United States: OIG Guidance on Inducements to Patients

Article by Kara M. Friedman and Kristian Werling

As part of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Congress enacted broad reforms to federal laws intended to prevent fraud in the medical industry. A major part of the reform included a strengthening of the federal anti-kickback statute that prohibits any form of payments to Medicare or Medicaid beneficiaries intended to influence the beneficiary's selection of a provider. Violation of the statute can lead to civil monetary penalties and possible exclusion from federal health care programs, including Medicare and Medicaid. The Office of Inspector General (OIG) of the U.S. Department of Health and Human Services is responsible for enforcing the amended fraud provisions. The OIG periodically issues advisory bulletins and opinions that address current issues relating to compliance with federal health care laws.

Advisory Bulletin: Offering Gifts and Other Inducements to Beneficiaries
On August 29, 2002, the OIG issued a Special Advisory Bulletin entitled "Offering Gifts and Other Inducements to Beneficiaries." The bulletin is designed to provide guidance to Medicare and Medicaid providers regarding limitations on beneficiary inducements imposed under Section 1128A(a)(5) of the Social Security Act, enacted as part of HIPAA. The pertinent HIPAA provision provides that 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 of up to $10,000 for each wrongful act. "Remuneration" includes waivers of co-payments and deductible amounts and transfers of items or services for free or for less than fair market value. HIPAA law and regulations do, however, contain a limited number of exceptions.

As the HIPAA enforcement agency, the OIG issued the guidance to alert the health care industry as to the scope of acceptable practices. The special Advisory Opinion provides bright-line guidance that the OIG purports will protect the Medicare and Medicaid programs, encourage compliance, and level the playing field among providers. The following principles are emphasized in the guidance:

• The OIG interprets the restrictions against remuneration to permit providers to provide beneficiaries inexpensive gifts (other than cash or cash equivalents) or services without violating the statute. Inexpensive gifts or services are those items that have a retail value of no more than $10 individually, and no more than $50 in the annual aggregate per patient.
• Providers may offer beneficiaries certain other valuable items or services that fit within one of the following five exceptions:

In the Advisory Bulletin, the OIG states that it is considering several additional regulatory exceptions. Particularly, 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. Also, the OIG will continue to respond to requests for advisory opinions related to the prohibition on inducements to beneficiaries. It has stated, however, the difficulty in drawing principled distinctions between categories of beneficiaries or types of inducements. In the past, favorable opinions have been 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. With regard to the other exceptions, prior to undertaking any such program, a provider should review its proposal with legal counsel.

This Advisory Bulletin follows other guidance issued by the OIG in this area. For example, previously, the OIG issued an advisory opinion on the issue of free transportation given to patients by health care providers. In that opinion, Advisory Opinion 00-7, the OIG reviewed seven factors in analyzing transportation arrangements: the population to whom the free services are offered, the nature or type of transportation offered, the geographic area, the availability and affordability of alternatives, marketing and advertising of the service, the type of provider and whether the costs of the transportation will be charged directly or indirectly to any federal health care program. Transportation programs offered by smaller providers or in areas where alternatives are available or more expensive transports (such as ambulance services) will be scrutinized more closely for possible HIPAA violations. Although advisory opinions only apply specifically to the requestor of the opinion and the specific fact situation therein, it is possible to glean some degree of guidance from them.

In Advisory Opinion 97-1, the requestors were companies providing dialysis services to patients suffering from end stage renal disease (ESRD). These providers were donating money to the American Kidney Fund (AKF). AKF, in turn, runs a grant program that provides funding to patients based on financial need to cover the necessary payments for their Medicare Part B and Medigap policy premiums. When a patient suffers from ESRD, primary indirect beneficiaries of these policies are the dialysis companies who provide a significant amount of services to ESRD patients on a monthly basis.

The OIG concluded that this particular arrangement does not violate the anti-kickback provisions. Of importance to the OIG was the fact that the payment was not being made to the beneficiary. Instead, the payments were donated by the providers to a bona fide charitable organization that distributed the funds as part of a grant program. Additionally, the OIG emphasized the fact that AKF did not take into consideration where beneficiaries received their ESRD services when considering grant applications and that the providers did not take into consideration whether AKF grant recipients were using their services when they made contributions to the AKF.

Advisory Opinion 02-12: Disease Management Reward Program Does Not Violate
Anti-Kickback Statute
The OIG provided related guidance on August 30, 2002, issuing Advisory Opinion 02-12 which discussed how anti-kickback rules would be applied to a rewards system implemented as part of a chronic disease management program. The requestor of this opinion operates an Internet-based system that provides behavior modification and drug regimen compliance services to managed care organizations (MCOs) and employer-based health plans which enroll their members in the program.

Under the program, MCOs and health plans provide the requestor with information about enrollees who might be candidates for participation in the service. Potential candidates include chronically ill patients who take maintenance medications and individuals participating in smoking cessation or weight-loss programs. Users of the program receive incentive "points" to encourage compliance (points are received for participating in maintenance programs and for compliance with prescribed regimens). Additionally, under the program, doctors and their staffs can earn similar points for participating in program activities such as reviewing patient information and compliance results. Participants in the program can redeem their points for goods and services, none of which are reimbursable by a federal health program. The fee for the program would be paid by the MCO or health plan on behalf of the enrollee. The Advisory Opinion indicated that this arrangement would not violate the anti-kickback statute.

The Internet program in question in the Advisory Opinion involved services for behavior modification programs and drug compliance programs. These services are generally not reimbursable under any federal health care programs. Thus, the OIG determined that giving remuneration to induce participation in the program does not create potential violations of the anti-kickback statute and are permissible under federal law. This Advisory Opinion has limited application to other analogous programs that might involve federal benefits since the program failed to meet a threshold criterion for application of the anti-kickback statute, namely, the eligibility of the program for Medicare and Medicaid reimbursement.

A second component of the same Internet-based service involved the sale of advertising on web pages that are used to convey content to users. The advertising will be used to sell health-related and non-health related products and services. The ads would include banner ads, hyperlinks to advertiser's web sites, sponsorships, and other "promotional opportunities." The requestor desired guidance on whether the advertising would violate the anti-kickback statute.

The OIG conveyed that although advertising can violate the anti-kickback statute because it is inherently meant to recommend the use of a product, this particular advertising is not unlawful. The ads contemplated by the service would be identical to other mainstream advertising that is targeted to health care consumers. Of primary importance to the OIG in this situation was the fact that the requestor would be simply selling space on a web site and not selling the advertised goods or services. The OIG found that the characteristics of the web advertising distinguished the advertisements from the substantive content of the site and that it did not create the implication that the requestor in any way or manner endorses or has co-branded with the particular advertiser. Thus, as long as the fees for the ads were not based on a "per click" or "per purchaser" basis, the ads do not create a violation of the anti-kickback statute.

This Legal Update is published by Ross & Hardies to provide a summary of significant developments to our clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation.