The US Department of Health and Human Services Office of Inspector General (OIG) recently issued Advisory Opinion (AO) 23-03, analyzing a proposed arrangement in which a company that manufactures an at-home colon cancer screening kit and its wholly-owned laboratory that performs the analysis (collectively, the Requestor) would furnish gift cards to certain patients to incentivize them to complete the sample collection process. Based on the facts and circumstances of the proposed arrangement, OIG reached a favorable conclusion, finding that the proposed arrangement would satisfy the Preventive Care Exception to the Beneficiary Inducement Civil Monetary Penalty (Beneficiary Inducements CMP) and otherwise presents low risk under the federal Anti-Kickback Statute (AKS). OIG also utilized AO 23-03 as an opportunity to clarify its position regarding the phrase “instruments convertible to cash,” as used in the Preventive Care Exception.
The furnishing of remuneration, whether in cash or kind (including by way of cash or gift cards), by healthcare providers and suppliers to federal health care program beneficiaries has long attracted scrutiny from OIG to the extent such remuneration may influence Medicare or Medicaid beneficiaries’ choice of a particular healthcare provider, practitioner or supplier, as well as induce beneficiaries to purchase items or services reimbursable by a federal health care program. However, OIG has acknowledged that in certain circumstances, remuneration may serve other, more beneficial purposes with respect to both beneficiaries and federal health care programs, particularly as it relates to encouraging preventive care and compliance with an established plan of care, which ultimately serves to lower costs. In this vein, OIG has adopted several exceptions to the general prohibition on furnishing remuneration to beneficiaries, including the Preventive Care Exception.
The final determination reached in AO 23-03 is consistent with OIG’s prior positions on the applicability and scope of the Preventive Care Exception, though certain elements of the decision are noteworthy, particularly as it relates to the furnishing of gift cards to beneficiaries and the related analysis under the AKS.
THE PROPOSED ARRANGEMENT IN AO 23-03
The Requestor consists of a parent company that manufactures a proprietary, at-home colorectal cancer screening test and its wholly-owned subsidiary laboratory that analyzes the test. The test, which is only available to patients via a prescription, is the first and only US Food and Drug Administration-approved, non-invasive, stool-based DNA colorectal cancer screening test, and the laboratory is the only one capable of analyzing the test. When prescribed, a package containing the test kit is shipped directly to patients. Patients must collect their stool sample at home and ship the sample in a prepaid package back to the laboratory, which then analyzes the test to determine whether the sample has markers of colorectal cancer or advanced adenoma. A follow-up diagnostic colonoscopy is typically recommended for patients with positive results.
The test is billable to Medicare, and the laboratory receives approximately $500 for each test it performs. Medicare covers the test once every three years for eligible beneficiaries.
The Requestor noted that it maintains contact with patients throughout the process of shipping and collecting the sample, including phone calls, text messages, emails and other contact methods, to remind the patient to complete and return the sample. Despite these efforts, approximately 30% of patients do not return their samples to the laboratory. To incentivize patients to complete and return the sample, the Requestor asked OIG to evaluate a proposed arrangement pursuant to which if patients do not return the stool sample after two weeks and at least two patient outreaches, the Requestor would send a letter to the patient advising that they may receive a prepaid gift card (e.g., Visa or Mastercard) with a value of up to $75 if they return the stool sample by a specified deadline.
The Requestor certified that the proposed arrangement would include a number of safeguards, namely: (1) patients would be told they could not use the gift cards for services provided by the Requestor; (2) patients could receive only one gift card per three-year period (i.e., the same time frame within which Medicare covers the test); (3) the Requestor would not promote or market the gift card to prescribers or patients; and (4) the Requestor would provide all patients with a gift card of the same dollar amount and not vary the gift card value based on patient demographics, the payor or the particular prescriber. Further, the gift card amount would be set at the “lowest amount less than or equal to $75 that significantly improves patient compliance.” The gift card could not be used to withdraw cash from an ATM or obtain cash back with another purchase. Finally, the gift card would not be available to patients who request the test through the Requestor’s website, whereby the Requestor connects patients with a provider to prescribe the test.
OIG determined that the proposed arrangement would implicate the Beneficiary Inducements CMP and the AKS, but ultimately concluded that the proposed arrangement would not constitute grounds for administrative sanctions, for the reasons set forth below.
Beneficiary Inducements CMP
The Beneficiary Inducements CMP provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a 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 Medicaid.
OIG determined that the proposed arrangement would implicate the Beneficiary Inducements CMP because the Requestor should know that the provision of gift cards would likely influence beneficiaries to return the sample to the laboratory for testing, which is ultimately reimbursable by Medicare or Medicaid. However, as referenced above, OIG promulgated several scenarios that are excluded from the definition of “remuneration” as that phrase is utilized in the Beneficiary Inducements CMP, including the Preventive Care Exception, which provides as follows:
[ . . . ] The term ‘remuneration’ does not include:
[ . . . ]
(4) 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. Such incentives include the provision of preventive care, but may not include –
(i) Cash or instruments convertible to cash; or
(ii) An incentive the value of which is disproportionally large in relationship to the value of the preventive care services (i.e., either the value of the service itself or the future health care costs reasonably expected to be avoided as a result of the preventive care).
The regulations further define “preventive care” for purposes of this exception as any service that is:
(1) A prenatal service or a post-natal well-baby visit or is a specific clinical service described in the current U.S. Preventive Services Task Force’s Guide to Clinical Preventive Services, (the “USPSTF’s Guide”) and
(2) Is reimbursable in whole or in part by Medicare or an applicable State health care program.
OIG concluded that the proposed arrangement satisfies this exception. In reaching this conclusion, OIG noted that the test meets the definition of “preventive care” as it is a clinical service described on the current US Preventive Services Task Force (USPSTF) Guide and is reimbursable by federal health care programs. OIG also concluded that although the incentive is in the form of a “cash equivalent” Visa or Mastercard gift card, the gift card (1) would not be an “instrument convertible to cash” (based on OIG’s clarification of that phrase’s meaning noted above), and (2) has a value that is not disproportionally large in relation to the value of the preventive care service itself. Based on these factors, the proposed arrangement meets the conditions of the Preventive Care Exception. Notably, OIG cautioned that the “value” of the incentive in relation to the value of the preventive service for purposes of this analysis is not necessarily limited to evaluating the preventive service’s Medicare reimbursable amount. Here, for example, OIG viewed the “value” of the test as including potential health benefits to beneficiaries and future healthcare costs that could be avoided as a result of the preventive care (i.e., the test).
Further, OIG noted that although the test could result in beneficiaries obtaining additional reimbursable services (such as a follow-up colonoscopy), OIG determined that the test would not be “indirectly or directly tied” to the provision of these additional services. Although OIG did not delve into its analysis as to this conclusion, it has previously interpreted “tied” in this context as “conditioned upon.” Here, although the gift card may incentivize beneficiaries to follow through with the test, obtaining the test is not in and of itself conditioned upon the beneficiaries’ receipt of additional reimbursable items or services, even if the test may naturally lead to that.
Based on these facts, OIG concluded that the gift card would not constitute “remuneration” under the Beneficiary Inducements CMP and thus would not constitute grounds for administrative sanctions.
Although OIG concluded that the proposed arrangement satisfies an exception to the Beneficiary Inducements CMP, OIG specifically noted that this does not “automatically render the Proposed Arrangement low risk” under the AKS. In its recently-released FAQ guidance, OIG restated its position that arrangements protected under a Beneficiary Inducements CMP exception are not “automatically” protected under the AKS (although AKS safe harbor compliance does result in Beneficiary Inducement CMP compliance). In practice, such arrangements tend to be lower risk under the AKS, since the facts and circumstances that satisfy the Beneficiary Inducements CMP exception are generally favorable factors in an AKS risk analysis. In AO 23-03 and the FAQ guidance, OIG takes the opportunity to remind the healthcare community that an analysis under both statutes is needed.
The AKS, a criminal statute, prohibits knowingly and willfully offering, paying, soliciting or receiving any remuneration to induce, or in return for, referring an individual to a person for the furnishing of, or arranging the furnishing of, any item or service reimbursable by a federal health care program; or any remuneration to induce, or in return for, the purchasing, leasing or ordering of, arranging for or recommending the purchasing, leasing or ordering of any good, facility, service or item reimbursable by a federal health care program. Arrangements that induce beneficiaries to obtain preventive care may implicate the AKS to the extent the arrangement is intended to induce business reimbursable by federal health care programs. Here, OIG determined that the proposed arrangement implicates the AKS because the Requestor would offer and pay remuneration in the form of a cash equivalent gift card in an attempt to induce a beneficiary to return the test to the laboratory, resulting in the purchase of laboratory services reimbursable by federal health care programs.
In evaluating arrangements related to preventive care, OIG considers, among other factors, (1) the nature and scope of the preventive care services; (2) whether the preventive care services are tied directly or indirectly to the provision of other items or services and, if so, the nature and scope of the other services; (3) the basis upon which patients are selected to receive the free or discounted services and (4) whether the patient is able to afford the services.
Here, OIG concluded that the proposed arrangement would be unlikely to lead to improperly increased costs or overutilization of federal health care program services, largely because Medicare reimburses for colorectal screening only once every three years. The Requestor would offer the gift card only once every three years in line with the Medicare coverage timeline. OIG also found favorable the fact that the Requestor would not offer any incentives to prescribers of the test, nor would the prescribers be able to anticipate whether the Requestor would offer or ultimately provide a gift card to any of a prescriber’s patients (as gift cards are only offered to those patients who fail to return the test on a timely basis after the Requestor transmits multiple reminders). As such, OIG concluded that the proposed arrangement is unlikely to influence a prescriber to order the test in lieu of not ordering a test or ordering another screening test or procedure. Further, because the test is reimbursed at a fixed rate, the Requestor would not be able to pass on the cost of the gift card to the Medicare program.
Second, OIG noted that the nature of the test and the condition it identifies were factors in its conclusion. Encouraging compliance with the test would align with recommended best practices for colorectal cancer screenings and reduce the significant 30% noncompliance rate. OIG noted that the collection of a stool sample can be unpleasant for patients (as opposed to a hair sample or a saliva sample), and thus a gift card may be more appropriate for encouraging completion of the test.
Finally, OIG reiterated the Requestor’s other procedural safeguards, as described above, as additional reasons why the proposed arrangement ultimately presents low risk under the AKS.
AO 23-03 offers one roadmap for companies interested in offering similar incentives to patients. However, OIG cautioned that different facts would likely have led to a different conclusion. Accordingly, structuring similar incentive arrangements will require careful analysis of the specific facts.
For example, in this case, OIG determined that the $75 prepaid gift card was not disproportionate as compared to the $500 received by the Requestor for the preventive service, taking into account other significant values attributable to this particular service for beneficiaries and federal health care programs alike. Notably, OIG did not quantify the value of the “health benefits” or set a clear rule for comparing the value of remuneration versus the value of a billed service. As discussed above, colorectal cancer is an expensive and deadly disease, and early screening is essential, thus the “health benefits” in this case are clear and significant. Other health conditions or value comparisons would be subject to a similar facts and circumstances analysis and may not come out as favorably. OIG specifically noted that, under a different set of facts, a $75 incentive could be “disproportionately large” compared to a preventative care service billed at $500.
OIG also took the opportunity to clarify its prior guidance on what it classifies as a “cash equivalent,” which it has long held as being a generally impermissible incentive for purposes of the Beneficiary Inducements CMP. Specifically, in prior guidance, OIG defined “cash equivalents” as including “items convertible to cash (such as a check) or that can be used like cash (such as a general purpose debit card, but not a gift card that can be redeemed only at certain stores for a certain purpose, like a gasoline gift card).” In AO 23-03, OIG clarified that the phrase “instruments convertible to cash” as utilized in the Preventive Care Exception is intended to refer to a subset of cash equivalents. Through this clarification, OIG provided a clear pathway for the use of a prepaid card (like a Visa or Mastercard) under the Preventive Care Exception. However, as OIG expressly noted, the analysis under the AKS is separate from the Beneficiary Inducements CMP and a Visa or Mastercard gift card is considered a “cash equivalent” for AKS purposes. Cash equivalent incentives would not qualify for the AKS patient engagement safe harbor and thus using cash equivalent gift cards still requires a thoughtful analysis of the purpose of the offer and other facts and circumstances.
Additionally, note that OIG never opines on state law in its AOs. Some states have their own anti-kickback and beneficiary inducement statutes that may restrict or limit arrangements in a manner distinct from their federal counterparts. Thus, it is important to note that there may be a different risk profile under state law, even if an arrangement appears relatively low risk under federal law.
Before entering into a similar arrangement, entities should consult legal counsel for a thoughtful analysis under both federal and applicable state law.