HHS-OIG finalizes Civil Monetary Penalties and Anti-Kickback Statute safe harbor amendments

The HHS-Office of Inspector General (OIG) released two long-awaited final rules on December 7, 2016 (1) relating to its enforcement of the Anti-Kickback Statute (AKS) and Civil Monetary Penalties Law (CMPL). The final regulations adopt new safe harbors to the AKS2 and new exceptions to the Beneficiary Inducement CMPL, some that were added by the Affordable Care Act (ACA) and other statutes, and some created by OIG in its discretion. These new protections seek to promote the objectives of health reform by reducing patient costs and improving access to better-quality care. The final regulations also provide new guidance on the factors OIG will consider in imposing penalties and exclusions under the CMPL, including aggravating and mitigating factors, and implement several new CMPL provisions added by the ACA. Together, the final regulations make wide-ranging changes to key fraud and abuse laws that affect nearly every sector of the health care industry.

New AKS Safe Harbors

Cost-Sharing Waivers

OIG expanded the existing safe harbor for co-payment, coinsurance and deductible waivers to include waivers by pharmacies and governmental ambulance providers.3 This adds to the existing safe harbor, which applies to waivers relating to inpatient hospital services and certain federally qualified health center cost-sharing obligations. In addition, OIG expanded the safe harbor to include cost-sharing waivers for any federal health care program beneficiary, instead of merely Medicare and Medicaid.

Key conditions of the pharmacy cost-sharing waivers include:

  • Before waiving or reducing the cost-sharing, the pharmacy either makes a good faith determination that the beneficiary is in financial need or the pharmacy fails to collect the cost-sharing amount after making a reasonable effort to do so (except for patients receiving subsidies under the Public Health Service Act). OIG rulemaking commentary reiterated that pharmacies have flexibility to determine their own financial need criteria, so long as they are reasonable and uniformly applied.

  • The safe harbor also requires that the waiver may not be advertised or part of a solicitation and the pharmacy may not "routinely" waive or otherwise reduce cost-sharing.

  • OIG emphasized that the safe harbor is available only to waivers by pharmacies, rather than by health plans or physicians, for example.

Among other conditions, the safe harbor for state- or municipality-owned ambulance service cost-sharing requires that the reduction or waiver must be offered on a uniform basis to all of the ambulance provider or supplier’s residents or (if applicable) tribal members, or to all individuals transported.

Local Transportation

Two different types of free or discounted transport are protected—individual transport (as OIG informally calls "more personalized" transportation) and shuttle services—each regardless of financial need.4 The most significant aspect of the safe harbor is that it applies to all individuals and entities, except those that "primarily supply health care items," such as pharmaceutical manufacturers and DME suppliers. Thus, the safe harbor not only includes entities such as hospitals, health plans, and clinically integrated networks, but also laboratories and home health agencies, which OIG stated in the proposed rule that it was considering excluding from protection. The safe harbor for individual ("more personalized") transportation:

  • Is limited to transportation to obtain medically necessary items or services;

  • Applies to "established patients," on which OIG clarified that a patient can be "established" after he or she selects and initiates contact with a provider or supplier to schedule an appointment;

  • Includes a 25-mile limit (except for patients residing in rural areas, in which case a 50-mile limit applies); and

  • Prohibits marketing of the transportation service, marketing of other services during the transportation, and determining availability based on anticipated federal health care program business, consistent with the proposed rule.

Notably, the finalized safe harbor adds new protection for "shuttle services" on fixed routes and schedules, that is not limited to assistance in obtaining health care services and is not limited to established patients.

  • For example, under this protection, an entity protected by the safe harbor (or its contractors) could operate a shuttle that stops at the grocery store and public transportation depots, if the other requirements are satisfied.

  • The "shuttle service" safe harbor applies to the same parties as the "more personalized" transportation, has a 25-mile limit that applies to all stops along the route, and prohibits the marketing of the shuttle service (other than posting necessary details), among other conditions.

Other Safe Harbors
  • OIG adopted a safe harbor for drug discounts based on participation in the Medicare Coverage Gap Discount Program (the "Program"), to parallel the exception added by the ACA.5 On top of the statutory exception, OIG added the condition that the drug manufacturer must be in compliance with the requirements of the Program.

  • OIG added a safe harbor for arrangements between Medicare Advantage (MA) Organizations and Federally Qualified Health Centers.6

  • OIG amended the referral services safe harbor to reflect the condition that any fee charged to participants may not be based on the volume or value of referrals to either party (as opposed to referrals only to the referral service operator).7

New Beneficiary Inducement CMPL Exceptions

OIG finalized five regulatory exceptions to the beneficiary inducement provision of the CMPL, following up on corresponding exceptions added to the CMPL by statute. The CMPL applies only to remuneration that the person providing it knows or should know is likely to influence the selection of a particular provider, practitioner, or supplier, and thus does not apply to entities such as manufacturers in many circumstances.

Items or Services Promoting Access to Care with Low Risk of Harm

This exception interprets an exception added to the CMPL statute by the ACA, for any remuneration that promotes access to care and poses a low risk of harm to patients and Federal health care programs. The final rule does not offer specific requirements to satisfy each of these broad standards. Instead, it adopts general definitions of each concept that had been included in commentary to the proposed rule—though OIG stated its intent to "strictly interpret" the language of the exception.

  • "Promotes access to care" is interpreted as a regulatory requirement that the item or service "improves a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid[.]"8 To further illustrate this requirement, OIG noted that this might include things that help patients get access to care or make care more convenient, such as smart phone applications, transportation or lodging prior to a procedure, or covering child care expenses in certain circumstances. But, the exception would not include rewards for getting access to care or following a treatment protocol.

  • "Low risk of harm" is interpreted as:

(1) being unlikely to interfere with, or skew, clinical decision making;

(2) being unlikely to increase costs to federal health care programs or beneficiaries through overutilization or inappropriate utilization; and

(3) not raising patient safety or quality-of-care concerns.

Retailer Reward Programs

The second exception to the CMPL regulations is for coupons, rebates, or other rewards that are offered by a retailer to the general public regardless of health insurance status and that are not tied to provision of other items or services reimbursed under federal health care programs.

Remuneration for Financially Needy Individuals

The third exception to the CMPL regulations is for free or discounted items or services (not including cash or equivalents) given to a recipient who is "in financial need." As required under the statute, the final rule requires that there must be a reasonable connection between the items or services and the individual’s medical care (in a medical and financial sense), while simultaneously requiring that the free or discounted items or services may not be "tied" to other reimbursable items or services. In addition, as under the statute, the final rule requires that the items or services may not be offered as part of an advertisement or solicitation. OIG commentary addressed some key issues:

  • OIG believes medical professionals working with patients are in the best position to determine if an item or service is reasonably connected to the patient’s medical care, and emphasized the exception does not include items or services that are essentially for entertainment or other nonmedical purposes.

  • OIG also reiterated that for an item or service to qualify for the exception it cannot have a "disproportionately large value" compared with the medical benefit, but declined to provide a specific dollar amount to define when something is disproportionately large. As an example of disproportionate value, OIG cited an electronic tablet provided to a weight loss patient, equipped with a weight loss program application but also other functionalities.

Copayment Waivers for First Fill of Generic Drugs

The fourth exception to the CMPL regulations is for waivers by a Part D plan of patient copayments owed for the first fill of a covered generic drug. Under the final rule:

  • OIG expanded the definition of "generic drug" also to include "authorized generic drug" (as defined in FDA’s regulations at 21 C.F.R. § 314.3), instead of just "generic drug" (as defined in the Part D regulations at 42 C.F.R. § 423.4) as proposed.

  • OIG requires in the final rule that waivers must be included in the benefit design package submitted to the Centers for Medicare & Medicaid Services (CMS).

  • While the proposed rule stated this exception would be effective for coverage years beginning after publication of the final rule, because the final rule was published after the deadline for submission to CMS of benefit plan packages for coverage year 2017, this exception is not applicable until coverage years beginning on or after January 1, 2018.

Copayment Reductions for Hospital Outpatient Services

Consistent with the exception added to the CMPL statute by the Balanced Budget Act of 1997 (BBA), OIG finalized a fifth exception to the CMPL regulations for certain copayment reductions for covered outpatient services to not less than 20% of the Medicare outpatient department fee schedule amount.

Gainsharing CMP

OIG did not finalize its proposal related to gainsharing because approximately six months after the proposed rule was published, Congress passed the Medicare and CHIP Reauthorization Act of 2015 (MACRA), which amended the CMPL statute. Specifically, section 512(a) of MACRA amended the CMPL statute to prohibit payments only to reduce or limit "medically necessary" services. While section 512(a) of MACRA is self-implementing, OIG did note that it may codify the statutory text in its regulations in future rulemaking.

New CMPL Prohibitions

CMPL Provisions Added by the ACA

The final regulations codify a number of new prohibitions added by the ACA. While the conduct described in these provisions has been subject to penalties, assessments, and/or exclusion since the ACA’s enactment in 2010, the final regulations add substantive changes or interpretations to a few of the new CMPL provisions as noted below. The OIG may impose penalties, assessments, and/or exclusion for:

  • Failure to grant OIG timely access to records.

  • Ordering or prescribing while excluded from federal health care programs, when the excluded person knows or should know that the item or service may be paid for by a federal health care program.

  • Making false statements, omissions, or misrepresentations in an enrollment or similar bid or application to participate in a federal health care program.

    • OIG adds "omissions" to the statutory prohibition.

  • Failing to report and return a known overpayment.

    • OIG may impose CMPs of up to $10,000 for each claim that the person identified as an overpayment but did not report and return, rather than each day that the person fails to report and return the overpayment (as proposed).

    • OIG defines an "overpayment" using the definition in SSA § 1128J(d) ("any funds that a person receives or retains under title XVIII or title XIX to which the person, after applicable reconciliation, is not entitled under such title").

    • OIG declines to defer to CMS on enforcing the requirement to report and return overpayments and acknowledges the potential for duplicative enforcement but does not commit to coordinating with CMS.

  • Making or using a false record or statement that is material to a false or fraudulent claim.

CMPL Provisions Added by Other Statutes

The final regulations also codify three other CMPL provisions that were previously enacted under other self-implementing statutory authorities. OIG may impose penalties (but not assessments or exclusions) for:

  • Offering financial or other incentives to Medicare-eligible individuals not to enroll or to terminate enrollment in a group health plan that would be primary to Medicare;

  • Making false statements or misrepresentations in the sale of Medicare Supplemental (i.e., Medigap) policies, or issuing individual benefits that duplicate Medicare or Medicaid benefits; or

  • Failing to report or knowingly reporting false drug pricing information as required by SSA § 1927(b)(3)(A), or refusing to provide information or knowingly providing false information about charges or prices in connection with a survey being conducted under SSA § 1927(b)(3)(B). Such CMPs would be imposed for each day the required information is not provided, at the National Drug Code (NDC) level.

CMPL Enforcement Guidance and Penalties

Enforcement Factors

The final regulations provide new guidance on the factors that OIG will consider in determining whether it will impose a penalty, assessment, or exclusion for a specific violation, and the length of the exclusion or amount of the penalty or assessment imposed. While many of these factors are included in existing regulations, OIG has consolidated the regulations so that the same factors will apply to each violation under the CMPL regulations.

  • Nature and circumstances of the violation o OIG will consider it a mitigating factor when violations involve claims of less than $5,000 (increased from $1,000).

    • OIG will consider it a mitigating factor when violations involve claims of less than $5,000 (increased from $1,000)

    •  OIG will consider it an aggravating factor when violations involve claims of more than $50,000 (increased from the proposed threshold of $15,000; the former rules simply said “substantial” amounts at issue would be an aggravating factor).

  • Degree of culpability of the person

    • OIG will consider actual knowledge to be an aggravating factor when some lesser intent is sufficient to prove a violation (e.g., the CMPL provision that prohibits claims for services that the person knows or should know were not provided as claimed).

    • However, having the lowest level of intent required to prove a violation will not be considered a mitigating factor.

    • OIG will consider self-disclosure through OIG’s Self-Disclosure Protocol or CMS’s Self-Referral Disclosure Protocol to be a mitigating factor if the individual or entity fully cooperates with OIG or CMS in resolving the violation.

    • However, returning overpayments, retraining employees, and conducting internal investigations will not, in themselves, be considered mitigating factors.

  • History of prior offenses or other wrongful conduct

    • OIG will consider the person’s or entity’s own prior offenses or wrongful conduct, but also prior offenses or wrongful conduct of any officer or managing employee of the entity at the time the violation occurred, or any person with an ownership or control interest at the time of the violation who knew or should have known of the violation.

  • Other matters as justice may require

    • OIG makes clear that the list of factors that it will consider is not limited to those specified in the regulations.

Penalties for Employing or Contracting with Excluded Persons

OIG does not finalize its proposal to impose penalties for employing or contracting with excluded persons who provide non-separately billable items or services based on the number of days the excluded person was employed or contracted. Rather, OIG will impose penalties based on each item or service provided, just as it does for separately billable items and services provided by excluded persons. The final regulations do not specify how OIG will identify each item or service when an excluded person provides items or services that are not separately billed. When imposing penalties for employing or contracting with excluded persons, OIG will not consider the salary or compensation paid to the excluded person, even though this is standard practice under OIG’s current Self-Disclosure Protocol.

Penalties for MA and Part D Organizations

The final regulations also codify new statutory provisions allowing OIG to impose penalties and assessments on MA and Part D organizations for:

  • Enrolling an individual without prior consent;

  • Transferring an enrollee from one plan to another without prior consent;

  • Transferring an enrollee solely for the purpose of earning a commission;

  • Failing to comply with applicable marketing restrictions; or

  • Employing or contracting with a person who engages in the conduct described above or in other conduct giving rise to CMPL liability for MA or Part D organizations.

  • The final rule clarifies that this provision is not limited to misconduct by agents but extends to misconduct by any employed or contracted provider or supplier.

Other CMPL Updates

The final regulations implement changes to the process for serving notice of intent to impose a penalty, assessment or exclusion by permitting service by any method authorized by Rule 4 of the Federal Rules of Civil Procedure. The final regulations also streamline provisions addressing penalties, assessments, and/or exclusions for:

  • Violations of the Emergency Medical Treatment and Labor Act (EMTALA), including by on-call physicians; and

  • Telemarketing that improperly uses the words, letters, symbols or emblems of HHS, CMS, Medicare, or Medicaid, including email and website violations.

If you have any questions or would like to discuss OIG’s final regulations, please contact one of the Hogan Lovells lawyers listed below.


Authored by Thomas Beimers, Jonathan Diesenhaus, Sheree Kanner, Craig Smith, Helen Trilling, Ronald Wisor, Eliza Andonova, Andrew Furlow, and David Thiess


1 81 Fed. Reg. 88,334 (Dec. 7, 2016) (addressing revisions to the CMPL regulations); 81 Fed. Reg. 88,368 (Dec. 7, 2016) (addressing safe harbors and beneficiary inducement exceptions). The corresponding proposed rules were issued on May 12, 2014 and October 1, 2014, which we discussed here and here. OIG has not yet finalized a corresponding rule addressing its exclusion authorities, proposed on May 9, 2014.
2 By existing statutory provisions, the new safe harbors will also apply to the Beneficiary Inducement CMP. 42 U.S.C. 1320a–7a(a)(6)(B).
3 42 C.F.R. § 1001.952(k).
4 42 C.F.R. § 1001.952(bb)
5 42 U.S.C. § 1320a–7b(b)(B)(3)(J); 42 C.F.R. § 1001.952(aa).
6 42 C.F.R. § 1001.952(z).
7 42 C.F.R. § 1001.952(f)(2).
8 OIG interpreted beneficiary to include either an individual or beneficiary population.
Thomas Beimers
Washington D.C.
Jonathan Diesenhaus
Washington, D.C.
Sheree Kanner
Washington, D.C.
Craig Smith
Helen Trilling
Senior Counsel
Washington, D.C.
Ronald Wisor
Washington D.C.
Eliza Andonova
Washington D.C.
David Thiess
Washington D.C.


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