On January 31, 2019, the Department of Health and Human Services (HHS) released a notice of proposed rulemaking (the Proposed Rule) as part of ongoing administration drug pricing reform efforts. The Proposed Rule would modify a regulatory provision that had previously protected certain pharmaceutical manufacturer rebates from criminal prosecution and financial penalties under the federal Anti-Kickback Statute.

Specifically, the Proposed Rule would exclude from “safe harbor” protection rebates and other discounts on prescription pharmaceutical products offered by pharmaceutical manufacturers to Medicare Part D plan sponsors or Medicaid Managed Care Organizations (MCOs), unless the price reduction is required by law (such as rebates required under the Medicaid Drug Rebate Program). The proposed exclusion would apply to rebates offered directly to Part D plan sponsors and Medicaid MCOs, as well as those negotiated by or paid through a pharmacy benefit manager (PBM). HHS stated that it does not intend for the revisions in this Proposed Rule to negatively impact protection of prescription pharmaceutical product discounts offered to other entities such as wholesalers, hospitals, physicians, pharmacies and third party payors in other federal health care programs. The proposed effective date of this regulatory modification is January 1, 2020, although HHS has sought comments regarding whether this allows sufficient time for parties to restructure existing arrangements.

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On August 24, 2018, the Office of Inspector General (OIG), Department of Health and Human Services (HHS) published a request for information, seeking input from the public on potential new safe harbors to the Anti-Kickback Statute and exceptions to the beneficiary inducement prohibition in the Civil Monetary Penalty (CMP) Law to remove impediments to care coordination and value-based care. The broad scope of the laws involved and the wide-ranging nature of OIG’s request underscore the potential significance of anticipated regulatory reforms for virtually every healthcare stakeholder.

The request for information follows a similar request by the Centers for Medicare and Medicaid Services (CMS) published on June 25, 2018, regarding the physician self-referral law, commonly known as the Stark Law. Both of these requests are part of HHS’s “Regulatory Sprint to Coordinated Care,” which is being spearheaded by the Deputy Secretary as an effort to address regulatory obstacles to coordinated care.

The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving anything of value in exchange for or to induce a person to make referrals for items and services that are payable by a federal health care program, or to purchase, lease, order or arrange for or recommend purchasing, leasing or ordering any services or items that may be covered by a federal health care program. The beneficiary inducement prohibition in the CMP Law authorizes the imposition of civil money penalties for paying or offering any remuneration to a Medicare or Medicaid beneficiary that the offeror knows or should know is likely to influence the beneficiary’s selection of a particular provider or supplier of Medicare or Medicaid payable items. Many value-based payment models implicate these statutes, and the OIG acknowledges that they are widely viewed as impediments to arrangements that would advance coordinated care.

While the request for information arises in the context of a concerted focus on care coordination and value-based payment, the request is wide-ranging and effectively invites stakeholders to provide comments on a broad range of potential issues under both the Anti-Kickback Statute and the beneficiary inducement prohibition. The OIG solicits comments across four general categories: (1) promoting care coordination and value-based care; (2) beneficiary engagement, including beneficiary incentives and cost-sharing waivers; (3) other regulatory topics, including feedback on current fraud and abuse waivers, cybersecurity-related items and services, and new exceptions required by the Bipartisan Budget Act of 2018; and (4) the intersection of the Stark Law and the Anti-Kickback Statute.

The OIG encourages individuals and organizations who previously submitted comments to CMS in response to its request for information on the Stark Law to also submit comments directly to OIG, even where those comments may be duplicative, to ensure they are considered by OIG as it exercises its independent authority with respect to the Anti-Kickback Statute and CMP Law.

Comments are due by October 26, 2018.

Amid bipartisan concerns in Congress and multiple U.S. Department of Health and Human Services (HHS) agencies about health “information blocking,” the HHS Office of Inspector General (OIG) recently issued an alert reminding the health care industry that health information blocking can impact whether an arrangement satisfies the electronic health record (EHR) items and services safe harbor (42 C.F.R. § 1001.952) (EHR Safe Harbor) under the federal Anti-Kickback Statute (AKS) (42 U.S.C. § 1320a-7b(b)).

The EHR Safe Harbor permits certain health care providers and other donors to pay up to 85 percent of the cost of EHR technology provided to a physician practice or other referral source if the arrangement meets all EHR Safe Harbor elements.  The third element of the EHR Safe Harbor requires that “The donor (or any person on the donor’s behalf) does not take any action to limit or restrict the use, compatibility, or interoperability of the items or services with other electronic prescribing or electronic health records systems (including, but not limited to, health information technology applications, products, or services).”

In the alert, the OIG cautions that information blocking may cause an arrangement that would otherwise satisfy the EHR Safe Harbor to fail to meet the third element. In an April 2015 report cited by the OIG in the alert, the Office of the National Coordinator of Health Information Technology defines information blocking: “Information blocking occurs when persons or entities knowingly and unreasonably interfere with the exchange or use of electronic health information.”

Previously, the OIG expressed concern about this issue in the preamble to its final rule amending the EHR Safe Harbor in 2013, stating, “[D]onors must offer interoperable products and must not impede the interoperability of any electronic health record software they decide to offer . . . Agreements between a donor and a vendor that preclude or limit the ability of competitors to interface with the donated software would cause the donation to fail to meet the condition at 42 CFR 1001.952(y)(3), and thus preclude protection under the electronic health records safe harbor.” (78 Fed. Reg. 79202, 79209 [December 27, 2013]).

The alert cites several examples of information blocking that would threaten protection under the EHR Safe Harbor.  For example, if a provider limits the use or interoperability of software by agreeing with the potential referral source to prevent a competitor from interfacing with the software, the safe harbor requirements would not be satisfied.  Likewise, if the software vendor agrees with a provider to charge high interface fees to outside providers or suppliers or to competitors, the safe harbor requirements may not be satisfied.

In order to avoid running afoul of the AKS (and resulting False Claims Act [FCA] claims), health care providers considering the roll-out of below-cost EHR technology to physician practices or other referral sources should take care to avoid health information access restrictions that unreasonably interfere with access to information for continuity of care or other appropriate purposes and, thereby, threaten EHR Safe Harbor protection.

In advisory opinion (15-03) earlier this month, the U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) found that a Medigap insurer’s arrangement allowing discounts on deductibles at certain preferred hospitals  – with a portion of the resulting savings going to the insurer’s policyholders  – would not result in penalties under the Anti-Kickback Statute (AKS) or Civil Monetary Penalties (CMP) Law prohibition on inducements to beneficiaries, because the likelihood of fraud and abuse under the proposal is minimal.

The requestor was an offeror of Medigap insurance, a supplemental insurance policy sold by private companies to pay some costs that Medicare does not cover. For its Medigap plans, the insurer proposed an arrangement with certain network hospitals through a preferred provider organization (PPO) where the PPO hospitals would provide discounts of up to 100 percent of the Part A inpatient deductibles, for which the requestor would otherwise be liable. Policyholders who were admitted for an inpatient stay at a network hospital would receive a $100 premium credit from the requestor towards the policyholder’s next renewal premium. If the policyholder was admitted to a non-network hospital, the requestor would pay the full deductible.

OIG stated that the AKS safe harbor for (1) waivers of beneficiary coinsurance and deductible amounts and (2) for reduced premium amounts offered by health plans would not protect the requestor’s proposal. First, the safe harbor for waivers of beneficiary coinsurance and deductible amounts “specifically excludes such waivers when they are part of an agreement with an insurer.” Second, the safe harbor for reduced premium amounts offered by health plans “requires health plans to offer the same reduced cost-sharing or premium amounts to all enrollees.” But under the requestor’s plan, the discounts would be available only to policyholders who opted for network hospitals.

Nevertheless, OIG found the risk of fraud and abuse under the AKS to be minimal, for several reasons:

  1. Neither the discounts nor the premium credits would increase or affect per-service Medicare payments, as Part A payments are fixed and not affected by cost-sharing;
  2. The arrangement would not likely increase utilization, as the discounts effectively would be invisible to the policyholders since they “would apply only to the portion of the individual’s cost-sharing obligations that the individual’s supplemental insurance otherwise would cover”;
  3. The arrangement would not unfairly affect competition among hospitals, since the PPO’s hospital network would be open to any accredited, Medicare-certified hospital that meets the requirements of applicable state laws and that contractually agrees with the PPO to discount all or a portion of the Part A deductible for policyholders;
  4. The arrangement was not likely to affect professional judgment, as the providers for the policyholders would not receive remuneration, and policyholders could go to any hospital without additional expense; and
  5. The requestor made clear to policyholders that they have the ability to go to any hospital without additional liabilities or penalties, thereby operating transparently.

OIG also said that the premium credits implicated the CMP prohibition on inducements to beneficiaries, because the credits are offered to induce policyholders to select certain network hospitals. OIG, however, found that the exception to the definition of remuneration for differentials in coinsurance and deductible amounts as part of a benefit plan design, in section 1128A(a)(i)(6)(C) of the Social Security Act, instructive for its analysis.  While the premium credits do not technically fit the exception, OIG viewed the premium credits as having “substantially the same purpose and effect” as differentials in coinsurance and deductibles, thus presenting a low risk of fraud or abuse.

OIG’s advisory opinion is consistent with similar opinions (e.g., 14-02, 14-04, 14-07, 14-10) issued in the past year approving discounts to Medigap insurers by preferred hospitals and credits to Medigap policyholders who use preferred hospitals.