OIG Issues New Advisory Opinion that Sheds Additional Light on How the Government Views Beneficiary Inducements

Written By Joanne Ceballos 

The federal Civil Monetary Penalties statute, 42 U.S.C. 1320a–7a, allows the government to impose Civil Money Penalties “(“CMPs”) when it determines that a health care provider has offered remuneration to a federal health care program beneficiary to influence the beneficiary to select the provider for services paid for by Medicare or Medicaid.  Similarly, the federal Anti-Kickback Statute, 42 U.S.C. 1320a–7b(b), prohibits offering remuneration in exchange for referrals of federal health care program business.  These statutes generally prevent a health care provider from advertising or offering free goods or services to federal health care program beneficiaries to induce them to obtain services from the provider that are payable by federal health care programs.  However, exceptions to this general prohibition do exist, and earlier this month the OIG issued  Advisory Opinion No. 15-01, which sheds light on how the OIG evaluates arrangements where non-cash inducements are provided to federal health care program beneficiaries. 

The Opinion was issued in response to a request by a provider of care coordination and intervention services (“Provider”) under a state’s Medicaid-funded Maternal Infant Health Program (the “Program”). To advance the Program’s goal of promoting healthy pregnancies, positive birth outcomes, and infant health and development, the Provider’s services include psychosocial and nutritional assessments, coordination with other medical care providers and Medicaid Health Plans, and family planning education.  The state sponsoring the Program directed Program providers to market their services to the target population and to medical care providers who would be potential referral sources, including advertising and offering incentives, such as free diapers, to Medicaid beneficiaries participating in the Program. Accordingly, the Provider advertised and offered one free pack of diapers (with a value of less than $5.00) to Program-eligible Medicaid beneficiaries who attended an initial consultation with the Provider, and beneficiaries who enrolled in the Program continued to receive a pack of free diapers at each visit with the Provider up to the Program maximum of ten visits.  The Provider also advertised and offered a free play yard, valued at approximately $50.00, to each beneficiary who completed all ten visits.

The OIG concluded that while the arrangement could potentially generate prohibited remuneration under the AKS if the requisite intent to induce or reward referrals of federal health care program business was present, it would not impose administrative sanctions under the CMP statute for two reasons.  First, the OIG noted that the free diapers, with a value of less than $5.00 per item and $50.00 in the aggregate (assuming a beneficiary attended and received a package of diapers at all ten Program visits) are “nominal value” incentives that are permissible under the OIG’s long-standing interpretation of the CMP statute permitting non-cash incentives to a federal health care program beneficiary of no more than $10 per item, or $50 in the aggregate on an annual basis. Second, the OIG noted that both the diapers and the play yards satisfy the requirements of the Preventive Care Exception in the CMP statute, 42 U.S.C. 1320a–7a(i)(6)(D). 

The regulatory criteria for preventive care incentives to be excluded from the definition of remuneration for purposes of the CMP statute are: (1) the incentive must be given to promote preventive care services, defined as  “prenatal service or a post-natal well-baby visits or a specific clinical service described in the current U.S. Preventive Services Task Force's Guide to Clinical Preventive Services;” (2) the incentive cannot be cash or an instrument convertible to cash; (3) the value of the incentive cannot be disproportionately large in relationship to the value of the preventive care service; and (4) the delivery of the preventive care service is not tied (directly or indirectly) to the provision of other services reimbursed in whole or in part by Medicare or Medicaid.  42 C.F.R. 1003.101.  The OIG concluded that the free play yards, whether offered alone or in combination with the free diapers, satisfied all the regulatory criteria of the Preventive Care Exception.  While it is easily understood how the Provider’s incentives comported with the first three regulatory requirements, it is less apparent how the Provider’s delivery of prenatal and post-natal counseling could be considered “not tied (directly or indirectly) to the provision of other services (namely, prenatal and post-natal well baby visits) reimbursed” by Medicaid, since a primary purpose of the Provider’s services is to encourage pregnant Medicaid beneficiaries to obtain proper prenatal and post-natal medical care.  The OIG reasoned, however, that even though the Provider’s preventive services are “intended to supplement the medical care that Program beneficiaries receive, Program services are not tied, directly or indirectly, to the provision of that care.”  In other words, Medicaid beneficiaries could avail themselves of the Provider’s services whether or not they obtained the recommended medical services.

 

While the AKS and CMP statutes generally prohibit health care providers from offering Medicare and Medicaid beneficiaries incentives to seek their services, the Preventive Care Exception is one of a number of statutory exceptions to the definition of remuneration in the CMP statute.  Providers seeking to market and promote their services to federal health care program beneficiaries are well-advised to take into consideration the parameters set by these statutes and their related regulations for such activities.