Uncategorized May 3, 2018
New Regulatory Exceptions to the Beneficiary Inducements under Anti-Kickback Statute and Civil Monetary Penalty Regulations




On December 7, 2016, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) published a final rule (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 Civil Monetary Penalty rules (CMP Law) regarding the prohibitions on inducements to beneficiaries. The Final Rule went effective January 6, 2017. These changes affect all health care providers, including hospitals, physicians, pharmacies as well as health care business owners.


Overview of The Law


The Anti-Kickback Statute

Under the federal AKS[1], it is a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by federal health care programs. “Remuneration” is defined broadly as meaning anything of value, directly or indirectly, overtly or covertly, in cash or in kind.


Civil Monetary Penalties Law

The CMP Law[2] includes a prohibition against offering or transferring remuneration to a Medicare or State health care program beneficiary that the person knows or should know is likely to influence beneficiary selection of a particular provider, for which payment may be made in whole or part by Medicare or State health care program. “Remuneration” is defined as any transfer of items or services for free or other than fair market value.


The New Safe Harbors

Because of the broad reach of the regulations, the OIG has published safe harbors in various areas, so that compliance with a safe harbor insulates a person from liability under the AKS and CMP Law.


Transportation[3] Exception

Healthcare providers struggled with whether transportation can be considered to be a “kickback” to use that provider, as well as a violation of the CMP Law, which prohibits giving patients inducements to receive care.


Under the new safe harbors, a health care provider or other eligible entity (i.e., any individual or entity, except those who primarily supply health care items) can provide free or discounted “local” (i.e., within 25 miles in urban areas and 50 miles in rural areas of the provider/supplier to or from which the patient is being transported) transportation to Medicare patients and other federal health care program beneficiaries if all of the following conditions are met:


  • the provider has a policy that is applied consistently;
  • the transportation’s availability is not related to volume or value of federal business;
  • the transportation is not air, luxury or ambulance level transportation;
  • the transportation is not publicly advertised or marketed, and persons involved in transportation are not paid on a per-beneficiary-transported basis;
  • the transportation is available only to established patients (i.e., a patient who has scheduled an appointment, or previously attended an appointment) for purpose of obtaining medically necessary items and services; and
  • the eligible entity bears the cost of the transportation.


In addition, an eligible entity can provide a “shuttle service” (a vehicle that runs on a set route, on a set schedule) if it:


  • is not air, luxury or ambulance transport;
  • is not marketed or advertised (other than posting necessary route and schedule details), and persons involved are not paid on a per-beneficiary transported basis; and
  • there is no more than 25 miles from any stop on the shuttle to any stop at a location where items/services are provided (50 miles in a rural area).


Access to Care Exception

The OIG also codified a safe harbor to the beneficiary inducements CMP that shields remuneration that “promotes access to care and poses a low risk of harm to patients and federal health care programs.”[4] The care by any items or services to which access is improved must be payable by Medicare or Medicaid. While the OIG indicated that it had considered whether promoting access to “care” could also include remuneration that promotes access to nonclinical care (i.e., services that are not reimbursable by Medicare or Medicaid), it ultimately concluded that this would be too expansive a reading of the statutory exception.[5]


Furthermore, 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.


Financial-Need-Based Exception

An even broader exception is available for patients in financial need, which 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.[6]

The regulatory version of this exception incorporates all of the statutory requirements, including that (1) the item or service not be advertised or solicited; (2) the item or service not be tied to the provision of other services reimbursed by Medicare or Medicaid; (3) there be a reasonable connection between the item or service and the individual’s medical care; and (4) there be an individualized determination of financial need.


Other Permissible Beneficiary Inducements

In addition, the OIG, in the same federal register as the anti-kickback safe harbors, published regulatory exceptions under the CMP law, allowing providers and suppliers to give patients certain items or services without violating the CMP law. (This is in addition to the above safe harbors, as safe harbors to the anti-kickback statute are incorporated by reference as exceptions to the beneficiary inducements CMP.) A couple of examples include:


Monetary Limits for Gifts. In revisiting the monetary limits it had previously implemented regarding the provision of beneficiary inducements “of nominal value,” which are deemed not to violate the beneficiary inducement statute, the OIG stated that due to inflation, it was increasing the limit for individual items from $10 to $15, and the annual aggregate limit per patient from $50 to $75.[7]


Retailer Reward Programs. The Final Rule also permits retailers[8] to offer or transfer coupons, rebates, or other rewards for free or less than fair market value if: (i) the items or services consist of coupons, rebates, or other rewards from a retailer; (ii) the items or services are offered or transferred on equal terms available to the general public, regardless of health insurance status; and (iii) the offer or transfer of the items is not tied to the provision of other items or services reimbursed in whole or in part by the program under” Medicare or a State health care program.



The regulators have offered a range of examples of what does and does not qualify for protection. Much of what will be permissible depends on facts, circumstances and context. The OIG also published these new limits in a general policy statement available on its website. For the most part, however, the enforcement agencies and providers have been left to their own devices to assess the risks of specific programs, inducements or incentives. However, in assessing whether the inducement is within the protected limits, providers are encouraged to analyze the moral hazards the beneficiary inducement prohibitions are intended to prevent, including:


  • Overutilization which inappropriately increases federal and state health care program costs and potentially harms beneficiaries;
  • Improperly influencing patient treatment decisions by offering items or services of value;
  • Skewing patients’ selection of providers by shifting focus to the value of the inducement as opposed the value or quality of the health care services; and
  • Creating a competitive disadvantage for providers who cannot afford or choose not to provide beneficiary incentives.



Permissible Beneficiary Inducements;

Beneficiary Inducements in an Evolving Market: Assessing the Risks, Understanding the Benefits and Drawing the Lines


[1] 42 U.S.C. § 1320a-7b.

[2] 42 U.S.C. § 1320a-7a.

[3] See previous blog post “Uber, Lyft And A Web Of Health Care Regulations”.

[4] 42 CFR § 1003.110.

[5] 81 Fed. Reg. at 88391.

[6] 42 CFR §1003.110 (a)(7).

[7] 81 Fed. Reg. at 88394.

[8] The term “retailer” is interpreted to exclude entities that primarily provide services, such as hospitals and physicians. As a result, this exception is primarily of use to pharmacies and other retailers that also include a pharmacy, as opposed to most health care providers.


Author Brad Byars

Co-Author Shairoz H. Virani