Brief Your CEO: The New Anti-Kickback Safe Harbors & Their Impact on Your Lab

If, like many lab managers, you are preparing to brief your CEO on significant regulatory changes from 2016 that are likely to impact business in 2017, be sure that the finalized revisions to the Anti-Kickback Statute (AKS) safe harbors are part of your agenda. Here are the key points about the final rule, which was issued by the Office of Inspector General (OIG) on Dec. 7, to cover in your briefing.

The AKS & Safe Harbors
First, set the legal context. Remind your CEO that the AKS makes it a criminal offense for labs to offer or pay "remuneration" to physicians for Medicare referrals. "Remuneration" is interpreted broadly to include not just cash but benefits such as gifts, supplies and services offered for free or less than fair market value. In addition fines of up to $50,000 + three times the remuneration amount, civil monetary penalties and imprisonment of up to five years, AKS violations can result in liability under other federal laws including the False Claims Act and Stark Law.

Many of the common business arrangements between labs and referring physicians raise potential kickback concerns. The good news is that the AKS and its regulations carve out "safe harbors" allowing transactions that would otherwise trigger kickback concerns provided that the parties take the prescribed precautions. Without safe harbors, it would be almost impossible for labs, hospitals and other providers to conduct business with referral sources. Key safe harbors affecting labs and referring physicians include:

  • Bona fide employment relationships
  • Personal services and management contracts
  • Discounts
  • Fair market value space or equipment rentals

Why the OIG Revised the Safe Harbors
Next, describe the regulatory context. Explain that safe harbors need to be constantly updated to keep up with new legislation, technology and business practices. The need for the latest revision arose as a result of legislation dating as far back as 1997 when a pair of new arrangements became offenses under the Civil Monetary Penalties Law:

  • Beneficiary inducements, that is, offering or providing remuneration to Medicare or Medicaid beneficiaries to influence their selection of a provider, such as by waiving co-payments or offering free transportation; and
  • Gainsharing, that is, certain incentive payments made to physicians by hospitals, HMOs and competitive medical plans.

Although the CMP Law made some limited exceptions, there was also a need to address not only these arrangements in the AKS safe harbor regulations. So, on Oct. 3, 2014, the OIG issued a proposed rule creating new AKS safe harbor protection for beneficiary inducements and gainsharing and addressing other legislative changes made under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and the Patient Protection and Affordable Care Act (ACA). According to the OIG, the final rule, which is almost identical to the proposed version, "further[s] the goals of access, quality, patient choice, appropriate utilization, and competition" while still preventing "increasing costs, steering patients inappropriately or otherwise creating risk of incentives being tied to referrals."

New Safe Harbor for Free Transportation
Next explain the final rule and its impact on business. Start with the change that is likely to have the most direct impact on labs: the new safe harbor covering "free or discounted local transportation services provided to" federal program beneficiaries. This new safe harbor covers both:

  • Actual transportation to and from a patient’s home so as to provide the patient access to a provider or supplier; and
  • Transportation vouchers.

Of course, all safe harbors have strings attached. One of the key limitations is that transportation may only be offered to established patients. But that does not necessarily mean that the patient must have previously received services from the provider. The final rule defines established patients as including new patients who contact the provider to schedule an appointment. Once the initial appointment is made, those new patients qualify as established patients for purposes of the safe harbor.

Be sure to tell your CEO about the other 10 limitations that apply to the new free transportation safe harbor:

  • It does not apply to certain types of transportation, i.e., luxury, air and ambulance level service;
  • The lab may not advertise that it provides free or discounted transportation or use it as a marketing tool;
  • Health care services or items may not be advertised or marketed during the transportation or at any time by drivers;
  • Drivers and others involved in arranging the transportation may not be compensated on a "per-beneficiary-transported basis";
  • Transportation must be for the purpose of accessing medically necessary items and services;
  • The entity making the transport possible must bear the cost of transport and may not shift those costs to federal programs or other payers or individuals;
  • The maximum distance of transportation to the lab is 25 miles in urban areas and 50 miles in rural areas, measured "as the crow flies" within a radius of that mileage;
  • The safe harbor does not apply to suppliers of items;
  • If a hospital transports a patient to a lab (or other specialty provider) the patient must be able to choose the specific provider and the hospital may not condition transport on the patient selecting a lab in the hospital’s network;
  • Consistent policies must be implemented to administer the transportation program.

It is important to stress that the OIG was considering excluding lab and home health services from the safe harbor because of concerns that transportation offered by these providers would be more likely to induce referrals. But after soliciting comments, the OIG ultimately decided not to omit labs and home health providers from the final rule.

The 5 Other Changes
Finally, brief your CEO on the other new safe harbors and/or revisions to existing safe harbors contained in the Final Rule:

1. Technical Correction to "Referral Services" Safe Harbor
The AKS includes a safe harbor allowing participants to make payments to a referral service as long as the payment is: Based solely on the costs of operating the referral service and not on the volume or value of referrals to or business generated by "either party for the referral service" for which payment may be made under Medicare.

The final rule makes a technical change to how the rule is worded. Specifically, it eliminates the phrase "by either party for the referral service," substituting "by either party for the other party." The change was made to eliminate the ambiguity in the current language that could be interpreted as meaning referral services may adjust their fees on the basis of volumes of referrals made to participants, the OIG explains.

2. New Safe Harbor for Pharmacy Cost-Sharing Waivers
The final rule creates new safe harbors allowing providers to waive or reduce Medicare/Medicaid beneficiary coinsurance/deductible amounts. One of these covers waivers or reductions by pharmacies of cost-sharing obligations under Medicare Part D and other federal health care programs, e.g., physician copayments for Part B drugs, as long as:

  • The waiver/reduction is not advertised or used for marketing;
  • The pharmacy does not routinely waive cost-sharing; and
  • The pharmacy either:
    • Determines in good faith that the beneficiary has a financial need; or
    • Fails to collect cost-sharing amounts after making reasonable efforts to do so.

3. New Safe Harbor for Emergency Ambulance Cost-Sharing Waivers
Another new safe harbor permits waiver or reduction Medicare/Medicaid beneficiary coinsurance/deductible amounts for "emergency ambulance services" furnished by a Part B ambulance provider or supplier owned or operated by a state or its political subdivision (or a tribal health program), provided that:

  • Providers offer the waiver or reduction on a uniform basis;
  • Waivers and reductions are not based on patient-specific factors other than residency; and
  • Providers do not claim the waiver or deduction amount as bad debt.

4. New Safe Harbor for Medicare Advantage/Federally Qualified Health Center (FQHC) Remuneration
The final rule creates an AKS version of a safe harbor contained in the MMA covering remuneration between a Medicare Advantage organization and a FQHC, as long as the remuneration is provided under a proper written agreement.

5. New Safe Harbor for Medicare Coverage Gap Drug Discounts
Section 3301(d) of the ACA allows for discounts on Part D drugs to beneficiaries under the Medicare Coverage Gap Discount Program (MCGDP). The final rule establishes an AKS version of "donut hole" discount safe harbor that applies as long as the drug manufacturers is in full compliance with MCGDP requirements.

Takeaway: Make sure you let your lab officers know about the new Anti- Kickback Statute safe harbors just adopted by the OIG. For most labs, the most important new safe harbor is the one allowing providers to offer free or reduced cost transportation between a Medicare/Medicaid beneficiary’s home and the facility, provided that specific conditions are met. The final rule also creates four other new safe harbors, two of which allow for waiving or reducing beneficiary copayments/deductibles in certain situations.


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