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OIG Seeks Comment on Recently Published Proposed Rule Expanding Anti-Kickback Safe Harbors

OIG Seeks Comment on Recently Published Proposed Rule Expanding Anti-Kickback Safe Harbors

The federal Anti-Kickback Statute ("AKS") criminalizes the solicitation or payment of remuneration in order to induce business that is reimbursable under the Medicare and/or Medicaid programs, such as kickbacks, bribes, and certain rebates. The U.S. Department of Health and Human Services Office of the Inspector General ("OIG") is also authorized to impose civil monetary penalties ("CMP") for such arrangements. Recognizing the breadth of this statute, which is aimed at targeting quid pro quo agreements, but which unfortunately caught within its swath a number of innocuous and legitimate business arrangements, Congress directed OIG to develop "safe harbor" exemptions for certain beneficial business arrangements that might otherwise implicate the AKS.

On October 2, 2014, OIG requested feedback on a proposed rule that would redefine the definition of "gainsharing" and add four new safe harbors. The OIG proposes to create a new safe harbor for pharmacies that waive Medicare Part D cost-sharing; however, the safe harbor is limited to cost-sharing waivers that are not advertised or routine. Additionally, the pharmacy must determine that the beneficiary has a financial need for the waiver. Further, in this proposed rule, the OIG has proposed a safe harbor for cost-sharing waivers for emergency ambulance services. OIG has proposed that this safe harbor be limited to government-owned and -operated ambulance providers that are Medicare Part B providers of emergency ambulance services. This safe harbor is not available for nonemergency ambulance transportation services. A safe harbor is also proposed for manufacturer discounts for drugs provided through the Medicare Coverage Gap Discount Program.

The proposed rule also includes the addition of a safe harbor to include protection for services that provide free or discounted local transportation to patients, which essentially codifies recent favorable OIG advisory opinions on proposed transportation programs. This is a welcome safe harbor, particularly for providers in rural or low-income areas who are well aware that lack of access to affordable transportation often prevents patients from receiving the care they need. The proposed safe harbor is limited to transportation for established patients but contemplates the possibility of transportation for a caregiver. To preclude the safe harbor from being used to generate business and referrals, OIG proposes that suppliers such as durable medical equipment companies or pharmaceutical manufacturers be exempt from this protection.

Of significant note is the OIG's proposal to narrow its interpretation of the CMP statute regarding "gainsharing" to reflect current best practices in medicine, which seek to align the incentives of hospitals and physicians to provide quality yet cost-effective care. Gainsharing refers to an arrangement where a hospital rewards physicians for their efforts to be cost-conscious by giving the physicians a percentage of whatever reduced patient care costs are attributable to those efforts. In most arrangements, in order to receive any payment, the clinical care must not have been adversely affected as measured by selected quality and performance measures. In addition, many plans require an independent consultant determine that the payment represents "fair market value" for the collective physicians' efforts. Currently, hospitals are prohibited from using gainsharing payments to knowingly induce a physician to "reduce or limit services" to federal program beneficiaries, lest the hospital's actions implicate the CMP statute.

If the OIG finds that a CMP is warranted, when determining the amount of the penalty, the OIG considers the following factors: (i) the nature of the payment designed to reduce or limit services and the circumstances under which it was made; (ii) the extent to which the payment encouraged the limiting of medical care or the premature discharge of the patient; (iii) the extent to which the payment caused actual or potential harm to program beneficiaries; and (iv) the financial condition of the hospital (or physician) involved in the offering (or acceptance) of the payment. After the issuance of multiple advisory opinions and other guidance on the gainsharing CMP over the years, the OIG has finally acknowledged that "not all changes in practice necessarily constitute a reduction in services." Thus, in its proposed rule, the OIG seeks comment on a new definition of "reduce or limit services" with an eye toward narrowing the scope of inducements that implicate the gainsharing CMP.

Providers who are interested in exploring gainsharing programs as a way to more closely align hospital and physician incentives may have a new option on the horizon, particularly if the OIG issues a final rule that reflects the realities of today's health care marketplace. Rather than taking a wait-and-see approach, it may be beneficial for providers across the country to respond to the OIG's request for comments with practical suggestions for how gainsharing programs can benefit the Medicare and Medicaid programs and be instrumental in population health management.

In order to avoid criminal and civil penalties, the OIG appears, in practice, to be increasingly requiring strict compliance with the safe harbors. The U.S. Department of Justice ("Department") has made it clear that, when prosecuting violations of the AKS, it intends to pursue not only organizations such as health care clinics or hospitals that have entered potentially unlawful arrangements, but also the specific employees the Department deems responsible for those arrangements. In light of the recent pronouncement from the Department's Criminal Division that it will now be closely reviewing all qui tam complaints brought under the federal False Claims Act, the Department has made clear its intention to make health care fraud, including through holding health care executives accountable for fraud, one of its highest priorities. It is advisable that any individual or entity concerned that a business arrangement may implicate the AKS—even if the entity believes it may be entitled to protection under a safe harbor—engage properly trained counsel to review the arrangement and advise whether it complies with federal law.

OIG is soliciting public comment on the proposed rule until December 2, 2014. Comments may be submitted electronically through the Federal eRulemaking Portal. Jones Day will continue to monitor these developments and is available to provide assistance to interested parties in providing comment to the OIG on this matter.

Lawyer Contacts

For further information, please contact your principal Firm representative or one of the lawyers listed below. General email messages may be sent using our "Contact Us" form, which can be found at www.jonesday.com.

Richard H. Deane, Jr.
Atlanta
+1.404.581.8502
rhdeane@jonesday.com

James R. Dutro
San Francisco
+1.415.875.5839
jdutro@jonesday.com

Thomas E. Dutton
Columbus
+1.614.281.3897
tedutton@jonesday.com

Gerald M. Griffith
Chicago
+1.312.269.1507
ggriffith@jonesday.com

Jeffrey L. Kapp
Cleveland
+1.216.586.7230
jlkapp@jonesday.com

Todd P. Kelly
Dallas
+1.214.969.5122
tkelly@jonesday.com

Laura F. Laemmle-Weidenfeld
Washington
+1.202.879.3496
lweidenfeld@jonesday.com

Rebekah N. Plowman
Atlanta
+1.404.581.8240
rplowman@jonesday.com

Stephen G. Sozio
Cleveland
+1.216.586.7201
sgsozio@jonesday.com

Heidi A. Wendel
New York
+1.212.326.8322
hwendel@jonesday.com

Lynsey M. Barron and Lindsey Lonergan, associates in the Atlanta Office, and Amy E. Kaufman, an associate in the Washington Office, assisted in the preparation of this Alert.

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