AMARILLO, TX – The Federal Anti-kickback Statute (“AKS”) makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing of, or arranging for the furnishing of, any item or service reimbursable under a federal health care program. The AKS’s prohibition also extends to remuneration to induce, or in return for, the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursed by a federal health care program. “Remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. The AKS has been interpreted to cover any arrangement where one purpose of the remuneration is to induce referrals for items or services reimbursable by a federal health care program.
The Federal Beneficiary Inducement Statute (“Inducement Statute”) provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or State health care program beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the order or receipt of any item or service for which payment may be made, in whole or in part, by Medicare or a State health care program. Section 1128A(i)(6) of the Act defines “remuneration” for purposes of the Inducement Statute as including “transfers of items or services for free or for other than fair market value.” Section 1128A(i)(6)(A) of the Act provides that, for purposes of the Inducements Statute, the term “remuneration” does not apply to the waiver of coinsurance and deductible amounts by a person if: (i) the waiver is not offered as part of any advertisement or solicitation; (ii) the person does not routinely waive coinsurance or deductible amounts; and (iii) the person waives the coinsurance and deductible amounts after determining in good faith that the individual is in financial need or fails to collect coinsurance or deductible amounts after making reasonable collection efforts.
Over the years, there have been government enforcement actions against arrangements in which a hospital, or a lab, or a home health agency, or a DME supplier, provides free services to a physician. The government’s theory is that (i) the free services save the physician money (i.e., he/she does not have to pay an employee to provide the services) and (ii) the free services constitute “remuneration” in violation of the AKS. And yet, over the last couple of years we have witnessed government enforcement agencies (e.g., the Department of Justice and Office of Inspector General) back off a bit and not bring enforcement actions against arrangements that (i) result in a low risk of fraud and abuse, (ii) are unlikely to increase costs to federal health care programs, and (iii) makes health care more accessible to patients. In particular, (i) the OIG published several Advisory Opinions providing guidelines for when it is proper to provide free health care to patients and (ii) effective January 1, 2021, the Personal Services and Management Contracts safe harbor to the AKS was broadened.
It appears that government enforcement agencies are backing away a bit from a strict reading of the wording of the AKS and are focusing more on (i) the intent of the parties to the arrangement, (ii) whether the arrangement will result in increased costs to a federal health care program, and (iii) whether patients will be provided expanded access to health care.
The latest OIG guidance is Advisory Opinion (“AO”) No. 23-11, issued on December 21, 2023, and posted on December 27, 2023. It states, in part:
Requestor manufactures [redacted] (the “System”), a medical device-based therapy that is designed to modulate the strength of cardiac muscle contraction in patients experiencing heart failure. The System consists of a rechargeable implantable pulse generator, a charger device, a programmer, and implantable therapy-delivery leads manufactured by a third party. The System is currently approved by the U.S. Food & Drug Administration (“FDA”) for use in heart failure patients who meet certain criteria, including a left ventricular ejection fraction ranging from 25 percent to 45 percent. Requestor is the sponsor of a clinical trial designed to determine the safety and efficacy of the System in a different population: heart failure patients with a higher ejection fraction of between 40 percent and 60 percent (the “Study”). For this population, the System currently is available for clinical use in the United States only pursuant to a Category B Investigational Device Exemption (“IDE”) approved by the FDA, which allows a device to be used in a clinical trial for an investigational indication.
Although patients, including Medicare and other Federal health care program beneficiaries, may continue to receive reimbursable follow-up services related to the System, the System itself is intended as a one-time treatment, and Requestor does not anticipate that use of the System would prompt future utilization by Study participants of any other products manufactured or under development by Requestor.
If certain criteria are met, Medicare pays for Category B IDE devices and routine care items and services furnished in a clinical study involving an FDA-approved Category B IDE device. The Centers for Medicare & Medicaid Services (“CMS”) must specifically approve a Category B IDE study for it to be eligible for coverage. To be approved for Medicare coverage, a study must meet a number of criteria, including, for example, that: (i) the principal purpose of the study is to test whether the device improves health outcomes of appropriately selected patients; (ii) the rationale for the study is well supported by available scientific and medical information, or it is intended to clarify or establish the health outcomes of interventions already in common clinical use; and (iii) the study results are not anticipated to unjustifiably duplicate existing knowledge. When establishing these approval criteria for Medicare coverage, CMS explained that these criteria help to ensure that the study design is appropriate to answer questions of importance to the Medicare program and its beneficiaries and to reduce the risk of harm to individuals. CMS approved the Study as a Category B IDE study for which, as described above, Medicare pays for the Category B IDE device and routine care items and services furnished in the study.
Under the Proposed Arrangement, Requestor would pay cost-sharing obligations that Medicare beneficiaries participating in the Study otherwise would owe for Study-related Medicare reimbursable items and services provided during the Study, up to a maximum of $2,000 per Study participant. Requestor would pay the cost-sharing amounts directly to the site and investigator to which the participant otherwise would owe the amount. As a result of these subsidies, Requestor asserts that Medicare beneficiaries would incur no cost-sharing expenses relating to their participation in the Study, unless their out-of-pocket cost-sharing obligations relating to the Study exceed $2,000.
According to Requestor, the purpose of the Proposed Arrangement is to: (i) reduce financial barriers to enrollment and prevent attrition from the Study due to financial reasons; (ii) facilitate socioeconomic diversity of the Study population; and (iii) preserve blinding of participants. With respect to reducing financial barriers, Requestor certified that, absent the Proposed Arrangement, Study participants who are Medicare beneficiaries likely would incur cost-sharing obligations for billable items and services associated with some of the appointments required as part of the Study … Requestor asserts that cost-sharing obligations … would be cost prohibitive for many Medicare beneficiaries who otherwise would participate in the Study and that Requestor’s cost-sharing subsidy may be essential to enrolling and retaining a sufficient number of participants to complete the Study. Additionally, Requestor views the cost-sharing obligations for the items and services provided during the Study as a barrier to enrolling and retaining a socioeconomically diverse population of participants.
Requestor’s cost-sharing subsidy also is intended to preserve the Study’s blinding procedures. Participants normally would be billed cost sharing for Medicare-billable items and services furnished as part of the Study. Requestor certified that it does not wish for providers to collect cost-sharing amounts from control-group beneficiaries because they do not have the potential to receive any therapeutic benefit during the initial 18-month period of the Study. Requestor maintains that failing to charge cost sharing to participants in the control group while charging cost sharing to participants in the treatment group could alert the former that they are in the control group, which could un-blind the Study. By subsidizing cost-sharing obligations for participants in both the control and treatment groups, the Proposed Arrangement would avoid cost sharing as a potential signal to participants regarding their assignment in the Study.
Neither Requestor nor its investigators would advertise the availability of cost-sharing subsidies to prospective participants. Information about the subsidies would be included in the informed consent documents provided to each participant, which Requestor asserts is the point at which most participants would learn of them.
Under the Proposed Arrangement, Requestor would offer and pay cost-sharing amounts for billable items and services provided to Medicare (and potentially other Federal health care program) beneficiaries participating in the Study. The Proposed Arrangement would implicate the Federal Anti-kickback Statute because these subsidies could induce Medicare (and potentially other Federal health care program) beneficiaries to participate in the Study, during which they would receive health care items and services that are reimbursable by a Federal health care program. Although Requestor would not advertise the availability of cost-sharing subsidies, investigators nevertheless would inform participants of the subsidies as part of the informed consent process. The Proposed Arrangement would implicate the Beneficiary Inducements CMP because the remuneration would be likely to influence a beneficiary to receive Medicare-billable items and services from a particular provider, practitioner, or supplier.
Under the Proposed Arrangement, Requestor also would provide remuneration to the investigators and sites participating in the Study in two forms: (i) the opportunity to bill Federal health care programs for items and services related to the Study; and (ii) a guaranteed payment of beneficiary cost sharing (at least up to the $2,000 limit), which, in some circumstances, an investigator or site may not be able to collect in full. Both forms of remuneration to investigators and sites would implicate the Federal anti-kickback statute.
The Proposed Arrangement would not fall squarely within any exception to the definition of “remuneration” for purposes of the Beneficiary Inducements CMP or any safe harbor to the Federal Anti-kickback Statute … Nevertheless, for the following reasons, we believe the risk of fraud and abuse presented by the Proposed Arrangement is sufficiently low under the Federal anti-kickback statute for OIG to issue a favorable advisory opinion, and, in an exercise of our discretion, we would not impose sanctions under the Beneficiary Inducements CMP.
First, the Proposed Arrangement appears to be a reasonable means of promoting enrollment in the Study, particularly where patients participating in the control group would not have the potential to receive any therapeutic benefit during the first 18 months of the Study … In addition, the cost-sharing subsidies that would be offered under the Proposed Arrangement appear to be a reasonable means to facilitate enrollment of a socioeconomically diverse set of participants by removing a potential financial barrier to participation in the Study. The subsidy also may reduce the likelihood that participants would fail to complete the entire course of the Study, which involves a number of clinical visits over an 18-month period plus potential follow-up visits every 6 months thereafter.
Second, the Proposed Arrangement would pose a low risk of overutilization or inappropriate utilization of items and services payable by a Federal health care program. Because the cost-sharing subsidies are specifically designed to facilitate enrollment of individuals in the Study and help prevent attrition during the course of the Study, it is possible that overall utilization of items and services may increase, but there is nothing to suggest that such an increase would be inappropriate. Indeed, the Proposed Arrangement would include various guardrails that mitigate the risk of inappropriate utilization or improper increased costs to Federal health care programs …
In addition, CMS approved the Study as a Category B IDE study, meaning CMS evaluated the Study and determined that it meets criteria to ensure appropriate patient protections and that the study design is appropriate to answer questions of importance to the Medicare program and its beneficiaries. Given this determination by CMS, in combination with the other facts set forth above, it appears unlikely that the Proposed Arrangement would result in overutilization or inappropriate utilization of Federal health care program items and services.
Finally, the Proposed Arrangement is distinguishable from problematic seeding arrangements, such as those in which manufacturers initially offer subsidies to lock in future utilization of a reimbursable item or service. Requestor would provide cost-sharing subsidies relating only to items and services furnished as part of the Study. The System itself is intended as a one-time treatment, and Requestor does not anticipate that use of the System would prompt future utilization by Study participants of any other products manufactured or under development by Requestor. Accordingly, the Proposed Arrangement would not present the risk exhibited by problematic seeding arrangements.
Lessons for DME Suppliers
DME suppliers understand that they cannot offer anything of value to federal health care program (“FHCP”) patients to induce the patients to purchase FHCP-covered products/services from the suppliers. Doing so (i) violates the AKS unless the arrangement complies with (or substantially complies with) one of the many “safe harbors” to the AKS and (ii) violates the Inducement Statute unless the arrangement fits an exception to the statute.
With 78 million Baby Boomers retiring at the rate of 10,000 per day…and with an almost equal number of Millennials closely following the Boomers…the demand for health care is noticeably spiking. What is also noticeable is the widening socio-economic gap between the “haves” and “have nots.” Recognizing the need to narrow the socio-economic gap, and in order to promote value-based health care, effective January 1, 2021, some of the restrictions under the AKS, Inducement Statute, and federal physician self-referral statute (“Stark”) were relaxed. In issuing these relaxations, the OIG and CMS stated that while some arrangements technically violate the AKS, Inducement Statute and/or Stark, the societal benefits of the arrangements outweigh the technical problems under these three statutes.
Now, hospitals, physicians, DME suppliers, home health agencies and other providers can offer arrangements/programs that on their face may violate one of the above-named statutes…so long as the benefit to a class or people on the whole outweighs technical violations. The Advisory Opinion discussed above is an example of this.
The lesson for DME suppliers is that they can offer arrangements/programs that, on their face, technically implicate the AKS, the Inducement Statute and/or Stark…but that may be acceptable because of the benefits afforded to a segment of society…particularly those on the lower end of the social-economic spectrum. The key is for the DME supplier to consult with its health care attorney to understand the guardrails that must be set up to offer such value-added programs.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm based in Texas with a national health care practice. He represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or email@example.com.
Jacque K. Steelman, JD is a member of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. She represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States. Steelman can be reached at (806) 345-6316 or firstname.lastname@example.org.