Late last year, the Department of Health and Human Services Office of the Inspector General (OIG) published a final rule (Final Rule) that amends the safe harbors to the federal Anti-Kickback Statute (AKS) by modifying an existing safe harbor, adding new safe harbors and codifying existing statutory provisions that provide further protections from sanctions under the AKS with respect to certain payment practices and business arrangements. The Final Rule also amends the exceptions to the civil monetary penalty rule (CMP) regarding beneficiary inducements by codifying revisions to the definition of “remuneration” added by the Balanced Budget Act of 1997 and the Patient Protection and Affordable Care Act, as amended (ACA).

Part one of this two-part series discusses the Final Rule’s changes to the AKS.  In the second installment, we will discuss the Final Rule’s changes to the CMP.

Expansion of AKS Safe Harbors

Protection for Cost-Sharing Waivers

The Final Rule significantly amends the existing safe harbor for waiver of beneficiary coinsurance and deductible amounts to create protection for  reducing or waiving a beneficiary’s copayment, coinsurance or deductible (collectively “cost-sharing”) amounts owed to a pharmacy or ambulance provider, subject to certain standards.

Pharmacy Cost-Sharing Waivers for Financially Needy Beneficiaries

Under the Final Rule, a pharmacy may reduce or waive the cost sharing amounts imposed under a federal healthcare program if the waiver or reduction meets the following standards: (i) the waiver or reduction is not offered as part of an advertisement or solicitation; (ii) the pharmacy does not routinely waive or reduce cost-sharing amounts; and (iii) the pharmacy waives the cost-sharing amount only after (a) determining in good-faith that the individual is either in financial need or (b) fails to collect the cost-sharing amount after making reasonable collection efforts.

The OIG declined to provide guidance on the number of cost sharing waivers that would be considered “routine,” and therefore, problematic. As pharmacies serve many different communities, including those with subsidy-eligible beneficiaries that are exempt from the prohibition against routine waivers, the OIG stated that it will neither mandate nor prohibit protocols to determine the number of waivers or reductions that pharmacies may develop to meet the safe harbor requirements. The OIG also declined to mandate specific guidelines for a pharmacy’s good faith determination of financial need, but emphasized that the guideline a pharmacy adopts must be reasonable and applied uniformly when performing the financial need assessment. Additionally, the OIG emphasized that a pharmacy must make an effort to collect the cost-sharing amounts. While the copayment amount or the “historical inability” to collect for a particular beneficiary may be “factors that are considered in determining what reasonable collection efforts are,” the pharmacy may not forego all collection efforts and must attempt to collect the cost-sharing amount.

Cost-Sharing Waivers or Reductions for Emergency Ambulance Services

The Final Rule also created a safe harbor related to ambulance services, a frequent topic of OIG Advisory Opinions. Specifically, this safe harbor permits coinsurance/deductible waivers or cost-sharing reductions by ambulance service providers for which Medicare pays under a fee-for-service payment system. The waiver or reduction of such cost sharing responsibilities by an ambulance provider in connection with “emergency ambulance services” falls within the protection of this newly established safe harbor so long as the ambulance provider: (1) is owned and operated by a state, a political subdivision of a state or a tribal health organization; (2) is enrolled as a Medicare Part B provider of the emergency ambulance services; (3) offers the waiver or reduction of cost-sharing amounts in a uniform manner to all individuals; and (4) does not later claim the amount reduced or waived as bad debt or otherwise shift the burden to Medicare, a state healthcare program, other payers or individuals. Importantly, the safe harbor only applies to emergency services, and privately owned ambulance providers do not qualify for safe harbor protection.

Protected Remuneration between FQHCs and Medicare Advantage Organizations

The OIG adopted a regulatory safe harbor to protect any remuneration between an FQHC (or an entity controlled by an FQHC) and an MA organization pursuant to a written agreement that meets certain statutory requirements. The statutory payment rule guarantees an FQHC a payment amount that at a minimum equals the amount the MA organization would make to a non-FQHC entity. Consistent with statutes, the safe harbor only protects payments related to an FQHC’s treatment of MA organization enrollees and does not include a fair market value requirement.

Protection for Discounts provided by Manufacturers on Drugs Furnished to Beneficiaries under the Medicare Coverage Gap Discount Program

The OIG also added safe harbor protection for drug price discounts when the discount is furnished to a beneficiary under the Medicare Coverage Gap Discount program established under the ACA. Under the Medicare Coverage Gap Discount, a manufacturer may offer discounts on drugs at the point of sale to an “applicable beneficiary” for an “applicable drug,” and the drug manufacturer participates in, and is in compliance with, the requirements of the Medicare Coverage Gap Discount Program.  An “applicable beneficiary” is an individual who, subject to a number of exclusions, has reached or exceeded the initial coverage limit for prescribed drugs, has not incurred costs for covered drugs in the year equal to the annual out-of-pocket threshold. An ‘‘applicable drug’’ is a part D drug or licensed biologic, available to an applicable beneficiary through an applicable formulary or provided through an exception or appeal.  OIG included these self-implementing statutory exceptions in its rulemaking for completeness.

Free or Discounted Local Transportation

The Final Rule also allows “eligible entities” to provide free or discounted local transportation to federal healthcare program beneficiaries to “established patients” in order to obtain medically necessary items or services so long as the eligible entities comply with the conditions of the regulation.

Under this new safe harbor, an “eligible entity” is any individual or entity, except individuals or entities that primarily supply healthcare items, like durable medical equipment suppliers or pharmaceutical companies.

The safe harbor protects round trip transportation from a patient’s home to a provider or supplier of services as long as the following conditions are met: (a) the eligible entity has a set policy regarding the availability of free  or discounted local transportation assistance, the policy is applied uniformly and consistently, and availability is not determined in a manner related to the past or anticipated volume or value of federal healthcare program business; (b) the mode of transportation cannot include air, luxury and ambulance-level transportation; (c) the transportation assistance cannot be publicly advertised or marketed to patients or others who are potential referral sources, marketing of healthcare items or services cannot occur during the course of the transportation, and drivers or others involved in arranging the transportation cannot be paid on a per-beneficiary-transported basis; (d) the eligible entity is prohibited from shifting the associated costs to Medicare, a state healthcare program, other payers or individuals; (e) the individual receiving the transportation benefit is an “established patient” of the eligible entity; and (f) the distance one-way traveled is no more than 25 miles from the healthcare provider or supplier, or 50 miles if the patient resides in a rural area.

A patient is considered to be an “established patient” for purposes of this safe harbor after he or she selects and initiates contact with a provider or supplier to schedule an appointment (e.g., telephone call). This differs from the standard under the Proposed Rule, where only patients who had selected a provider or supplier and had attended an appointment with the provider or supplier were deemed to be “established.” Because the eligible entity is not permitted to market the transportation services, OIG believes that making transportation available to new patients who contact the provider or supplier on their own initiative is sufficiently low risk to warrant safe harbor protection.

The OIG clarified that an eligible entity offering free or discounted local transportation need not require transportation to be planned in advance. Further, a transportation program can use vouchers rather than having the transportation provided directly by the eligible entity in the form of a shuttle service (discussed below) or other mode of transportation.

The safe harbor also protects the offering of a shuttle service by eligible entities. The term “shuttle” refers to a vehicle (except for air, luxury or ambulance) that runs on a set route and on a set schedule. Of note, the “established patient” requirement does not apply to shuttle services. However, shuttle transportation must remain “local,” meaning that there are no more than 25 miles between any stop on the route and any stop at a location where healthcare items or services are provided, or within 50 miles if the patient resides in a rural area. The marketing prohibitions also apply to shuttle services, except that the shuttle schedule and stops may be posted in public. All of the remaining requirements of the safe harbor (e.g., eligible entity requirements, other marketing restrictions and the prohibition on cost-shifting) apply to shuttle service offerings.

Technical Correction to Referral Safe Harbor

As a technical correction, the OIG finalized an amendment to the second standard of the referral service safe harbor to clarify that any payments participants make to the referral service must not be based on “the volume or value of any referrals to or business otherwise generated by either party for the other party . . . .” The prior language “for the referral service” may have supported an ambiguous interpretation that referral services may adjust their fees on the basis of the volume of referrals made to participants.

While the Final Rules’ provisions do not, on balance, appear to present a major change to the AKS, they do reflect a trend toward expanding the safe harbors and exceptions available under relevant fraud and abuse laws.