United States: At Long Last, OIG Issues Final Rule For Beneficiary Inducement Safe Harbors

More than two years since issuing the proposed rule, the HHS Office of the Inspector General (OIG) issued the long-awaited and highly anticipated final rule (the Final Rule) that provides amendments to the Anti-Kickback Statute (AKS) regulatory safe harbors and adds protections for certain payment practices and business arrangements under the beneficiary inducement provisions of the Civil Monetary Penalty Law (CMP). These amendments and updates to the AKS and CMP regulations attempt to clarify the OIG's enforcement position in light of changes due to health reforms, to streamline the OIG's advisory opinion workload, and to implement long-existing mandates enacted in statutes. This post discusses the amendments to the beneficiary inducement provisions of the CMP codified in 42 C.F.R. Part 1003 (CMP Regulations).


The beneficiary inducement provisions of the CMP prohibit any person from offering remuneration to Medicare or Medicaid beneficiaries that the offeror knows or should know are likely to influence the selection of particular providers, practitioners, or suppliers. The Final Rule amends the definition of "remuneration" in the CMP Regulations by codifying certain statutory exceptions added by the Balanced Budget Act of 1997 (BBA) and the Patient Protection and Affordable Care Act of 2010, as amended (ACA).

At the outset and throughout the Final Rule, the OIG clarified that these exceptions are to protect arrangements under the beneficiary inducement provisions of the CMP but do not create an exception to or preempt any other federal or state law – including the AKS. It is important to remember that some arrangements that implicate the beneficiary inducement provisions of the CMP could also potentially implicate the AKS and there may not be an applicable AKS safe harbor to protect the arrangement.

The following is a brief summary of the CMP exceptions set forth in the Final Rule, which goes into effect on January 6, 2017.

1. Copayment Reductions for Certain Hospital Outpatient Department (OPD) Services.

First, the OIG simply codified an existing statutory exception that allows hospitals to reduce copayment amounts for certain outpatient department services. Congress added this exception as part of the BBA, and the OIG proposed to adopt regulatory language identical to the statutory language. The OIG received no comments to this exception.

2. Remuneration that Promotes Access to Care and Poses a Low Risk of Harm.

The OIG also codified a safe harbor to the beneficiary inducements CMP that Congress enacted through the ACA. The exemption shields remuneration that "promotes access to care and poses a low risk of harm to patients and Federal health care programs." Importantly, there is no financial maximum amount for remuneration that qualifies for this safe harbor.

As we discussed in our prior advisory on the proposed rule, the OIG explicitly sought comments on its proposed definitions of "promotes access to care" and "poses a low risk of harm." In the Final Rule, the OIG focused on three categories: (1) what is "care;" (2) what does it mean to "promote access" to care; and (3) what type of remuneration poses a low risk of harm.

What Is "Care"?

When considering whether an item or service offered to a beneficiary will "promote access to care," the OIG stated that the relevant "care" means any items or services provided to a Medicare or Medicaid beneficiary and that are payable by Medicare or Medicaid. In response to the many comments received, the OIG rejected its proposal to limit the definition of "care" to medically necessary care because some states cover care that is not medical in nature (e.g., Medicaid coverage of personal care services). This is an important concession made by the OIG and significantly broadens the scope of this exception.

What Does it Mean to "Promote Access" to Care?

The OIG stuck with its proposal that an arrangement promotes access to care only if it "improves a particular beneficiary's ability to obtain" care. The OIG did, however, recognize that certain items and services that support access to care or make it more convenient may also meet the exception.

The OIG's discussion on this point focused on remuneration that removes obstacles or provides tools and resources that will help a beneficiary access care. But the OIG draws a line at remuneration that rewards patient adherence. Remuneration that may entice a beneficiary to receive care (e.g., movie tickets in return for attending a counseling session) would not qualify for the exception, but items that make it possible for the beneficiary to access care (e.g., child care assistance during the time of the counseling session) will qualify for protection under this safe harbor. It will be important to structure any offerings or programs in a way that facilitates care, as opposed to rewarding treatment adherence.

What Type of Remuneration Poses a Low Risk of Harm?

The OIG proposed a three-prong test for determining whether remuneration offered to a beneficiary poses a "low risk of harm." Specifically, remuneration poses a low risk of harm if the items or services: (1) are unlikely to interfere with, or skew, clinical decision-making; (2) are unlikely to increase costs to federal health care programs or beneficiaries through overutilization or inappropriate utilization; and (3) do not raise patient safety or quality of care concerns.

There was general support for these criteria, but also some requests for clarification regarding the scope of certain factors. Regarding the second prong in particular, the OIG agreed with a commenter that the "harm" to avoid is an overall increase in health care costs. While certain inducements may cause an increase in one area of health care spending, the overall expenses to care for that patient may be lower because a disease is being better managed. The OIG stressed that they are concerned with increased costs relating to "overutilization" and "inappropriate utilization" – not increased utilization, as long as it is appropriate. The OIG also clarified that educational items or services on their own are not considered remuneration, even if they reference a specific provider or supplier. But, it is possible to implicate the beneficiary inducement CMP by offering something of value to attendees at an educational program.

3. Coupons, Rebates, and Other Retailer Reward Programs.

The Final Rule also codified the ACA exception permitting retailers (i.e., an entity that sells items directly to consumers) to offer or transfer coupons, rebates, or other rewards (including store merchandise, gasoline, or frequent flyer miles) for free or less than fair market value if the items or services are available on equal terms to the general public and are not tied to the provision of other items or services reimbursed in whole or in part by Medicare or Medicaid. Although the OIG did not make any changes to the text of the regulation as set forth in the proposed rule, the OIG's responses to the stakeholder comments provided some clarifications on what arrangements would be covered by this exception.

In its comments to the Final Rule, the OIG clarified that retailers would include independent or small pharmacies, online retailers, and entities that sell a single category of items, but would not include individuals or entities that primarily provide services (e.g., physicians or hospitals). Additionally, the OIG explicitly stated that manufacturers are not considered "retailers" for purposes of this exception.

The second criterion requires that the items or services be offered or transferred on equal terms to the public, regardless of health insurance status. To meet this requirement, the general public must have the same access to, and use of, the retailer reward as the retailer's insured customer base. The OIG clarified that this requirement does not prohibit a retailer from having an enrollment process for the beneficiary to qualify for the reward as long as the terms of enrollment, and the terms of earning and redeeming rewards, do not vary based on a beneficiary's insurance status or health plan. Additionally, in its response to comments, the OIG indicated that rewards programs could be targeted to patients with a particular disease state.

The third criterion requires that the offer or transfer of items or services not be tied to the provision of other items or services reimbursed in whole or in part by Medicare or Medicaid. The OIG clarified that the reward may not take the form of discounts specific to Medicare or Medicaid reimbursable items or services. However, the reward can be a discount that could be used on anything in the store, including Medicare or Medicaid covered items or services. In an attempt to clarify arrangements that would and would not meet this requirement, the OIG provided some rather confusing examples. According to the OIG, this requirement would not be met if a pharmacy had a rewards program that offered two points for every dollar spent on prescription copayments, but only one point for every dollar spent elsewhere in the store. Likewise, rewards in the form of copayment waivers or coupons would not meet this requirement because the reward would be tied to the purchase of a reimbursable item (i.e., the item for which the copayment is waived or discounted). However, if the reward were a coupon to be used on anything in the store, rather than limited to a coupon off of a copayment, the coupon would meet this requirement even if the coupon were redeemed on a copayment.

Of note, the OIG clarified that the retailer rewards exception creates a pathway for retailers to include Medicare and Medicaid beneficiaries in their rewards programs without violating the beneficiary inducement provisions of the CMP. However, as with the other beneficiary inducement exceptions, the retailer rewards safe harbor is only applicable to the beneficiary inducement CMP and is not an automatic exception to the AKS.

4. Financial Need-Based Exception.

The Final Rule also codified the ACA exception that permits individuals or entities to offer or transfer items or services (excluding cash or cash equivalents such as checks or debit cards) for free or less than fair market value to Medicare and Medicaid beneficiaries if (1) there is a good faith determination of the individual's financial need, (2) the items or services are not advertised, (3) the offer is not tied to the provision of other items or services reimbursed by Medicare or Medicaid, and (4) there is a "reasonable connection" between the items or services being offered and the medical needs of the individual. Several commenters urged the OIG to interpret the statutory exception more expansively and allow additional flexibility. However, the OIG punted by noting that it is codifying regulatory text that mirrors the statutory language but that it will continue to "assess the need for additional flexibility in the future."

In the proposed rule, the OIG explicitly solicited comments on the boundaries that should be imposed with respect to the criterion that there be a "reasonable connection" between the items or services being offered and the medical needs of the individual. In the Final Rule, the OIG indicated that it would interpret "reasonable connection to medical care of the individual" broadly and rely on the patient's medical professional to determine what is reasonably connected to his or her patient's medical care.

5. Waivers of Cost-Sharing for the First Fill of a Generic Drug.

The final ACA exception codified in the Final Rule permits Part D and MA-PD plan sponsors to waive enrollee copayments for the first fill of a generic drug covered by Part D. In the Final Rule, the OIG relies on the definition of "generic drug" set forth in the Part D regulations. Additionally, the Final Rule requires plan sponsors to disclose this incentive program in their benefit plan package submissions to CMS for coverage years beginning on or after January 1, 2018.


One of OIG's stated objectives in soliciting comments on its interpretations of the beneficiary inducement CMP exceptions was to "ensure that we protect low-risk, beneficial arrangements without opening the door to abusive practices that increase costs or compromise patient choice or quality of care." The fact that the OIG, in most cases, simply codified the existing statutory exceptions without additional clarifications or guidance demonstrates how difficult it is to balance the broad prohibitions in the law with actual business practices and the particular needs of patients.

Additionally, health care providers and industry stakeholders involved in creating patient incentive programs and care coordination arrangements should be aware that simply complying with an exception to the beneficiary inducement provisions of the CMP does not guarantee that the arrangement will be protected from prosecution under the AKS. It is hard to fathom why a beneficiary inducement that promotes a patient's access to medical services and poses low risk of harm to the patient and federal health care programs should receive safe harbor protection for beneficiary inducements but not for kickbacks. Although the OIG recognizes this potential Catch-22, the OIG has only committed to "monitor the changing health care delivery landscape" to consider appropriate safe harbors in the future. Hopefully, the fact that an arrangement meets a beneficiary inducement safe harbor will be consequential when seeking an OIG Advisory Opinion regarding the kickback implications of the arrangement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Rachel Irving Pitts
Carrie A. Roll
Ellyn Sternfield
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