Kusserow on Compliance: OIG raises nominal value threshold for beneficiary gifts

A frequent issue that compliance officers have to address is whether offering something of value to beneficiaries may implicate federal law. The release by the HHS Office of Inspector General (OIG) of a new policy statement on the subject can answer those questions. Under section 1128A(a)(5) of the Social Security Act (SSA), enacted as part of the Health Care Portability and Accountability Act (HIPAA) (P.L. 104-191), a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of Medicare or Medicaid payable items or services may be liable for civil monetary penalties (CMPs) of up to $10,000 for each wrongful act. Congress thus broadly prohibited offering remuneration to Medicare and Medicaid beneficiaries, subject to limited, well-defined exceptions. To the extent that providers have programs in place that do not meet any exception, the OIG, in exercising its enforcement discretion, will take into consideration whether the providers terminate prohibited programs expeditiously following publication of this Bulletin.

What this means is that offering valuable gifts to beneficiaries to influence their choice of a Medicare or Medicaid provider raises quality and cost concerns, and many providers may have an economic incentive to offset the additional costs attributable to the giveaway by providing unnecessary services or by substituting cheaper or lower quality services. The use of giveaways to attract business also favors large providers with greater financial resources for such activities, disadvantaging smaller providers and businesses.

The policy statement includes the following definitions:

  • Remuneration. Includes, without limitation, waivers of copayments and deductible amounts and transfers of items or services for free or for other than fair market value, with a limited number of exceptions.
  • Inducement. The offer of valuable (i.e., not inexpensive) goods and services as part of a marketing or promotional activity, regardless of whether the marketing or promotional activity is active or passive. In addition, the OIG considers the provision of free goods or services to existing customers who have an ongoing relationship with a provider likely to influence those customers’ future purchases.

Congress expressed its intent that inexpensive gifts of nominal value should be permitted.   In a Special Advisory Bulletin in 2002, the OIG expressed its interpretation of “inexpensive” or “nominal value” to mean a retail value of no more than $10 with an aggregate limit of $50 annually, noting it would periodically review these limits and adjust them according to inflation.  In December, 2016, the OIG adjusted the figures as to what it would interpret as “nominal value” for the first time since 2000 to be a retail value of no more than $15 per item, or $75 in the aggregate per patient on an annual basis.  It made it clear, however that the items may not be cash or cash equivalents.

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 © 2017 Strategic Management Services, LLC. Published with permission.