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Changes Proposed for Anti-Kickback Statute

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It has been said before—healthcare is changing. Most often providers must adapt their practices to comply with governing regulations. Sometimes, governing regulations must be revised to adapt to providers practices. And on occasion, governing regulations must be revised to be consistent with other governing regulations. This is one of those occasions.

On October 3, 2014, the Office of Inspector General (“OIG”) published a Proposed Rule (“Rule”) that would make changes to the safe harbor regulations under the federal anti-kickback statute (“AKS”). Much of the Rule codifies changes to the AKS that were already established by the Affordable Care Act and the Medicare Modernization Act of 2003. It also, however, proposes two new safe harbors.

Codification of Pre-Existing Safe Harbors

Part D Cost-Sharing Waivers by Pharmacies: The Rule would protect certain cost-sharing waivers, including pharmacy waivers for financially needy Medicare Part D participants. Generally, cost-sharing waivers are prohibited by the AKS. To meet the safe harbor, pharmacies would need to meet three criteria: (1) the waiver/reduction is not advertised or part of a solicitation; (2) the pharmacy does not routinely wave cost-sharing; and (3) before waiving a cost-sharing obligation, the pharmacy determines in good faith that either the beneficiary has a financial need, or the pharmacy fails to collect cost-sharing amounts after making a reasonable effort to do so.

Federally Qualified Health Centers and Medicare Advantage Organizations: This Rule would protect certain remuneration between federally qualified health centers and Medicare Advantage organizations pursuant to a written agreement requiring that the Medicare Advantage organization pay the contracting health center no less than the level and amount that the plan would pay for the same services to another type of entity.

Medicare Coverage Gap Discount Program: To implement another existing exemption in the AKS, one that was added in 2010 with the Affordable Care Act, the OIG would add a safe harbor protecting brand drug discounts provided by drug manufacturers to Part D enrollees in the coverage gap under the Medicare Coverage Gap Discount Program. The safe harbor would incorporate the definitions of “applicable beneficiary” and “applicable drug” which are set forth in the Affordable Care Act.

New Safe Harbors

Local Transportation: The OIG would establish a new safe harbor protecting free or discounted local transportation made available to patients by an eligible entity, provided that the following criteria are met: (1) the availability of the transportation services is not determined in a manner related to the past or anticipated volume or value of referrals; (2) the transportation does not take the form of air, luxury, or ambulance-level transportation; (3) the services are not marketed or advertised, no marketing of healthcare items and services occurs during the course of the transportation, and drivers or others arranging for the transportation are not paid on a per-beneficiary basis; (4) the eligible entity that makes the transportation available bears the costs of the transportation services and does not shift the burden onto other payors; and (5) the distance from the patient’s location to the provider is no more than 25 miles. Entities that supply health care items (such as pharmaceutical companies and durable medical equipment suppliers) and laboratories are excluded from the definition of “eligible entities.”

Cost-Sharing Waivers for Emergency Ambulance Services: This Rule would establish a safe harbor to protect reductions or waivers of cost-sharing amounts for emergency ambulance services furnished by providers owned by states or municipalities. Generally, items and services provided free of charge by a governmental entity are not reimbursable. The providers would be required to offer the reduction or waiver on a uniform basis, without regard to patient-specific factors. The OIG is also seeking an express prohibition against claiming the amount reduced or waived as bad debt for payment purposes under Medicare or a state health care program, or otherwise shifting the burden of the waiver to other payors.

Technical Correction

Finally, the Rule would also amend the existing safe harbor for referral services to clarify that the safe harbor precludes protection for payments from participants to referral services that are based on the volume or value of referrals to, or business otherwise generated by, either party for the other party. The “either party for the other party” language was inadvertently changed in a 2002 revision, but appeared in the 1999 Rule.

In addition to proposed changes to the AKS, the Rule also proposes changes to the civil monetary penalty rules. These changes would allow providers greater flexibility to enter into beneficial arrangements that are not in violation of the statute. The OIG is soliciting comments on how to best implement the changes. Comments on the Rule are due by December 2, 2014. If you are in the health care industry and would like more information contact a health care law attorney today.

Molly Nicol Lewis is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLL Ms. Lewis concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at or at (859) 231-8780.

This article is intended as a summary of federal and state law and does not constitute legal advice.