On January 6, 2017, several new regulatory exceptions to the beneficiary inducement statute went into effect. These regulations, published by the Department of Health and Human Services Office of Inspector General (OIG) in a final rule dated December 7, 2016,1 bring long awaited closure to many of the outstanding issues raised in the statutory versions of the exceptions implemented by the Affordable Care Act (ACA) and in the proposed regulations issued by the OIG on October 3, 2014.2 Several exceptions that may be of particular interest to children’s hospitals are highlighted below.

Access to Care Exception

The beneficiary inducement statute prohibits providing free or discounted items or services to a Medicare or Medicaid beneficiary that are likely to influence the beneficiary to seek Medicare or Medicaid-reimbursable services from a particular provider.3 The new “access to care” exception protects the provision of remuneration that promotes access to care and poses a low risk of harm to patients and federal health care programs.4 The OIG indicated in commentary to the final regulation that items potentially covered by this exception include free or discounted medications, supplies, or devices; technology for reporting health data; scales; programmable tools to help with medication dosage or refill reminders; and telemedicine capability.5

Despite the broad nature of this exception, the OIG cautioned in commentary that it may be difficult to meet the “low risk of harm” requirement if a more applicable exception or one of the safe harbors to the Anti-Kickback Statute (which also may be used to protect arrangements implicating the beneficiary inducement statute) was available and not utilized.6 The OIG also clarified that this exception only protects remuneration that promotes access to items and services that are payable by Medicare or Medicaid for the beneficiaries who receive them. 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.7 The OIG also noted that providing incentives in return for receiving care or for complying with a treatment plan would not qualify for this exception, as such incentives would be considered a “reward” for accessing care rather than “promoting” access to care.8

Financial-Need-Based Exception

The new “financial-need-based” exception protects the offer or transfer of items or services for free or less than fair market value if certain conditions, including an assessment of financial need, are met. 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.9

In commentary to the final regulation, the OIG confirmed that items or services may not be “conditioned on” the patient’s use of other Medicare or Medicaid reimbursable services (e.g., free lodging could not only be provided to patients who will receive a certain Medicare or Medicaid reimbursable service). In addition, the OIG reiterated that the item or service must be reasonably connected to an individual’s medical care from both a medical and financial perspective. With respect to determining reasonableness from a medical perspective, the OIG acknowledged that a medical professional would be in the best position to make this determination based on the particular situation, but also provided specific examples that would not meet the requirements of the exception. These examples included scenarios where a medical professional provided a bicycle to a patient needing more exercise, or tickets to an entertainment event for a depressed patient.10 With respect to financial reasonableness, the OIG indicated that items or services with “high financial value” are less likely to be considered reasonably connected to a patient’s medical care. However, the OIG declined to provide a specific retail value for items or services that it would consider problematic.11

The OIG also stated that it was not mandating any specific requirements for determining financial need. However, the OIG did indicate that it expected entities to have policies in place for determining financial need, and to uniformly apply those policies.12 However, the OIG made several statements regarding financial need determinations for Medicaid patients of which children’s hospitals should take note. In particular, the OIG said that a statement of inability to pay by a Medicaid patient may be sufficient for a financial need determination “because Medicaid patients have been screened for financial eligibility by the state.”13 In addition, the OIG stated that “if a physician’s policy was that any patient on Medicaid is qualified for assistance, the simple fact that the patient’s file shows Medicaid as the payor is sufficient documentation.”14 Based on the foregoing, a children’s hospital may be able to comply with the financial-need element of this exception with ease, given that the majority of its government-pay patients are likely Medicaid patients.

Monetary Limits for Gifts of Nominal Value

In addition to the above exceptions, the OIG revisited 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 $75.15 The OIG also published these new limits in a general policy statement available on its website.

1 81 Fed. Reg. 88368. 2 79 Fed. Reg. 59717. 3 42 U.S.C. § 1320a-7a(a)(5). 4 42 C.F.R. § 1003.110. 5 81 Fed. Reg. at 88397. 6 Id. at 88390-91. 7 Id. at 88391.  8 Id. at 88394-95.  9 42 C.F.R. § 1003.110.  10 81 Fed. Reg. at 88403.  11 Id. at 88404.  12 Id. at 88405. 13 Id. 14 Id. 15 81 Fed. Reg. at 88394.

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