[Federal Register: August 30, 2002 (Volume 67, Number 169)]
[Notices]
[Page 55855-55858]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30au02-120]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Inspector General
Publication of OIG Special Advisory Bulletin on Offering Gifts
and Other Inducements to Beneficiaries
AGENCY: Office of Inspector General (OIG), HHS.
[[Page 55856]]
ACTION: Notice.
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SUMMARY: The OIG periodically develops and issues guidance, including
Special Fraud Alerts and Special Advisory Bulletins, to alert and
inform the industry about potential problems or areas of special
interest. This Federal Register notice sets forth the recently issued
OIG Special Advisory Bulletin addressing the offering of gifts and
other inducements to Medicare and Medicaid beneficiaries.
FOR FURTHER INFORMATION CONTACT: Vicki Robinson or Joel Schaer, Office
of Counsel to the Inspector General, (202) 619-0335.
SUPPLEMENTARY INFORMATION:
I. Background
We are issuing this Special Advisory Bulletin to help the industry
better understand the prohibition on furnishing inducements to Medicare
and Medicaid beneficiaries at section 1128A(a)(5) of the Social
Security Act. Specifically, the Special Advisory Bulletin addresses the
offering of gifts and other inducements to beneficiaries to influence
their choice of a Medicare or Medicaid provider, practitioner, or
supplier.
II. Special Advisory Bulletin: Offering Gifts and Other Inducements to
Beneficiaries (August 2002)
Introduction
Under section 1128A(a)(5) of the Social Security Act (the Act),
enacted as part of Health Insurance Portability and Accountability Act
of 1996 (HIPAA), a person who offers or transfers to a Medicare or
Medicaid beneficiary any remuneration that the person knows or should
know is likely to influence the beneficiary's selection of a particular
provider, practitioner, or supplier of Medicare or Medicaid payable
items or services may be liable for civil money penalties (CMPs) of up
to $10,000 for each wrongful act. For purposes of section 1128A(a)(5)
of the Act, the statute defines ``remuneration'' to include, without
limitation, waivers of copayments and deductible amounts (or any part
thereof) and transfers of items or services for free or for other than
fair market value. (See section 1128A(i)(6) of the Act.) The statute
and implementing regulations contain a limited number of exceptions.
(See section 1128A(i)(6) of the Act; 42 CFR 1003.101.)
Offering valuable gifts to beneficiaries to influence their choice
of a Medicare or Medicaid provider \1\ raises quality and cost
concerns. Providers may have an economic incentive to offset the
additional costs attributable to the giveaway by providing unnecessary
services or by substituting cheaper or lower quality services. The use
of giveaways to attract business also favors large providers with
greater financial resources for such activities, disadvantaging smaller
providers and businesses.
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\1\ For convenience, in this Special Advisory Bulletin, the term
``provider'' includes practitioners and suppliers, as defined in 42
CFR 400.202.
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The Office of Inspector General (OIG) is responsible for enforcing
section 1128A(a)(5) through administrative remedies. Given the broad
language of the prohibition and the number of marketing practices
potentially affected, this Bulletin is intended to alert the health
care industry as to the scope of acceptable practices. To that end,
this Bulletin provides bright-line guidance that will protect the
Medicare and Medicaid programs, encourage compliance, and level the
playing field among providers. In particular, the OIG will apply the
prohibition according to the following principles:
First, the OIG has interpreted the prohibition to permit
Medicare or Medicaid providers to offer beneficiaries inexpensive gifts
(other than cash or cash equivalents) or services without violating the
statute. For enforcement purposes, inexpensive gifts or services are
those that have a retail value of no more than $10 individually, and no
more than $50 in the aggregate annually per patient.
Second, providers may offer beneficiaries more expensive
items or services that fit within one of the five statutory exceptions:
waivers of cost-sharing amounts based on financial need; properly
disclosed copayment differentials in health plans; incentives to
promote the delivery of certain preventive care services; any practice
permitted under the federal anti-kickback statute pursuant to 42 CFR
1001.952; or waivers of hospital outpatient copayments in excess of the
minimum copayment amounts.
Third, the OIG is considering several additional
regulatory exceptions. The OIG may solicit public comments on
additional exceptions for complimentary local transportation and for
free goods in connection with participation in certain clinical
studies.
Fourth, the OIG will continue to entertain requests for
advisory opinions related to the prohibition on inducements to
beneficiaries. However, as discussed below, given the difficulty in
drawing principled distinctions between categories of beneficiaries or
types of inducements, favorable opinions have been, and are expected to
be, limited to situations involving conduct that is very close to an
existing statutory or regulatory exception.
In sum, unless a provider's practices fit within an exception (as
implemented by regulations) or are the subject of a favorable advisory
opinion covering a provider's own activity, any gifts or free services
to beneficiaries should not exceed the $10 per item and $50 annual
limits.\2\
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\2\ The OIG will review these limits periodically and may adjust
them for inflation if appropriate.
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In addition, valuable services or other remuneration can be
furnished to financially needy beneficiaries by an independent entity,
such as a patient advocacy group, even if the benefits are funded by
providers, so long as the independent entity makes an independent
determination of need and the beneficiary's receipt of the remuneration
does not depend, directly or indirectly, on the beneficiary's use of
any particular provider. An example of such an arrangement is the
American Kidney Fund's program to assist needy patients with end stage
renal disease with funds donated by dialysis providers, including
paying for their supplemental medical insurance premiums. (See, e.g.,
OIG Advisory Opinion No. 97-1 and No. 02-1.)
Elements of the Prohibition
Remuneration. Section 1128A(a)(5) of the Act prohibits the offering
or transfer of ``remuneration''. The term ``remuneration'' has a well-
established meaning in the context of various health care fraud and
abuse statutes. Generally, it has been interpreted broadly to include
``anything of value.'' The definition of ``remuneration'' for purposes
of section 1128A(a)(5)--which includes waivers of coinsurance and
deductible amounts, and transfers of items or services for free or for
other than fair market value--affirms this broad reading. (See section
1128A(i)(6).) The use of the term ``remuneration'' implicitly
recognizes that virtually any good or service has a monetary value.\3\
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\3\ Some services, such as companionship provided by volunteers,
have psychological, rather than monetary value. (See, e.g., OIG
Advisory Opinion No. 00-3.)
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The definition of ``remuneration'' in section 1128A(i)(6) contains
five specific exceptions:
Non-routine, unadvertised waivers of copayments or
deductible amounts based on individualized determinations of financial
need or exhaustion of reasonable collection efforts. Paying the
premiums for a beneficiary's Medicare Part B or supplemental insurance
is not protected by this exception.
Properly disclosed differentials in a health insurance
plan's copayments or
[[Page 55857]]
deductibles. This exception covers incentives that are part of a health
plan design, such as lower plan copayments for using preferred
providers, mail order pharmacies, or generic drugs. Waivers of Medicare
or Medicaid copayments are not protected by this exception.
Incentives to promote the delivery of preventive care.
Preventive care is defined in 42 CFR 1003.101 to mean items and
services that (i) are covered by Medicare or Medicaid and (ii) are
either pre-natal or post-natal well-baby services or are services
described in the Guide to Clinical Preventive Services published by the
U.S. Preventive Services Task Force (available online at http://
odphp.osphs.dhhs.gov/pubs/guidecps). Such incentives may not be in the
form of cash or cash equivalents and may not be disproportionate to the
value of the preventive care provided. (See 42 CFR 1003.101; 65 FR
24400 and 24409.)
Any practice permitted under an anti-kickback statute safe
harbor at 42 CFR 1001.952.\4\
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\4\ For example, anti-kickback statute safe harbors exist for
warranties; discounts; employee compensation; waivers of certain
beneficiary coinsurance and deductible amounts; and increased
coverage, reduced cost-sharing amounts, or reduced premium amounts
offered by health plans. See 42 CFR 1001.952(g), (h), (i), and (k).
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Waivers of copayment amounts in excess of the minimum
copayment amounts under the Medicare hospital outpatient fee schedule.
(See section 1128A(i)(6) of the Act; 42 CFR 1003.101.)
In addition, in the Conference Committee report accompanying the
enactment of section 1128A(a)(5), Congress expressed its intent that
inexpensive gifts of nominal value be permitted. (See Joint Explanatory
Statement of the Committee of Conference, section 231 of HIPAA, Public
Law 104-191.) Accordingly, the OIG interprets the prohibition to
exclude offers of inexpensive items or services, and no specific
exception for such items or services is required. (See 65 FR 24400 and
24410.) The OIG has interpreted inexpensive to mean a retail value of
no more than $10 per item or $50 in the aggregate per patient on an
annual basis. Id. at 24411.
Inducement. Section 1128A(a)(5) of the Act bars the offering of
remuneration to Medicare or Medicaid beneficiaries where the person
offering the remuneration knows or should know that the remuneration is
likely to influence the beneficiary to order or receive items or
services from a particular provider. The ``should know'' standard is
met if a provider acts with deliberate ignorance or reckless disregard.
No proof of specific intent is required. (See 42 CFR 1003.101.)
The ``inducement'' element of the offense is met by any offer of
valuable (i.e., not inexpensive) goods and services as part of a
marketing or promotional activity, regardless of whether the marketing
or promotional activity is active or passive. For example, even if a
provider does not directly advertise or promote the availability of a
benefit to beneficiaries, there may be indirect marketing or
promotional efforts or informal channels of information dissemination,
such as ``word of mouth'' promotion by practitioners or patient support
groups. In addition, the OIG considers the provision of free goods or
services to existing customers who have an ongoing relationship with a
provider likely to influence those customers' future purchases.
Beneficiaries. Section 1128A(a)(5) of the Act bars inducements
offered to Medicare and Medicaid beneficiaries, regardless of the
beneficiary's medical condition. The OIG is aware that some specialty
providers offer valuable gifts to beneficiaries with specific chronic
conditions. In many cases, these complimentary goods or services have
therapeutic, as well as financial, benefits for patients. While the OIG
is mindful of the hardships that chronic medical conditions can cause
for beneficiaries, there is no meaningful basis under the statute for
exempting valuable gifts based on a beneficiary's medical condition or
the condition's severity. Moreover, providers have a greater incentive
to offer gifts to chronically ill beneficiaries who are likely to
generate substantially more business than other beneficiaries.
Similarly, there is no meaningful statutory basis for a broad
exemption based on the financial need of a category of patients. The
statute specifically applies the prohibition to the Medicaid program--a
program that is available only to financially needy persons. The
inclusion of Medicaid within the prohibition demonstrates Congress'
conclusion that categorical financial need is not a sufficient basis
for permitting valuable gifts. This conclusion is supported by the
statute's specific exception for non-routine waivers of copayments and
deductibles based on individual financial need. If Congress intended a
broad exception for financially needy persons, it is unlikely that it
would have expressly included the Medicaid program within the
prohibition and then created such a narrow exception.
Provider, Practitioner, or Supplier. Section 1128A(a)(5) of the Act
applies to incentives to select particular providers, practitioners, or
suppliers. As noted in the regulations, the OIG has interpreted this
element to exclude health plans that offer incentives to Medicare and
Medicaid beneficiaries to enroll in a plan. (See 65 FR 24400 and
24407.) However, incentives provided to influence an already enrolled
beneficiary to select a particular provider, practitioner, or supplier
within the plan are subject to the statutory proscription (other than
copayment differentials that are part of a health plan design). Id. In
addition, the OIG does not believe that drug manufacturers are
``providers, practitioners, or suppliers'' for the limited purposes of
section 1128A(a)(5), unless the drug manufacturers also own or operate,
directly or indirectly, pharmacies, pharmacy benefits management
companies, or other entities that file claims for payment under the
Medicare or Medicaid programs.
Additional Regulatory Considerations
Congress has authorized the OIG to create regulatory exceptions to
section 1128A(a)(5) of the Act and to issue advisory opinions to
protect acceptable arrangements. (See sections 1128A(i)(6)(B) and
1128D(b)(2)(A) of the Act.) While the OIG has considered numerous
arrangements involving the provision of various free goods and services
to beneficiaries, for the following reasons the OIG has concluded that
any additional exceptions will likely be few in number and narrow in
scope:
Any exception will create the activity that the statute
prohibits--namely, competing for business by giving remuneration to
Medicare and Medicaid beneficiaries. Moreover, competition will not
only result in providers matching a competitor's offer, but inevitably
will trigger ever more valuable offers.
Since virtually all free goods and services have a
corresponding monetary value, there is no principled basis under the
statute for distinguishing between the kinds of goods or services
offered or the types of beneficiaries to whom the goods or services are
offered. Attempting to draw such distinctions would necessarily result
in arbitrary standards and would undermine the entire prohibition.
Congress has provided no further statutory guidance on the bases for
distinguishing and evaluating potential exceptions.
Despite these serious concerns, the OIG is considering soliciting
public comment on the possibility of regulatory ``safe harbor''
exceptions under section
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1128A(a)(5) for two kinds of arrangements:
Complimentary local transportation. The OIG is considering
proposing a new exception for complimentary local transportation
offered to beneficiaries residing in the provider's primary catchment
area. The proposal would permit some complimentary local transportation
of greater than nominal value. However, the exception would not cover
luxury or specialized transportation, including limousines or
ambulances (but would permit vans specially outfitted to transport
wheelchairs). The proposed exception may include transportation to the
office or facility of a provider other than the donor; however, such
arrangements may implicate the anti-kickback statute insofar as they
confer a benefit on a provider that is a potential referral source for
the party providing the transportation.
Government-sponsored clinical trials. The OIG may propose
a new exception for free goods and services (possibly including waivers
of copayments) in connection with certain clinical trials that are
principally sponsored by the National Institutes of Health or another
component of the Department of Health and Human Services.
The OIG is reviewing its pending proposal (65 FR 25460) to permit
certain dialysis providers to purchase Medicare supplemental insurance
for financially needy persons in the light of the principles
established in this Bulletin.
While the OIG does not expect at this time to propose any
additional regulatory exceptions related to unadvertised waivers of
copayments and deductibles, the OIG recognizes that such waivers occur
in a wide variety of circumstances, some of which do not present a
significant risk of fraud and abuse. The OIG encourages the industry to
bring these situations to our attention through the advisory opinion
process. Instructions for requesting an OIG advisory opinion are
available on the OIG Web site at http://oig.hhs.gov/advopn/index.htm.
Finally, the OIG reiterates that nothing in section 1128A(a)(5)
prevents an independent entity, such as a patient advocacy group, from
providing free or other valuable services or remuneration to
financially needy beneficiaries, even if the benefits are funded by
providers, so long as the independent entity makes an independent
determination of need and the beneficiary's receipt of the remuneration
does not depend, directly or indirectly, on the beneficiary's use of
any particular provider. The OIG has approved several such arrangements
through the advisory opinion process, including the American Kidney
Fund's program to assist needy patients with end stage renal disease
with funds donated by dialysis providers. (See, e.g., OIG Advisory
Opinion No. 97-1 and No. 02-1.)
Conclusion
Congress has broadly prohibited offering remuneration to Medicare
and Medicaid beneficiaries, subject to limited, well-defined
exceptions. To the extent that providers have programs in place that do
not meet any exception, the OIG, in exercising its enforcement
discretion, will take into consideration whether the providers
terminate prohibited programs expeditiously following publication of
this Bulletin.
The Office of Inspector General (OIG) was established at the
Department of Health and Human Services by Congress in 1976 to
identify and eliminate fraud, abuse, and waste in the Department's
programs and to promote efficiency and economy in departmental
operations. The OIG carries out this mission through a nationwide
program of audits, investigations, and inspections.
The Fraud and Abuse Control Program, established by the Health
Insurance Portability and Accountability Act of 1996 (HIPAA),
authorized the OIG to provide guidance to the health care industry
to prevent fraud and abuse and to promote the highest level of
ethical and lawful conduct. To further these goals, the OIG issues
Special Advisory Bulletins about industry practices or arrangements
that potentially implicate the fraud and abuse authorities subject
to enforcement by the OIG.
Dated: August 8, 2002.
Janet Rehnquist,
Inspector General.
[FR Doc. 02-22124Filed 8-29-02; 8:45 am]
BILLING CODE 4152-01-P