OIG releases new final rules related to the Anti-Kickback Statute and Civil Monetary Penalties Law



December 14, 2016

Health Care Alert

Author(s): Jill H. Gordon, Rebecca Simone, Philip Rosenberg, Jena M. Grady, Alexandra Busto

The OIG recently released two final rules that adds certain “low risk” safe harbors under the Anti-Kickback Statute and finalized implementing regulations for certain provisions of the ACA related to the Civil Monetary Penalties law.

The federal agency responsible for oversight and prevention of fraud and abuse with respect to federal health care programs is the Office of the Inspector General (OIG) within the Department of Health and Human Services. The OIG recently released two final rules [1] related to the Anti-Kickback Statute and the Civil Monetary Penalties law. The final rules added certain “low risk” safe harbors under the Anti-Kickback Statute. In addition, the OIG finalized implementing regulations for certain provisions of the ACA related to the Civil Monetary Penalties law. Both sets of rules will be effective on January 6, 2017. The following describes some of the highlights of these new rules.

Anti-Kickback Statute: new safe harbors

The federal Anti-Kickback Statute (AKS) provides criminal penalties for individuals or entities that knowingly and willfully offer or receive remuneration in order to induce or reward the referral of business reimbursable by federal health care programs. The statute ascribes criminal liability to parties on both sides of an impermissible “kickback” transaction. The offense is classified as a felony and is punishable by fines of up to $25,000, imprisonment for up to five years or both. Violations may also result in the imposition of civil monetary penalties, program exclusion and liability under the False Claims Act.

The OIG is authorized to promulgate “safe harbor” regulations that specify arrangements that do not violate the Anti-Kickback Statute. Compliance with the safe harbors is optional. Full compliance with a safe harbor provides comfort that an arrangement does not violate the law. However, failure to fit within a safe harbor merely means that all facts and circumstances must be reviewed to determine whether the parties had the requisite intent to violate the Anti-Kickback Statute.

The final rules modified some existing safe harbors as well as added new safe harbors. Below we discuss two of the new safe harbors for cost-sharing waivers and free or discounted local transportation.

Cost-sharing waivers

The OIG finalized safe harbors for “low risk” patient cost-sharing waivers including pharmacy waivers of Part D cost-sharing for financially needy beneficiaries and waivers of cost-sharing for emergency ambulance services furnished by government-owned ambulance services.

Part D cost-sharing waivers

The Part D waiver permits pharmacies to waive or reduce cost-sharing amounts if:

  • The waiver or reduction is not offered as part of an advertisement or solicitation, and for beneficiaries that are not eligible for subsidies under Section 1860D-14(a)(3) of the Social Security Act:
  • the pharmacy does not routinely waive or reduce cost-sharing amounts, and
  • the pharmacy waives the cost-sharing amounts only 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.

The Final Rule clarifies that the safe harbor is expanded to Medicaid patients; however, the safe harbor remains available only to pharmacies and would not protect other individuals or entities that may waive patient cost-sharing responsibilities in connection with medications (for example, waivers by physicians for copayments for Part B drugs). OIG declined to give any specific indication as to what constitutes “financial need” but emphasized that such determinations applied by pharmacies must be “reasonable and applied uniformly.” A pharmacy’s maintenance of a written policy related to financial need determinations is encouraged. Commenters requested clarification of how “reasonable collection efforts” may be met and OIG referred to the CMS Provider Reimbursement Manual’s description of the term, which requires providers to issue a bill for the patient’s financial obligations, and also includes “other actions such as subsequent billings, collection letters and telephone calls or personal contacts with this party which constitute a genuine rather than a token, collection effort.”[2]

Cost-sharing reductions or waivers for emergency ambulance services

The final ambulance safe harbor permits state or tribal health care program-operated ambulance providers or suppliers for emergency ambulance services to reduce or waive cost-sharing amounts so long as the reduction or waiver is: (i) provided on a uniform basis; and (ii) the waived and reduced amounts are not later claimed as a bad debt for payment purposes under a federal health care program (or otherwise shift the burden of the reduction or waiver onto a federal health care program, other payers, or individuals). Several recent OIG Advisory Opinions have addressed waivers of patient cost-sharing responsibilities by ambulance providers that are owned and operated by states or political divisions of states. This safe harbor should serve to reduce the amount of future advisory opinions on the subject matter and clarify OIG opinion on the same.

Free or discounted local transportation services

The regulations contain a new safe harbor that protects free or discounted local transportation provided by anyone other than a person or entity whose primary business is to supply health care items (e.g., a pharmaceutical company). This new safe harbor contains the following conditions:

  • The availability of the free or discounted transportation is set forth in a policy that is applied uniformly and consistently, and is not determined in a manner related to the past or anticipated volume or value of federal health care program business.
  • The free or discounted transportation does not involve air, luxury or ambulance-level transports.
  • The free or discounted transportation is not marketed or advertised, no heath care marketing occurs during the transports or at any other time by the drivers who provide the transports and drivers or others arranging for the transports are not paid on a per-beneficiary-transported basis.
  • The free or discounted transportation is made available only:
    • to an established patient of the entity that is providing the transport or an entity to or from which the patient is being transported,
    • 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), and
    • for the purpose of obtaining medically necessary items and services.
  • The cost of the free or discounted transportation is borne by the entity that is providing or arranging the transport and is not shifted to any federal health care program.

The transportation safe harbor additionally protects certain “shuttle services.” The safe harbor regulations define shuttle services as a “vehicle that runs on a set route, on a set schedule.” Unlike the safe harbor conditions for free or discounted transportation, a shuttle service does not have to be limited to “established patients”; the regulations allow anyone (including family and friends of a patient) to use the shuttle service.

Civil Monetary Penalties Law: new exceptions to the beneficiary inducement prohibition

The Civil Monetary Penalties (CMP) law provides for the imposition of civil monetary penalties against individuals who violate any of the prohibitions listed in this law. The OIG may impose penalties as well as initiate administrative proceedings to exclude violators of the CMP law from federal health care programs.

Under the beneficiary inducement prohibition, unless an exception applies, the CMP law may be implicated by any person who offers or transfers remuneration to a Medicare or state health care program (including Medicaid) beneficiary that the benefactor knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of any item or service. The final rule added a few new exceptions to the beneficiary inducement prohibition. Below we discuss new exceptions related to (i) remuneration that poses a low risk of harm and promotes access to care; (ii) coupons, rebates and other retailer reward programs; and (iii) certain remuneration to financially needy individuals. In addition, we discuss a modification to an existing exception for remuneration that is only of nominal value.

Low risk of harm/promotes access to care

The ACA created a new exception to the CMP beneficiary inducement prohibition for remuneration that poses a low risk of harm and promotes access to care. Since it was not clear how the OIG would define “low risk of harm” and “promotes access to care,” this final rule offers providers long-awaited clarity on the boundaries of this exception.

Specifically, “low risk of harm” means that payment that would otherwise implicate the CMP would be permitted if it is unlikely to interfere with or skew clinical decision making; is unlikely to increase costs to federal health care programs or beneficiaries through inappropriate utilization; and will not raise patient-safety or quality-of-care concerns. The OIG did not specify a dollar limit on remuneration in order for it to qualify under the definition of “low risk.”

“Promotes access” means that it improves a particular beneficiary’s or a defined beneficiary population’s ability to obtain medically necessary items and services. Only items or services that facilitate access to items or services that are payable by Medicare or a state health care program meet the definition of “promotes access to care.”

Perhaps the best way to understand this exception is through some of the examples offered by the OIG. An item that dispenses medications at a certain time could meet the exception because it is a tool that enables the patient to access the right drugs at the appropriate dosage and time. Smartphone apps or low-cost fitness trackers could, in certain circumstances, promote access by tracking milestones that are reported to the treating physician. Providing free child care during appointments also could promote access to care by helping a patient to comply with a treatment regimen. In contrast, offering movie tickets to a patient whenever the patient attends an appointment would not fit in the exception as it does not help the patient access care, nor does it remove a barrier that would prevent the patient from accessing care. Similarly, more expensive items and services would not qualify for this exception because they create a high risk of harm in the patients self-referring back to a particular provider.

Coupons, rebates and other retailer reward programs that meet specified requirements

This exception to the beneficiary inducement prohibition in CMP law allows a reward program sponsored by a retailer when the items or services consist of coupons, rebates or other rewards that are offered or transferred on terms equal to those available to the general public. Further, the benefits of the reward program must not be tied to the provision or ordering of other items or services by Medicaid or Medicare.

The final rule clarifies that “retailer” excludes individuals or entities that primarily provide only services (e.g., hospitals and physicians); therefore, these service providers would not qualify for the exception. However, an entity that provides both goods and services would be able to qualify for the rewards program exception. Thus, if a hospital system had a separate retail component such as a convenience store, the store alone could establish a rewards program. Additionally, the regulations explain that the phrase, “available to the general public” does not prohibit retailers from having an enrollment process or certain reward programs that target patients with a particular disease. Finally, reward programs offering discounts for in-store items (not reimbursed by Medicare or Medicaid) or specific non-Medicaid or Medicare reimbursable items appear to fit under the exception.

Financially needy individuals

The OIG finalized an exception to the beneficiary inducement prohibition of the CMP law for financially needy patients when the following conditions are present: the provider makes a good faith determination that the recipient is in financial need; the items or services are not offered as part of any advertisement or solicitation; the offer is not tied to the provision of other items or services reimbursed by Medicare or Medicaid; and there is a reasonable connection between the items or services and the medical care of the individual.

Nominal value exception

With the publication of these final rules, the OIG also announced an increase in the dollar amounts allowed under the nominal value exception to the beneficiary inducement prohibition under the CMP law. The OIG reasoned that this increase was necessary to bring the exception in line with inflation. The amount allowed per patient is now $15 per item and $75 annually.

Civil Monetary Penalties Law: no per day penalty for failure to report and return an overpayment

Separate and apart from the beneficiary inducement prohibition described above, the CMP law requires that overpayments must be reported and returned within sixty days of the date that the overpayment was identified or that a related cost report was due (whichever is later). The default penalty for this type of violation is $10,000 per item or service. The proposed rules sought to implement a per day penalty for each day a person failed to report and return an overpayment after the allowed timeframe. However, based on responses to this proposal, the finalized rule maintains the default penalty of up to $10,000 for each item or service and did not adopt a per day penalty. Nevertheless, the OIG maintains that a failure to return overpayment for a lengthy period could trigger one of the CMP law’s “aggravating factors,” resulting in additional penalties.

Civil Monetary Penalties Law: making or using a false record or statement material to a false or fraudulent claim

The CMP law also provides a cause of action against any person who knowingly makes, uses or otherwise causes a false record or statement that is material to a false or fraudulent claim for reimbursement by a federal health care program. This cause of action mirrors the False Claims Act (FCA). Given the similarities of the goals of these laws, the CMP’s definition of “material” was revised to align with the FCA. Specifically, “material” is now defined as having the tendency or capability to “influence the payment or receipt of money or property.” Notably, a penalty of up to $50,000 may be imposed for each false record or statement that violates the CMP.

More information

Given the threat of expensive settlements and enforcement actions, it is imperative that health care providers pay close attention to this guidance and work with counsel to carefully consider how these new rules impact their practices.


  1. 81 Fed. Reg. 88334 available at https://www.gpo.gov/fdsys/pkg/FR-2016-12-07/pdf/2016-28293.pdf; and 81 Fed. Reg. 88368 available at https://www.gpo.gov/fdsys/pkg/FR-2016-12-07/pdf/2016-28297.pdf. [Back to reference]
  2. CMS Provider Reimbursement Manual (CMS Pub. 15-1) §310 [Back to reference]

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