Kusserow on Compliance: OIG Advisory Opinion 15-01, advertising and providing baby care items in connection with services

On February 2, 2015, the HHS Office of Inspector General (OIG) posted an a­­­dvisory opinion in response to an inquiry as to whether certain advertising and incentive practices were in violation of the federal Anti-Kickback Statute (AKS). The requestor is a state-licensed provider that offers care coordination and intervention services to pregnant women and infant children under a state Maternal Infant Health Program (Program). The OIG disclosed that it has an exception regarding an entity’s practice of advertising and providing free diapers and play yards in connection with the services it provides under a state’s home visiting program for at-risk mothers and infants.

According to the state Program Operations Guide (Guide), all pregnant women and infant children who are Medicaid beneficiaries are eligible. The Guide requires program providers, such as the entity, to conduct marketing and outreach activities to the target population in the areas they serve and suggests the provision of incentives, such as free diapers, as an outreach activity. Eligible beneficiaries may receive one free pack of diapers during their initial consultation. In order to receive the free diapers, the beneficiaries are not required to enroll in the program or designate the entity as their program services provider. However, beneficiaries who enroll in the Program thereafter and designate the entity as their provider may receive additional free packs of diapers, limited to one free pack per billable visit. The aggregate value of diapers the entity provides to any individual beneficiary is less than $50. To receive a free play yard under the Program, a beneficiary must enroll in the Program, select the entity as her program services provider, and complete ten visits. The play yards have a value of approximately $50.

The OIG opined that although the diapers and play yards are intended to induce Medicaid beneficiaries to enroll in the Program and to select the entity as the provider, the arrangement does not subject the entity to sanctions of civil monetary penalties (CMP) because:

  • the diapers are nominal in value;
  • both the diapers and the play yards satisfy the Preventive Care Exception requirements that excludes incentives given to individuals for the delivery of preventive care from the definition of remuneration for purposes of CMP (42 C.F.R. section 1003.101);
  • the diapers are not prohibited by CMP because they fall within the per-item and aggregate thresholds set by the OIG for incentives of nominal value;
  • neither the diapers, nor the play yard, nor the combination of the two is disproportionately large in relationship to the value of the Program services (noting that a beneficiary has to complete ten visits to receive the play yard); and
  • because the Program services are not tied to the provision of the medical care that Program beneficiaries receive, neither the diapers nor the play yards constitute remuneration under the CMP.

Ultimately, the OIG stated that the arrangement does not constitute grounds for the imposition of CMPs under the AKS. The OIG further clarified that although 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 were present, the OIG would not impose administrative sanctions on the entity in connection with the arrangement. The OIG reminds readers that the advisory opinion is limited in scope to the specific arrangement described in the advisory opinion and has no applicability to other arrangements, even those which appear similar in nature or scope.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2015 Strategic Management Services, LLC. Published with permission.