United States: HHS OIG Adopts New Anti-Kickback Safe Harbor And Civil Monetary Penalty Exceptions

On December 7, 2016, the Department of Health and Human Services (HHS), Office of Inspector General (OIG), issued a final rule that will have a widespread impact on health care service providers, medical transport providers, drug manufacturers and pharmacies, among others. The final rule creates additional safe harbors under the anti-kickback statute and revises the definition of "remuneration" under the civil monetary penalties rules. These new provisions enhance the ability of providers to implement programs to eliminate barriers to care. The final rule will take effect on January 6, 2017.

Revisions to the Anti-Kickback Statute

The anti-kickback statute provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit or receive remuneration in order to induce or reward the referral of business reimbursable under Federal health care programs. Because the statute could cover potentially innocuous commercial arrangements, Congress carved out certain "safe harbors" to describe practices that would not be subject to criminal penalties, and OIG has promulgated additional safe harbors.

Changes to Existing Safe Harbor for Cost-sharing Waivers

The safe harbor regulations enumerated at 42 C.F.R. §1001.952(k) include exceptions to the term "remuneration," allowing the waiver or reduction of certain patient cost-sharing obligations. Previously enacted cost-sharing waiver exceptions include waivers for some amounts owed to a hospital for inpatient hospital services, and amounts owed by individuals who qualified for subsidized services or amounts paid to federally qualified health care centers or certain other qualified health care facilities. The December 2016 final rule expands these existing safe harbors, which previously covered cost-sharing waivers issued to Medicare or State health program beneficiaries, to cover cost-sharing waivers issued to all Federal health care program beneficiaries, which includes Medicare, Medicaid, the State Children's Health Insurance Program (SCHIP), TRICARE, the Veterans Health Administration (VHA) program, and the Indian Health Service (IHS) program.

The December 2016 final rule also adds two new exceptions to the term "remuneration" for cost-sharing waivers by pharmacies and emergency ambulance services, along with three other safe harbors, discussed below.

Waivers or Reductions by Pharmacies

The final rule allows for pharmacies to reduce or waive cost-sharing amounts imposed under a Federal health care program if the waivers or reductions are not offered as part of an advertisement or solicitation. The ban on advertisement and solicitation is intended to deny safe harbor protection for potentially abusive steering arrangements. Waivers or reductions offered to certain individuals eligible for Medicare Part D subsidies need only meet the no-advertising, no-solicitation requirement to fall within this safe harbor. For waivers or reductions offered to individuals not eligible for subsidies, the pharmacy must meet several additional requirements. It must not routinely waive or reduce cost-sharing amounts, and must only waive the cost-sharing amounts "after determining in good faith that the individual is in financial need or after failing to collect the cost-sharing amounts after making reasonable collection efforts." Providers should note that this rule only applies to pharmacies, and thus would not allow a physician to waive cost-sharing for Part B drugs.

For beneficiaries who are not already receiving subsidies, pharmacies will have to formulate their own financial need assessments under this rule and also make "reasonable collection efforts." The guidelines from the final rule state that providers must "make determinations of financial need on a good faith, individualized, case-by-case basis in accordance with a reasonable set of income guidelines uniformly applied in all cases." To comply with this provision of the rule, pharmacies should either institute or clarify an existing written policy and provide training to personnel involved in cost-sharing waivers. Reasonable collection efforts are "those efforts that a reasonable provider would undertake to collect amounts owed for items and services provided to patients."

Waivers or Reductions for Emergency Ambulance Services

The final rule also allows for cost-sharing reductions or waivers for emergency ambulance services. This safe harbor extends only to emergency ambulance services furnished by a state, municipality, or federally recognized Indian tribe. After commenters pushed for amounts owed under Medicaid and other Federal health care programs to be covered, the final rule expanded the application of the safe harbor as requested.

Unlike the pharmacy cost-sharing waivers, waivers for emergency ambulance services must not take into account insurance or financial status of the beneficiary. In addition, the ambulance provider must not shift costs to a Federal health care program: for example, by upcoding services or providing medically unnecessary services. The safe harbor only applies to emergency services; nonemergency transportation was deemed too high of a risk to be protected by the safe harbor.

Free or Discounted Shuttle Service and Local Transportation

The final rule also adopts a new safe harbor that will allow eligible entities to provide free or discounted local transportation or shuttle services as long as they meet the requirements of 42 C.F.R. § 1001.952(bb). An eligible entity is any individual or entity, except for individuals or entities (or family members or others acting on their behalf) that primarily supply health care items, such as durable medical equipment suppliers, pharmaceutical companies and pharmacies. The final rule breaks down transportation into two categories: (i) transportation in the form of a "shuttle service" provided by an eligible entity, and (ii) other transportation offered to Federal health care program beneficiaries.

For shuttle services, the shuttle must not be air, luxury, or ambulance-level transportation; it must not be marketed or advertised; no marketing of health care items and services may occur during the ride; the driver must not be paid on a per-beneficiary-transported basis; the distance between the farthest stops must not be more than 25 miles or 50 miles in a rural area; and the eligible entity should not engage in cost-shifting onto any Federal health care program or other payer.

In order to offer transportation to Federal health care program beneficiaries, eligible entities must meet five requirements. First, the availability of the free or discounted local transportation services must be set forth in a policy, applied uniformly and consistently and not determined in a manner related to volume or value of Federal health care business. Second, the transportation must not be air, luxury, or ambulance-level transportation. Third, the eligible entity must not market or advertise the transportation services, nor may it market health care items and services during the course of transportation. Drivers cannot be paid on a per-beneficiary-transported basis. Fourth, the eligible entity must only make the transportation available to established patients.

With respect to the fourth requirement, an established patient includes an established patient of the eligible entity providing the transportation, where the eligible entity is a provider or supplier of health care services. It also includes an established patient of the provider or supplier to or from which the individual is being transported. Patients can be considered "established" as early as when they contact the provider or supplier on their own initiative. Providers must not, however, reach out to a new patient offering services coupled with free transportation. The destination must be within 25 miles of the health care provider or supplier to or from which the patient would be transported, or within 50 miles if the patient resides in a rural area. Fifth, the eligible entity that makes the transportation available must bear the cost of the transportation services and not shift the burden onto Federal health care programs, other payers, or individuals.

In practice, hospitals and other eligible entities will be able to provide some forms of transport services for their patients without fear of violating the anti-kickback statute, so long as they meet the applicable safe harbor requirements laid out above.

Protected Remuneration between FQHCs and Medicare Advantage

The final rule establishes another safe harbor that will protect any remuneration between a federally qualified health center (FQHC) (or an entity controlled by such a health center) and a Medicare Advantage (MA) organization pursuant to a written agreement required by § 1853(a)(4) of the Social Security Act. To comply with § 1853(a)(4), the payment to the FQHC must not be less than the level and amount of payment that the MA organization would make to a non-FQHC entity. Note that the statute does not include a fair market value requirement. Relationships between FQHCs and third-party entities may qualify for the remuneration exception if they are consistent with requirements of § 1853(a)(4). Remuneration between an FQHC and an independent practice association (IPA) would fall within the safe harbor in a situation where the IPA stands in the shoes of the MA organization pursuant to an indirect contract arrangement.

Provision of free space by the FQHC to the MA organization would not be covered by the safe harbor, because arrangements must be related to MA plan enrollees being treated at the FQHC. Similarly, financial support from the MA to the FQHC for outreach services or infrastructure costs, for example, would not be covered.

Medicare Coverage Gap Discount Program

The final rule creates a new safe harbor that supplements the already-existing statutorily-based Medicare Coverage Gap Discount Program, which allows prescription drug manufacturers to enter into an agreement with the Secretary of HHS to provide access to discounts on drugs at the point of sale. "Applicable drugs" furnished to "applicable beneficiaries" under the Medicare Coverage Gap Discount Program will not be considered remuneration. The safe harbor cross-references the definitions of "applicable drug" and "applicable beneficiary" as listed at § 1860D-14A of the Social Security Act.

The December 2016 final rule modifies the proposed rule by requiring that manufacturers be "in compliance with the requirements of the Medicare Coverage Gap Discount Program," rather than "in full compliance with all requirements" of the program. OIG states that "minor, technical instances of non-compliance should not preclude safe harbor protection," allowing manufacturers some flexibility with respect to minor violations of the program, such as missing a payment deadline by one day. However, "[a] manufacturer that knowingly and willfully provided discounts without complying with the requirements of the Medicare Coverage Gap Discount Program could be subject to sanctions, unless such discounts are protected by another safe harbor."

Technical Revision of the Anti-Kickback Statute

The final rule makes a technical correction to the safe harbor found at 42 C.F.R. § 952(f), pertaining to referral services. The language was changed inadvertently in 2002 to say ". . . business otherwise generated by either party for the referral service . . ." and is now changed back to the 1999 language, ". . . business otherwise generated by either party for the other party" (emphases added).

Civil Monetary Penalties

The civil monetary penalties law authorizes the Secretary of HHS to impose penalties and assessments on persons who defraud Medicare or Medicaid or engage in certain other prohibited conduct. Such conduct could lead to those persons or entities being excluded from Federal health care programs (a term that includes State health care programs). The December 2016 final rule applies to one specific provision of the civil monetary penalties, which imposes penalties on any person who "offers to or transfers remuneration to any individual eligible for benefits" under a Federal health care program "that such person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part" by a Federal health care program.

The December 2016 final rule carves out five new exceptions to the definition of remuneration in the provision above.

Reduction in Copayment for Certain Outpatient Services

The rule adds a straightforward cost-sharing exception that allows for reduction in the copayment amount for covered outpatient department services under § 1833(t)(8)(B) of the Social Security Act. This cost-sharing exception adds to the already-existing regulation that allows for differentials in coinsurance and deductible amounts as part of a benefit plan design for the payers of such amounts, with any differentials disclosed in writing to all beneficiaries, third party payers and providers. The foregoing safe harbor does not apply to physician practice billing.

Remuneration That Poses a Low Risk of Harm and Promotes Access to Care

A provider can avoid civil monetary penalties when it provides items or services that improve a beneficiary's ability to obtain items and services payable by Medicare or Medicaid, and pose a low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs. The inclusion of "items and services" revises the earlier proposed language, "medically necessary health care items and services." However, OIG stated it will not permit remuneration that would be likely to influence a patient to access unnecessary care. For example, cash and cash equivalents would not meet the criteria for the exception. Importantly, the items or services provided need not be items or services that are eligible to be paid by Medicare or Medicaid. Therefore, nonclinical items that improve a beneficiary's access to Federal health services could be eligible. Examples listed include telemedicine capability, health and wellness-related technology, smartphone applications, home monitoring devices, nutritional services, health and wellness coaching, Internet classes, and discount programs that tie health and wellness achievements to the receipt of retail items and services.

The items or services provided must be analyzed in accordance with several factors listed in the regulations. Namely, the items and services must (i) be unlikely to interfere with, or skew, clinical decision making, (ii) be unlikely to increase costs to Federal health care programs or beneficiaries through overutilization or inappropriate utilization, and (iii) not raise patient safety or quality-of-care concerns.

Retailer Rewards and Discounts

Retailers may offer or transfer items or services for free or less than fair market value, without being subject to civil monetary penalties. The items or services must consist of coupons, rebates, or other rewards from a retailer; must be offered or transferred on equal terms available to the general public, regardless of health insurance status; and must not be tied to the provision of other items or services reimbursed in whole or in part by a Federal health care program.

The preamble to the final rule states that remuneration need not be of "nominal value" to fall under this category, but also that remuneration of "nominal value" might not meet the criteria of the exception if, for example, it is tied to the provision of items or services reimbursed by a Federal health care program.

Remuneration to Financially Needy Individuals

The regulations also provide for a financial-need-based exception to the definition of remuneration. There may be some overlap between this provision and the exception for remuneration that poses a low risk of harm and promotes access to care. Under this provision, a person may offer or transfer items or services for free or less than fair market value if: the items or services are not offered as part of an advertisement or solicitation and are not tied to the provision of other items or services reimbursed in whole or in part by a Federal health care program; there must be a reasonable connection between the items or services and the medical care of the individual; and the person providing the items or services must determine in good faith that the individual is in financial need.

Similar to the anti-kickback safe harbor revision, OIG does not provide a uniform measure of need or threshold of assistance, and states that the determination of financial need should be done on an individual basis. No specific documentation is required, but a written policy would prove useful for a provider or supplier in any relevant investigation.

Copayment Waivers for the First Fill of Generic Drugs

A Medicare Part D Plan sponsor may waive any copayment for the first fill of a covered Part D drug that is either a generic drug or an authorized generic drug, as long as the waiver is included in the benefit design package submitted to CMS. The authorized generic drug exception was added between the proposed rule and the final rule. It is important to note that this is the only regulation that will apply beginning with coverage on or after January 1, 2018; the other regulations take effect on January 6, 2017.


The final rule provides greater legal certainty and flexibility for a variety of providers interested in eliminating barriers to care, especially those facing low-income patients.

HHS OIG Adopts New Anti-Kickback Safe Harbor And Civil Monetary Penalty Exceptions

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.