and pharmacy benefit managers.
Jane Haviland's practice focuses primarily on health care enforcement defense. Jane defends laboratories, physicians, and other clients facing government investigations and whistleblower complaints regarding alleged violations of the federal False Claims Act, the federal anti-kickback statute, the Stark law, and similar state laws.