As we discussed in a previous post, the Department of Health and Human Services Office of Inspector General (OIG) published a final rule (Final Rule) amending the safe harbors to the Anti-Kickback Statue (AKS) and also amending exceptions to the Civil Monetary Penalties rule (CMP), providing greater protection for certain arrangements with beneficiaries.
In this second part of our two-part series, we discuss the Final Rule’s changes to the CMP.
Expanded Protections for CMP Beneficiary Inducement
The Final Rule adds five new exceptions for beneficiary arrangements, incorporating these exceptions into the CMP’s definition of “remuneration.”

  1. Copayment Reductions for Certain Outpatient Department Services

The OIG proposed a cost-sharing exception permitting reduction in the copayment amount for some or all covered hospital outpatient department services to no less than 20% of the Medicare fee schedule in its Proposed Rule. This cost-sharing exception builds upon Section 4523 of the Balanced Budget Act of 1997 (the BBA), which prompted the Secretary of the Department of Health and Human Services to establish a copayment reduction procedure.  In the Final Rule, the OIG added the exception into the definition of “remuneration” using substantively identical language to the statutory language.

  1. Certain Remuneration That Poses a Low Risk of Harm and Promotes Access to Care

The Final Rule adds a new interpretive exception that aligns with an existing statutory exception protecting “any other remuneration which promotes access to care and poses a low risk of harm to patients and Federal health care programs.” The OIG noted that “[t]his exception should be read in the context of more specific exceptions and safe harbors,” and it would look to those exceptions “to determine if remuneration poses a low risk of harm.” Certain arrangements that do not meet the exceptions for a safe harbor or exception may be protected under this exception. Any entity asserting such protection for its arrangements has the burden of demonstrating sufficient facts and analysis for the OIG to determine that the arrangement fits within the exception.
This exception builds off of specific aspects of the statutory language. The OIG defined “care” to mean items and services that are payable by Medicare, Medicaid or a state health program, but does not include a medically necessary qualifier. The OIG defined “promotes access” to limit the exception to only remuneration that “improves a particular beneficiary’s ability to obtain medically necessary items and services” for a defined beneficiary population, but not on an individual patient-by-patient basis. The OIG clarified that its interpretation of items or services that “promote access to care” captures giving patients the opportunities to remove socioeconomic, education and other barriers to access necessary care; while excluding items or services that purely reward patients for accessing care. Furthermore, remuneration associated with a coordinated care arrangement that meets the requirement of being low risk and assists patients to access necessary care can fit within this exception.
In addition to promoting access to care, remuneration must pose a low risk of harm to federal healthcare programs for protection under this exception. The OIG finalized its proposed interpretation of a “low risk of harm to Medicare and Medicaid beneficiaries and Medicare and Medicaid program” to mean that the remuneration must: “(1) be unlikely to interfere with, or skew, clinical decision-making; (2) be unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (3) not raise patient-safety or quality-of-care concerns.” In its commentary, the OIG cautioned that certain forms of remuneration (such as cash, cash equivalents and copayment waivers) and, specifically, remuneration provided in connection with marketing, are unlikely to be considered by the OIG to be low risk.

  1. Retailer Rewards

The OIG adopted the ACA’s statutory text creating an exception to the beneficiary inducements provisions of the CMP for retailer rewards programs that meet certain criteria. A retailer rewards program may offer or transfer items for free or less than fair market value if: (a) the items or services consist of coupons, rebates or other rewards from a retailer; (b) the items or services are offered or transferred on equal terms available to the general public, regardless of health insurance status; and (c) the offer or transfer of the items or services is not tied to the provision of other items or services reimbursed in whole or in part by Medicare or a state health program.
The OIG interprets “retailers” to be entities “that sell [ ] items directly to consumers . . . [and do not] primarily provide services,” including both big-box stores with pharmacies and smaller, independent pharmacies. These retailers may offer rewards that must not be copayment waivers. Additionally, these rewards must be available to everyone regardless of health insurance status, and must not be tied to the provision of items or services reimbursed by Medicare or a state healthcare program. For example, a reward of a $20 coupon that could be used on anything in the store would be eligible for protection, whereas a reward of federally reimbursable items stemming from the purchase of federally reimbursable items would not.

  1. Remuneration to Financially Needy Individuals

The Final Rule incorporates a third new statutory provision that excepts from the definition of “remuneration” the offer or transfer of items or services for free or less than fair market value if the following requirements are met: (a) the items and services are not advertised or tied to the provision of other items or services reimbursed by the Medicare or state healthcare programs (including Medicaid); (b) there is a reasonable connection between the items or services and the medical care of the individual; and (c) the recipient has been determined to be in financial need.
This exception, like others, does not impose any affirmative obligations on providers or suppliers to provide free items or services, waive copayments or implement any program that involves giving anything of value to beneficiaries; rather, this exception describes the circumstances under which such gifts or benefits are not prohibited by the beneficiary inducements CMP.

  1. Copayment Waivers for the First Fill of Generic Drugs

The OIG adopts another ACA statutory provision excepting from the definition of “remuneration” the waiver by a Part D Plan sponsor of any copayment for the first fill of a covered Part D drug. The OIG states that the purpose of this exception is to “minimize drug costs by encouraging the use of lower cost generic drugs.” The Part D Plan sponsor must include the waiver in its annual benefit design package it submits to CMS if the sponsor will use it. This exception is applicable to coverage years beginning on or after January 1, 2018.
While the AKS and CMP are often viewed by the healthcare and life science industries as impediments to improving the efficiency and innovation of healthcare delivery, the OIG in its Final Rule liberalizes those requirements by enhancing the flexibility of healthcare providers to engage in business arrangements that improve access to care, while still protecting federal programs and patients from fraud and abuse. In an environment where value-based reimbursement models and population health initiatives are the growing norm, the AKS and CMP exceptions under the Final Rule encourage hospitals, pharmacies, ambulance providers, Medicare Advantage Plans and FQHCs to collaborate and strategize among each other on efforts to better serve beneficiaries, members and patients alike.