Health & Human Services, Office of Inspector General, Proposes New Fraud and Abuse Rules

By Sheva Sanders, Jason Engelhart, Ryan McGary

The U.S. Department of Health & Human Services, Office of Inspector General (OIG) published 79 Fed. Reg. 59717 on October 3, 2014. This proposed rule has the potential to have an impact on a broad array of financial arrangements in the health care industry.

The proposed rule would specifically create safe harbors under the federal Anti-Kickback Statute for a number of financial arrangements; codify certain exceptions to the definition of “remuneration” under the federal law imposing civil monetary penalties for beneficiary inducements; and codify and clarify the standards for imposing civil monetary penalties as a result of certain “gainsharing” arrangements between physicians and hospitals.

It's important to note that although the proposed rule largely codifies existing statutory provisions and longstanding guidance in OIG Advisory Opinions, the OIG has sought feedback on a number of aspects of its proposal, often inviting a more permissive view than that advanced by the text of the proposed rule. For example, the OIG has invited additional discussion of its proposed anti-kickback safe harbor for local transportation services, which may be of particular interest to both rural and non-rural hospitals. Thus, the main significance of the proposed rule is that it may foreshadow future developments in this area.

The Proposed Anti-Kickback Safe Harbors

In addition to proposing a technical correction to the referral services safe harbor, the OIG proposed anti-kickback safe harbors that would provide protection for the following types of arrangements:

  • Pharmacy waivers of cost-sharing for financially needy Medicare Part D beneficiaries. 
  • Waivers of cost-sharing for emergency ambulance services furnished by government-owned ambulance services. Although the proposed safe harbor is limited to waivers of fee-for-service Medicare cost sharing, the OIG has solicited comments on whether to expand the safe harbor to include waivers of cost-sharing amounts owed under other federal health care programs, such as Medicaid. 
  • Certain remuneration between Medicare Advantage Organizations and federally Qualified Health Centers.  

  • Pharmaceutical manufacturer discounts under The Medicare Coverage Gap Discount Program.  

  • Certain free or discounted local transportation services offered by individuals or entities other than those that primarily supply health care items (e.g., durable medical equipment suppliers). The OIG devoted a large portion of the proposed rule to its discussion of this proposed safe harbor, and it has invited comment to help the agency more clearly define the contours of the safe harbor. For example, the OIG has indicated that it may be more lax regarding certain requirements for rural providers, and that it might broadly construe the purposes for which the provision of free transportation would be protected (e.g., the safe harbor might provide protection for transportation to apply for government benefits or to go to a food bank).

    The Proposed CMP/Beneficiary Inducements Exceptions

    The proposed civil monetary penalties/beneficiary inducements law exceptions are largely unremarkable, since they largely codify existing statutory exceptions for (1) copayment reductions for certain hospital outpatient department services; (2) certain remuneration that poses a low risk of harm and promotes access to care; (3) certain “retailer rewards” (e.g., coupons and rebates); (4) certain remuneration to financially needy individuals; and (5) copayment waivers for the “first fill” of generic drugs.
    The OIG has indicated that the proposed regulatory exceptions might be revised to provide more detail and clarity than the statutory exceptions. For example, the agency has invited comment on the issue of whether, and under what circumstances, certain patient “adherence rewards” would fall within the scope of the “access to care” exception.

    The Proposed Gainsharing CMP

    The proposed regulatory codification of the “gainsharing” civil monetary penalty law tracks closely with the language of the Social Security Act and does not seem to be targeted at expanding upon or limiting the existing OIG utterances on gainsharing. Generally, it prohibits hospitals from providing physicians with financial inducements to reduce or limit services to be provided to Medicare or Medicaid beneficiaries, and it prohibits physicians from accepting such inducements. However, the OIG has intimated that it is considering the impact of this law on certain, fairly common, arrangements between hospitals and physicians.
    For example, the OIG has solicited comment on the application of this law to hospital standardization of certain items (e.g., medical devices or surgical equipment), hospital compensation of physicians based on compliance with certain protocols based on quality metrics, and arrangements under which the patient is not aware that the hospital and physician are gainsharing.

    Next Steps

    We will continue to monitor the status of the proposed rule. We will also continue to assist clients in structuring financial relationships for compliance with the anti-kickback statute, the civil monetary penalties/beneficiary inducements law, and OIG guidance regarding gainsharing. Clients that stand to benefit from a proposed safe harbor or exception (either as proposed, or in a broadened form) and clients that are party to a hospital-physician gainsharing arrangement may wish to submit a comment to OIG. Comments to the proposed rule are due by December 2, 2014. We have prepared a number of comment letters in the past and can assist in this regard.


If you would like to discuss any of these issues or their effect on your business, please contact one of the attorneys listed below or your usual Stinson Leonard Street LLP contact.

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