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.

Kusserow on Compliance: Civil monetary penalty rules revised regarding inducements

In December 2016, the HHS Office of Inspector General (OIG) issued a Final rule applying to the Civil Monetary Penalty Law (CMPL) administered by the OIG. The legislation creating the law came about in 1981, upon my request as HHS Inspector General. In testimony before Congress, I requested legislation to provide an administrative alternative to the False Claims Act.  This was to permit taking action against wrongdoers administratively, rather than through the court system. The resulting legislation authorized the imposition of administrative penalties and assessments on any person who “offers to or transfers remuneration to any individual eligible for benefits” under a federal health care program “that such person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part” by a federal health care program–in short, it imposes financial penalties and exclusion from federal health care programs and participation in any state health care programs. The HHS Secretary assigned these authorities to the OIG. Remuneration is a major element in the CMPL and is implicated in other legislation, including the Anti-Kickback Statute and Stark Laws. It has undergone changes in definition over time.  The following outlines the five new exceptions to its definition under CMPL.

Five new exceptions to the definition of remuneration

  1. Reduction in copayment for certain outpatient services. The rule adds a cost-sharing exception permitting reduction in the copayment amount for covered outpatient department services, but does not apply to physician practice billing.
  2. Remuneration that poses a low risk of harm and promotes access to care. A provider can avoid the CMPL when it provides items or services that improve a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid, and pose a low risk of harm to beneficiaries and the programs. This does mean it permits remuneration that would be likely to influence a patient to access unnecessary care. The inclusion of “items and services” revises the earlier proposed language, “medically necessary health care items and services.”  Cash and cash equivalents would not meet the criteria for the exception.
  3. Retailer rewards and discounts. Retailers may offer or transfer items or services for free or less than fair market value without being subject to civil monetary penalties. However, they must consist of coupons, rebates, or other rewards from a retailer; be offered or transferred on equal terms available to the general public, regardless of health insurance status; and must not be tied to the provision of other items or services reimbursed in whole or in part by a federal health care program.
  4. Remuneration to financially needy individuals. The regulations also provide for a financial need-based exception to the definition of remuneration, wherein a person may offer or transfer items or services for free or less than fair market value if: the items or services are not offered as part of an advertisement or solicitation and are not tied to the provision of other items or services reimbursed in whole or in part by a Federal health care program; there is a reasonable connection between the items or services and the medical care of the individual; and the person providing the items or services must determine in good faith that the individual is in financial need.
  5. Copayment waivers for the first fill of generic drugs. A Medicare Part D Plan sponsor may waive any copayment for the first fill of a covered Part D drug that is a generic drug, as long as the waiver is included in the benefit design package submitted to CMS.

These regulatory changes are effective January 6, 2017. A separate section of the same rule package focused on revision of the Anti-Kickback provisions.  For information about those changes, see my December 29, 2016, post.

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.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2016 Strategic Management Services, LLC. Published with permission.

Kusserow on Compliance: Reminder—False Claims Act penalties are increasing next month

Last year, Congress enacted legislation modifying the False Claims Act (FCA) to add incentives to “Whistleblowers” and provide added deterrence to those who would violate law by increasing financial penalties.  The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, passed as part of the Bipartisan Budget Act of 2015 (P.L. 114-74), requires the Department of Justice (DOJ) to increase FCA penalties to annually account for inflation, raising penalties. The DOJ last raised civil monetary penalties under the FCA to their current levels in August 1999, increasing the minimum penalty from $5,000 to $5,500, and increasing the maximum penalty from $10,000 to $11,000. This increase was consistent with the maximum 10 percent increase provided for in the 1996 Debt Collection Improvement Act.  The $11,000 per claim penalty represents the maximum penalty permissible under prior law—exactly double the $5,500 per claim minimum penalty.  Under the new legislation now going into effect, this will increase next month, and the change will bump the minimum penalty for a FCA from $5,500 to $10,781 and increase the maximum penalty from $11,000 to $21,563. One of the provisions of the legislation is requiring the federal government to increase civil monetary penalties as a “catch up adjustment,” which requires agencies to update penalties to account for inflation. The initial adjustment would be implemented through rulemaking.

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.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2016 Strategic Management Services, LLC. Published with permission.