Updated Safe Harbors for Anti-kickback Statute

The federal Anti-Kickback Statute (AKS) is a well-known protector of federal fraud and abuse 1 . The AKS first came to fruition in 1972 when it was passed by congress. The statute has a hand in most of the business practices and relationships in the healthcare, pharmaceutical, and medical device industries 1 . At its core, the statute prohibits business transactions that would reward referrals for products or services reimbursed by the federal healthcare programs 1 . Violating this statue is classified as a felony and punishable by fines up to $25,000 and imprisonment of up to 5 years.

Seeking a third-party fair market valuation (FMV) safeguards the transaction from government scrutiny. These services should always be obtained from a well-qualified and experienced third party professional who understands the inner workings and nature of the healthcare industry. Compliance with regulations ensures that the strict penalties are avoided and operations can run smoothly from business to business.

On December 7, 2016, the United States Department of Health and Human Services (HHS) and Office of Inspector General (OIG) issued a final rule adding several new safe harbors to the AKS as well as adding to the existing safe harbors that have already been put in place 2 . Three of the key new regulations that focus on payment practices are as follows:

  1. Referral services
  2. Cost-sharing waiver
  3. Local transportation

Under this new ruling, the referral services safe harbor language was clarified regarding payments from participants to referral services that are based on volume or value.

Cost-sharing waiver safe harbors have expanded and will now include all federal healthcare programs; previously, they only applied to Medicare and state health programs. Furthermore, the OIG increased protection to pharmacies’ obligation for cost-sharing when the business determines the individual has a financial need or has been unable to collect the amounts due after exercising reasonable efforts. And lastly, emergency ambulance providers are protected, however, they must meet some basic criteria: 1) they are either owned or operated by the state, a political subdivision of the state, or a tribal healthcare program, 2) they are engaged in an emergency response, 3) they offer the reduction/waiver on a uniform basis, and 4) not later claim the reduction as bad debt for payment purposes under a federal health care program 3 .

Additionally, the OIG has also added new safe harbor rules for local transportation and shuttle services, which has been seen as one of the more significant additions of the final regulations to the AKS. This ruling states that an eligible entity may provide free or discounted transportation services to federal healthcare beneficiaries if several requirements are met. These requirements include: 1) that the availability of free or discounted transportation is applied consistently to eligible individuals and is not based on past service volume or anticipated future service volumes 2) transportation service cannot be utilized through air travel, and cannot be classified as a luxury or ambulance level transportation, and 3) not publicly marketed (2). The ruling also further states that this is only applicable to an established patient that is defined as “a person who has selected and initiated contact to schedule an appointment with the provider or has previously received service from that provider.” Additionally, there are some distance requirements that have been broadened; the service must be provided within 25 miles of the provider or 50 miles in rural-considered areas 3 .

These regulations open the door for providers and suppliers alike to review and consider new opportunities based of these provisions, and whether current contracts are affected and need to be modified. Third party service providers can assist organizations in navigating these changes in regulations/requirements by applying their tools and expertise and positioning organizations to implement improvement strategies that assist in remaining compliant with regulations.

Below are three instances where third party service providers and organizations can work together under these new provisions. These instances include demonstrating the fair market value (FMV) of payments, analysis of current cost sharing and collections of physician groups in both their fiscal and operations areas, and the value of conducting and utilizing community health needs assessments.

  1. Demonstrating the FMV of payments to remain in compliance with the statute has increased the demand for valuation services. Professional services firms that provide this experience can be invaluable to organizations and assist with compliance with federal requirements and regulations.
  2. Cost-sharing and collections are always seen as opportunities for improvement for physician groups and their overall value. Independent analysis can assist physician groups to identify areas of improvement in both fiscal and operations area.
  3. Many hospitals are considering shutting down their ambulance medication/supplies restocking programs because of potential violation of the AKS. Understanding community health needs are central to non-profit hospitals meeting their mission. Conducting these needs assessments for hospitals can assist them in evaluating the benefit of their services while providing insight into staffing needs, and physician access.
What Is the Anti-Kickback Statute? | Young Lawyers Division. americanbar.org. http://www.americanbar.org/publications/tyl/topics/health-law/what-is-anti-kickback-statute.html. Accessed March 17, 2017.
Office of Inspector General Enacts New Safe Harbors and Policy Statement under the Anti-Kickback Statute. The National Law Review. http://www.natlawreview.com/article/office-inspector-general-enacts-new-safe-harbors-and-policy-statement-under-anti. Accessed March 17, 2017.
OIG Rings In The New Year With New Anti-Kickback Statute Safe Harbors – Food, Drugs, Healthcare, Life Sciences – United States. mondaq.com. http://www.mondaq.com/unitedstates/x/560282/Healthcare/OIG+Rings+In+The+New+Year+With+New+AntiKickback+Statute+Safe+Harbors. Accessed March 17, 2017.