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General Questions Regarding Certain Fraud and Abuse Authorities

(1) When an arrangement does not satisfy a safe harbor under the Federal anti-kickback statute, does that mean it’s automatically illegal? If an arrangement satisfies most of a safe harbor’s conditions, does that mean it is lower risk?

The safe harbor regulations at 42 CFR § 1001.952 describe various payment and business practices that, although they potentially implicate the Federal anti-kickback statute, are not treated as offenses under the statute. Compliance with a safe harbor is voluntary; failure to satisfy a safe harbor does not mean that an arrangement is illegal.

There is no safe harbor protection for partial compliance with the conditions of a potentially applicable safe harbor. To receive the benefit of safe harbor protection, an arrangement must squarely satisfy each condition set forth in the applicable safe harbor. The risk of any arrangement that implicates the Federal anti-kickback statute and does not meet all of the elements of a safe harbor would be assessed based on the totality of its facts and circumstances, including the intent of the parties.

(2) How is the scope of the Beneficiary Inducements CMP different from the scope of the Federal anti-kickback statute?

The Federal anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing of, or arranging for the furnishing of, any item or service reimbursable under a Federal health care program. The statute’s prohibition also extends to remuneration to induce, or in return for, the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by a Federal health care program. Stated simply for the purposes of this explanation, the Federal anti-kickback statute is an intent-based criminal statute prohibiting the exchange of anything of value for Medicare and other Federal health care program referrals. Federal health care programs include Medicare, TRICARE, and CHAMPVA, Medicaid, CHIP, and other programs.

The Beneficiary Inducements CMP provides for the imposition of CMPs against any person who offers or transfers remuneration to a Medicare or State health care program beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the order or receipt of any item or service for which payment may be made, in whole or in part, by Medicare or a State health care program. Section 1128A(i)(6) of the Social Security Act defines “remuneration” for purposes of the Beneficiary Inducements CMP as including “the waiver of coinsurance and deductible amounts (or any part thereof), and transfers of items or services for free or for other than fair market value.”

The Beneficiary Inducements CMP “is a separate and distinct authority, completely independent of the [Federal] anti-kickback statute.” See 63 Fed. Reg. 14,393, 14,395 (Mar. 25, 1998). It is narrower than the Federal anti-kickback statute in a number of ways. For example:

  • It contains a different, narrower prohibition than the Federal anti-kickback statute. The Federal anti-kickback statute’s prohibition applies to remuneration to induce or reward, among other things, referrals of an individual to a person for the furnishing of any item or service, and purchases of any good, facility, service, or item, payable by a Federal health care program. In contrast, the prohibition under the Beneficiary Inducements CMP applies to remuneration that is likely to influence a beneficiary’s selection of a particular provider, practitioner, or supplier for items or services reimbursable by Medicare or a State health care program.
  • It applies only to the person offering or transferring the remuneration. The Federal anti-kickback statute applies to both the person offering or paying the remuneration and the person soliciting or receiving it.
  • It uses a definition of “remuneration” that does not apply for purposes of the Federal anti-kickback statute. It also has exceptions to the definition of “remuneration” that do not apply for purposes of the Federal anti-kickback statute. (For more information on this topic, see FAQ #3.)
  • It applies only to items and services reimbursable by Medicare or a State health care program (e.g., Medicaid and CHIP). The Federal anti-kickback statute applies to items and services payable by any Federal health care program (e.g., Medicare, TRICARE, and CHAMPVA) or by a State health care program.

(3) If an arrangement meets all of the requirements to be protected by an exception to the Beneficiary Inducements CMP, would that arrangement also automatically be protected under the Federal anti-kickback statute?

No. The exceptions to the definition of “remuneration” under the Beneficiary Inducements CMP at section 1128A(i)(6) of the Act and 42 CFR § 1003.110 do not provide protection from sanctions under the Federal anti-kickback statute. However, one of the exceptions to the definition of “remuneration” under the Beneficiary Inducements CMP applies to “any permissible practice described in any subparagraph of section 1128B(b)(3) or in regulations issued by the Secretary.” Therefore, any practice that is protected by an exception or safe harbor to the Federal anti-kickback statute also is excepted from the definition of “remuneration” under the Beneficiary Inducements CMP (i.e., such practice does not violate the Beneficiary Inducements CMP), but the reverse is not true.

(4) Could a financial arrangement that satisfies an exception to the physician self-referral law (42 U.S.C. § 1395nn) violate the Federal anti-kickback statute?

Compliance with the physician self-referral law, 42 U.S.C. § 1395nn, or an exception to the physician self-referral law does not rebut any implication of intent under the Federal anti-kickback statute. Notably, conditions (including the same or similar terms used in the safe harbors to the Federal anti-kickback statute and which are separately defined under the physician self-referral law) required by an exception to the physician self-referral law may differ from conditions set forth in any similar safe harbor to the Federal anti-kickback statute. In other words, satisfying an exception under the physician self-referral law does not mean that an arrangement satisfies the conditions of a similar safe harbor to the Federal anti-kickback statute. In addition, satisfying an exception to the physician self-referral law alone does not provide protection from sanctions under the Federal anti-kickback statute. Indeed, it is possible, depending on the facts and circumstances, that an arrangement may comply with an exception to the physician self-referral law but violate the Federal anti-kickback statute. The fact that a party complies with the requirements of the physician self-referral law or an exception to the physician self-referral law is not evidence that the party does or does not have the intent to induce or reward referrals for purposes of the Federal anti-kickback statute. By way of example, a party that knowingly and willfully offers and pays any remuneration to induce, or in return for, Federal health care program referrals could be liable under the Federal anti-kickback statute, even if the financial arrangement at issue satisfies an exception to the physician self-referral law.

(5) How does OIG differentiate between “cash,” “cash equivalents,” and “in-kind” gift cards? How would OIG categorize a gift card to a big-box store? How would OIG categorize a gift card to a big-box store, the terms of which expressly limit the scope of items the consumer could purchase with such gift card (e.g., the gift card could only be used to purchase fresh food items)?

“Cash” refers to monetary payments in the form of currency. (Note that cash could be transmitted electronically, too, such as through a peer-to-peer application.) “Cash equivalents” include items convertible to cash (such as a check) or items that can be used like cash, such as a general-purpose prepaid card such as a Visa or Mastercard gift card. Gift cards offered by large retailers or online vendors that sell a wide variety of items (e.g., big-box stores) could easily be diverted from their intended purpose or converted to cash. Consequently, OIG considers such gift cards to be cash equivalents. (We note that the regulatory text of the Preventive Care Exception, found at 42 CFR § 1003.110, uses the term “instruments convertible to cash” and not “cash equivalents.” The phrase “instruments convertible to cash” refers to a subset of “cash equivalents,” which includes a broader range of remuneration. For example, OIG would consider a preloaded prepaid card to be a “cash equivalent” but not an “instrument convertible to cash.”)

OIG considers some gift cards to be “in-kind,” such as gift cards that can be redeemed only for certain categories of services or items (e.g., a meal delivery service or gasoline). OIG also considers vouchers for a particular item or service (e.g., a meal or taxi ride) to be an in-kind item.

With respect to a gift card to a big-box store for a particular item or select categories of items, such as a gift card to a big-box store that can, by its express terms, be used only to purchase fresh food items (e.g., produce), OIG would consider that to be an in-kind item. The reason is because it is a gift card that can be redeemed for only a certain category of items.

Understanding these categories is important to understanding what form of remuneration could be protected under certain safe harbors to the Federal anti-kickback statute and exceptions to the Beneficiary Inducements CMP. For example, the delineation of what OIG considers “in-kind” is important for the purposes of the patient engagement and support safe harbor, 42 CFR § 1001.952(hh), which protects only the provision of in-kind items, goods, and services. So, while a general-purpose prepaid card or an unrestricted gift card to a big-box store could not receive protection under that safe harbor, a gas card, a gift card to a fitness center, or a gift card to a big-box store that could be used for only certain items, such as fresh food items, could receive protection under that safe harbor, provided all other safe harbor requirements are satisfied. For further discussion of these terms, see, e.g., 81 Fed. Reg. 88,368, 88,393 (Dec. 7, 2016) and 85 Fed. Reg. 77,684, 77,790 (Dec. 2, 2020).

Other agencies, including the Centers for Medicare & Medicaid Services (CMS), may have adopted their own interpretation of terms such as “cash equivalent” and “in-kind”; this answer reflects only OIG’s interpretation of these terms.

(6) Do arrangements between electronic health record (EHR) vendors and their customers implicate the Federal anti-kickback statute?

Possibly. The Federal anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing of, or arranging for the furnishing of, any item or service reimbursable under a Federal health care program. The statute’s prohibition also extends to remuneration to induce, or in return for, the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by a Federal health care program. To the extent the EHR software is either itself reimbursable, in whole or in part, by Federal health care programs or used in the furnishing of items or services reimbursable by a Federal health care program, various financial arrangements could implicate the Federal anti-kickback statute. For example, the statute could be implicated by an arrangement where an EHR vendor pays remuneration to a customer to, for example, market its EHR software to other individuals or entities. As another example, the statute could be implicated by a provider or supplier paying an EHR vendor to recommend—through its software—that provider or supplier for items or services reimbursable by a Federal health care program. These examples are illustrative and not intended to cover all situations in which arrangements between EHR vendors and their customers implicate the Federal anti-kickback statute. EHR vendors and their customers should carefully review all arrangements to determine whether the Federal anti-kickback statute is implicated.

(7) Does remuneration exchanged between entities with common ownership implicate the Federal anti-kickback statute?

The Federal anti-kickback statute is an intent-based, criminal statute that, as a general matter, prohibits payments in exchange for referrals or other Federal health care program business. Congress did not exempt from the statute’s prohibitions remuneration exchanged between entities with common ownership. Consequently, such remuneration could implicate the Federal anti-kickback statute. Furthermore, OIG has previously declined to provide safe harbor protection for remuneration exchanged between wholly-owned entities, including parent entities and their wholly-owned subsidiaries, indicating that common ownership does not eliminate the risk of improper referrals under the statute:

. . . we are concerned . . . that integrated delivery systems, including arrangements involving wholly-owned subsidiaries, may present opportunities for the payment of improper financial incentives that result in overutilization of services and increased program costs and that may adversely affect quality of care and patient freedom of choice among providers . . . .

See 64 Fed. Reg. 63,518, 63,520 (Nov. 19, 1999) (emphasis added).

However, we recognize that as the health care industry moves away from a fee-for-service payment model toward value-based care, providers may need additional flexibility to support legitimate, collaborative arrangements. Through our final rule at 85 Fed. Reg. 77,684 (Dec. 2, 2020), we finalized safe harbors that provide additional flexibility to providers and suppliers pursuing value-based arrangements. Illustratively, providers and suppliers with common ownership may be able to establish a “value-based enterprise” and utilize the safe harbors that are available to those entities. (See, e.g., 42 CFR § 1001.952(ee)–(gg).)

We note that compliance with a safe harbor is voluntary and that the advisory opinion process remains available for those who wish to obtain OIG review of a particular arrangement involving common ownership.

(8) If all other elements of the single-specialty ambulatory surgical center (ASC) safe harbor are satisfied, can an ASC offer an investment interest in a single-specialty ASC to a physician who derives less than one-third of his or her medical practice income from all sources for the previous fiscal year or previous 12-month period from the performance of “procedures” (as that term is defined in 42 CFR § 1001.952(r)(5))?

Remuneration to a physician in the form of a return on an investment interest in an ASC implicates the Federal anti-kickback statute if the physician-investor makes referrals to the ASC. The ASC safe harbor at 42 CFR § 1001.952(r) sets forth conditions that, if satisfied, will protect remuneration to ASC physician-investors. To qualify for safe harbor protection, the arrangement must squarely satisfy all of the conditions of the applicable ASC safe harbor (i.e., surgeon-owned, single-specialty, multispecialty, or hospital/physician). If an arrangement fails to squarely satisfy all of the conditions, then the safe harbor will not protect the arrangement from potential liability under the Federal anti-kickback statute.

Every subsection of the ASC safe harbor requires that at least one-third of each physician-investor’s medical practice income from all sources for the previous fiscal year or previous 12-month period be derived from the performance of “procedures” (as defined in 42 CFR § 1001.952(r)(5)) (the Practice Income Test). Physicians who do not meet the Practice Income Test cannot rely on the ASC safe harbor to protect the investment income they receive from the ASC, and the ASC likewise cannot rely on the ASC safe harbor to protect its distribution of investment income to these physicians. OIG adopted the Practice Income Test as a condition in the ASC safe harbor because physicians who meet this standard are more likely to use the ASC as an extension of their physician office space, which reduces the risk that the physician’s investment interest would induce or reward referrals for ASC procedures that the physician does not personally perform.

Compliance with a safe harbor is not required, and arrangements that do not qualify for safe harbor protection are evaluated based on the totality of the facts and circumstances of the specific arrangement. OIG considers a number of facts and circumstances when evaluating the relative risk of fraud and abuse presented by ASC investments by physicians who do not meet the Practice Income Test (but who satisfy all of the other pertinent safe harbor conditions). These factors include: (i) whether the physician-investors will refer patients to the ASC for procedures that they will not personally perform, (ii) whether the physician-investors will make use of the ASC for their own procedures, and (iii) what circumstances cause the physician-investors to fail the Practice Income Test (e.g., they perform a high volume of inpatient procedures).

(9) Where can I find the inflation-adjusted amount for the monetary cap in the safe harbor for arrangements for patient engagement and support to improve quality, health outcomes, and efficiency, 42 CFR § 1001.952(hh)?

The yearly inflation updates to the annual monetary cap on protected patient engagement tools and supports set forth in the safe harbor condition at 42 CFR § 1001.952(hh)(5) can be found here.

(10) Does the discount safe harbor protect remuneration retained by pharmacy benefit managers (PBMs) and characterized as “rebates”?

No. Any payment retained by a PBM—even if characterized as a “rebate”—is a service or administrative fee and would not be eligible for protection under the discount safe harbor. While it is possible that remuneration retained by PBMs could be protected under either the GPO safe harbor, 42 C.F.R. § 1001.952(j), or the safe harbor for personal services and management contracts and outcomes-based payment arrangements, 42 C.F.R. § 1001.952(d), any potential safe harbor protection under those two safe harbors would require an assessment of the arrangement and a determination of its compliance with all specific conditions of the applicable safe harbor.

The discount safe harbor, 42 C.F.R. § 1001.952(h), protects remuneration in the form of “a discount, as defined in paragraph (h)(5) of [that] section, on an item or service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs,” subject to certain conditions on buyers, sellers, and offerors of the discount. The safe harbor defines “discount” as “a reduction in the amount a buyer (who buys either directly or through a wholesaler or a group purchasing organization) is charged for an item or service based on an arms-length transaction,” subject to certain exclusions. In addition, the discount safe harbor defines “rebate” as “any discount the terms of which are fixed and disclosed in writing to the buyer at the time of the initial purchase to which the discount applies, but which is not given at the time of sale.” In other words, as defined in the safe harbor, a rebate is a form of a discount, and a discount is a reduction in price.

OIG addressed the issue of portions of rebates that PBMs retain in both a 2019 proposed rule (84 Fed. Reg. 2340 (Feb. 6, 2019)) that would modify the discount safe harbor and add two new safe harbors (Proposed Rule) and the corresponding 2020 final rule (85 Fed. Reg. 76,666 (Nov. 30, 2020)) (Final Rule). For example, in the preamble to the Proposed Rule, OIG noted that “[w]e recognize that the payments manufacturers retrospectively make to PBMs under rebate agreements would not constitute discounts or other reductions in price to the extent such payments are retained by the PBM and not passed through to any buyer.” 84 Fed. Reg. at 2343 n.36. In the preamble to the Final Rule, OIG “reiterate[d] . . . that any type of a ‘fee’ (which would include any payment retained by a PBM) is not a discount or other reduction in price and therefore will not meet the discount safe harbor at § 1001.952(h) . . . .” 85 Fed. Reg. at 76,683. These statements reflected the existing law and continue to reflect existing law, despite the legislative moratorium on the implementation, administration, or enforcement of the Final Rule until January 1, 2032. See Inflation Reduction Act of 2022, Pub. L. No. 117-169, § 11301.

(11) Could the group purchasing organization (GPO) safe harbor protect remuneration paid by pharmaceutical manufacturers to pharmacy benefit managers (PBMs)?

The OIG Compliance Program Guidance for Pharmaceutical Manufacturers states that PBMs may be able to structure arrangements to satisfy the conditions in the GPO safe harbor. More recently, we responded to inquiries related to the current state of the law regarding protection of certain PBM arrangements under the GPO safe harbor. See 85 Fed. Reg. 76,666, 76,715 (Nov. 30, 2020). We continue to believe that financial arrangements involving PBMs that squarely satisfy all safe harbor requirements can be protected by the GPO safe harbor; however, as noted below, there may be structural impediments to many PBMs qualifying for protection under this safe harbor.

The statutory exception for GPOs, 42 U.S.C. § 1320a-7b(b)(3)(C), protects “any amount paid by a vendor of goods or services to a person authorized to act as a purchasing agent for a group of individuals or entities” that furnish federally reimbursable items or services. The GPO safe harbor, 42 C.F.R. § 1001.952(j), includes a definition of the term “GPO,” explaining what it means to be “a person authorized to act as a purchasing agent for a group of individuals or entities.” We emphasize that a PBM would need to meet the safe harbor’s definition of a “group purchasing organization” for its arrangements to qualify for protection under this safe harbor, including the requirement that the PBM’s customers (e.g., health plans) can be “neither wholly-owned by the GPO nor subsidiaries of a parent corporation that wholly owns the GPO (either directly or through another wholly-owned entity).” 42 C.F.R. § 1001.952(j)(2). Many PBMs would not satisfy this definition and therefore could not qualify for protection under the GPO safe harbor.

The GPO safe harbor does not protect any discounts (including discounts in the form of rebates) that a GPO might negotiate on behalf of its customers; the GPO safe harbor protects only payments (e.g., administrative fees) from the vendors to the GPO. We reiterate that all transparency requirements set forth in the GPO safe harbor must be met for these payments to be protected by the safe harbor. For a PBM’s arrangements with vendors (e.g., manufacturers) to satisfy the GPO safe harbor, in addition to meeting the definition of a “GPO” and other safe harbor conditions, a PBM would need to have a written agreement with each customer (e.g., health plan) that provides for either of the following: (i) the participating vendors (e.g., manufacturers) would pay a fee of three percent or less of the purchase price of the goods or services, or (ii) if the fee is not fixed at three percent or less, the agreement specifies the amount (or if not known, the maximum amount) that the PBM would be paid by each vendor. See 42 C.F.R. § 1001.952(j)(1).

Yes. Section 1128A(i)(6)(D) of the Act excludes incentives given to individuals to promote the delivery of preventive care from the definition of “remuneration” for purposes of the Beneficiary Inducements CMP (the Preventive Care Exception). The regulations implementing the Preventive Care Exception, 42 C.F.R. § 1003.110, exclude from the definition of “remuneration” incentives given to individuals to promote the delivery of preventive care services where the delivery of such services is not tied (directly or indirectly) to the provision of other services reimbursed in whole or in part by Medicare or an applicable State health care program. The regulations define “preventive care” to include any service that is (i) a specific clinical service “described in the current U.S. Preventive Services Task Force’s [(USPSTF)] Guide to Clinical Preventive Services” and (ii) reimbursable by Medicare or an applicable State health care program.

The 1996 USPSTF Guide to Clinical Preventive Services included certain immunizations for adults and children. However, the USPSTF has not updated its 1996 immunization recommendations, explaining that “the USPSTF recognizes the importance of immunizations in primary disease prevention” and “does not wish to duplicate the significant investment of resources made by others to review new evidence on immunizations in a timely fashion and make recommendations.” Instead, the USPSTF refers to ACIP’s recommendations on immunizations for children and adults. See https://www.uspreventiveservicestaskforce.org/uspstf/recommendation/immunizations-for-adults and https://www.uspreventiveservicestaskforce.org/uspstf/immunizations-children.

In the preamble to the final rule implementing the Preventive Care Exception, OIG explained its inclusion of a specific clinical service described in the then-current USPSTF Guide to Clinical Preventive Services in the definition of “preventive care.” There, OIG stated:

The Guide to Clinical Preventive Services addresses preventive care services provided to asymptomatic individuals in a clinical setting, classifying a number of preventive care services into three broad categories: screening tests, counseling interventions, and immunizations and chemoprophylaxis. For purposes of this regulation, to be considered as preventive care the service in question must be described in the Guide (e.g., listed in the table of contents) to fall within the exception. The mere fact that a service involves screening, counseling, or immunization will not suffice to qualify the service for the preventive care exception.

65 Fed. Reg. 24400, 24408 (Apr. 26, 2000), https://www.govinfo.gov/content/pkg/FR-2000-04-26/pdf/00-10142.pdf (emphasis added).

Because the USPSTF no longer provides vaccination-related recommendations and instead refers to ACIP’s recommendations, vaccines have not been and will not be “described in the Guide.” Consequently, OIG will interpret the defined term “preventive care” under the Preventive Services Exception to include any vaccine administered consistent with a current ACIP recommendation on immunizations for children and adults, provided the vaccine is reimbursable by Medicare or an applicable State health care program. This FAQ does not opine on preventive services other than vaccinations, nor does it alter the applicability of the USPSTF Guide with respect to preventive services beyond vaccinations for the purposes of the Preventive Care Exception.

Last updated May 31, 2023