[Federal Register Volume 81, Number 235 (Wednesday, December 7, 2016)]
[Rules and Regulations]
[Pages 88368-88409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28297]



[[Page 88367]]

Vol. 81

Wednesday,

No. 235

December 7, 2016

Part III





Department of Health and Human Services





-----------------------------------------------------------------------





Office of Inspector General





-----------------------------------------------------------------------





42 CFR Parts 1001 and 1003





 Medicare and State Health Care Programs: Fraud and Abuse; Revisions to 
the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary 
Penalty Rules Regarding Beneficiary Inducements; Final Rule

  Federal Register / Vol. 81 , No. 235 / Wednesday, December 7, 2016 / 
Rules and Regulations  

[[Page 88368]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Parts 1001 and 1003

RIN 0936-AA06


Medicare and State Health Care Programs: Fraud and Abuse; 
Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil 
Monetary Penalty Rules Regarding Beneficiary Inducements

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: In this final rule, OIG amends the safe harbors to the anti-
kickback statute by adding new safe harbors that protect certain 
payment practices and business arrangements from sanctions under the 
anti-kickback statute. The OIG also amends the civil monetary penalty 
(CMP) rules by codifying revisions to the definition of 
``remuneration,'' added by the Balanced Budget Act (BBA) of 1997 and 
the Patient Protection and Affordable Care Act, Public Law 111-148, 124 
Stat. 119 (2010), as amended by the Health Care and Education 
Reconciliation Act of 2010 (ACA). This rule updates the existing safe 
harbor regulations and enhances flexibility for providers and others to 
engage in health care business arrangements to improve efficiency and 
access to quality care while protecting programs and patients from 
fraud and abuse.

DATES: These regulations are effective on January 6, 2017.

FOR FURTHER INFORMATION CONTACT: Heather L. Westphal, Office of Counsel 
to the Inspector General, (202) 619-0335.

SUPPLEMENTARY INFORMATION: 

------------------------------------------------------------------------
     Social Security Act citation         United States Code citation
------------------------------------------------------------------------
1128.................................  42 U.S.C. 1320a-7.
1128A................................  42 U.S.C. 1320a-7a.
1128B................................  42 U.S.C. 1320a-7b.
1860D-14A............................  42 U.S.C. 1395w-114A.
1927.................................  42 U.S.C. 1396r-8.
1102.................................  42 U.S.C. 1302.
------------------------------------------------------------------------

Executive Summary

A. Purpose of the Regulatory Action

    The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) and ACA include exceptions to the anti-kickback statute, 
and the BBA of 1997 and ACA include exceptions to the definition of 
``remuneration'' under the civil monetary penalties law. The OIG is 
codifying those changes here. At the same time, OIG is finalizing 
additional changes to make technical corrections to an existing 
regulation and to add new safe harbors to the anti-kickback statute to 
protect certain services that the industry has expressed an interest in 
offering and that we believe could be, if properly structured and with 
appropriate safeguards, low risk to Federal health care programs.

B. Summary of the Major Provisions

1. Anti-Kickback Statute and Safe Harbors
    In this final rule, we amend 42 CFR 1001.952 by modifying certain 
existing safe harbors to the anti-kickback statute and by adding safe 
harbors that provide new protections or codify certain existing 
statutory protections. These changes include:
     A technical correction to the existing safe harbor for 
referral services;
     protection for certain cost-sharing waivers, including:
     pharmacy waivers of cost-sharing for financially needy 
beneficiaries; and
     waivers of cost-sharing for emergency ambulance services 
furnished by State- or municipality-owned ambulance services;
     protection for certain remuneration between Medicare 
Advantage (MA) organizations and federally qualified health centers 
(FQHCs);
     protection for discounts by manufacturers on drugs 
furnished to beneficiaries under the Medicare Coverage Gap Discount 
Program; and
     protection for free or discounted local transportation 
services that meet specified criteria.
2. Civil Monetary Penalty Authorities
    We amend the definition of ``remuneration'' in the CMP regulations 
at 42 CFR part 1003 by interpreting and incorporating certain statutory 
exceptions for:
     Copayment reductions for certain hospital outpatient 
department services;
     certain remuneration that poses a low risk of harm and 
promotes access to care;
     coupons, rebates, or other retailer reward programs that 
meet specified requirements;
     certain remuneration to financially needy individuals; and
     copayment waivers for the first fill of generic drugs.
    In addition, because the original language in the introductory 
paragraph of the definition of ``remuneration'' referred only to 
``coinsurance and deductible amounts,'' we have added the word 
``copayment'' for consistency with the other text that we proposed and 
are finalizing.

C. Costs and Benefits

    There are no significant costs associated with the regulatory 
revisions that would impose any mandates on State, local, or tribal 
governments or on the private sector.

I. Background

A. The Anti-Kickback Statute

    Section 1128B(b) of the Social Security Act (the Act), the anti-
kickback statute, provides criminal penalties for individuals or 
entities that knowingly and willfully offer, pay, solicit, or receive 
remuneration in order to induce or reward the referral of business 
reimbursable under Federal health care programs, as defined in section 
1128B(f) of the Act. The offense is classified as a felony and is 
punishable by fines of up to $25,000 and imprisonment for up to 5 
years. Violations may also result in the imposition of CMPs under 
section 1128A(a)(7) of the Act, program exclusion under section 
1128(b)(7) of the Act, and liability under the False Claims Act (31 
U.S.C. 3729-33).
    The types of remuneration covered specifically include, without 
limitation, kickbacks, bribes, and rebates, whether made directly or 
indirectly, overtly or covertly, in cash or in kind. In addition, 
prohibited conduct includes not only the payment of remuneration 
intended to induce or reward referrals of patients, but also the 
payment of remuneration intended to induce or reward 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 any Federal health care program.
    Because of the broad reach of the statute, concern was expressed 
that some relatively innocuous commercial arrangements were covered by 
the statute and, therefore, potentially subject to criminal 
prosecution. In response, Congress enacted section 14 of the Medicare 
and Medicaid Patient and Program Protection Act of 1987, Public Law 
100-93 (section 1128B(b)(3)(E) of the Act), which specifically requires 
the development and promulgation of regulations, the so-called safe 
harbor provisions, that would specify various payment and business 
practices that would not be treated as criminal offenses under the 
anti-kickback statute, even though they may potentially be

[[Page 88369]]

capable of inducing referrals of business under Federal health care 
programs. In authorizing the Department of Health and Human Services 
(Department or HHS) to protect certain arrangements and payment 
practices under the anti-kickback statute, Congress intended that the 
safe harbor regulations be updated periodically to reflect changing 
business practices and technologies in the health care industry.
    Section 205 of the Health Insurance Portability and Accountability 
Act of 1996, Public Law 104-191, established section 1128D of the Act, 
which includes criteria for modifying and establishing safe harbors. 
Specifically, section 1128D(a)(2) of the Act provides that, in 
modifying and establishing safe harbors, the Secretary of Health and 
Human Services (Secretary) may consider whether a specified payment 
practice may result in:
     An increase or decrease in access to health care services;
     an increase or decrease in the quality of health care 
services;
     an increase or decrease in patient freedom of choice among 
health care providers;
     an increase or decrease in competition among health care 
providers;
     an increase or decrease in the ability of health care 
facilities to provide services in medically underserved areas or to 
medically underserved populations;
     an increase or decrease in the cost to Federal health care 
programs;
     an increase or decrease in the potential overutilization 
of health care services;
     the existence or nonexistence of any potential financial 
benefit to a health care professional or provider, which benefit may 
vary depending on whether the health care professional or provider 
decides to order a health care item or service or arrange for a 
referral of health care items or services to a particular practitioner 
or provider;
     any other factors the Secretary deems appropriate in the 
interest of preventing fraud and abuse in Federal health care programs.
    Since July 29, 1991, we have published in the Federal Register a 
series of final regulations establishing safe harbors in various 
areas.\1\ These provisions have been developed ``to limit the reach of 
the statute somewhat by permitting certain non-abusive arrangements, 
while encouraging beneficial or innocuous arrangements.'' (56 FR 35952, 
35958 (July 29, 1991)). Many of the safe harbors create new exemptions, 
while other safe harbors interpret exceptions already promulgated by 
statute.
---------------------------------------------------------------------------

    \1\ 56 FR 35952 (July 29, 1991); 61 FR 2122 (Jan. 25, 1996); 64 
FR 63518 (Nov. 19, 1999); 64 FR 63504 (Nov. 19, 1999); 66 FR 62979 
(Dec. 4, 2001); 71 FR 45110 (Aug. 8, 2006); 72 FR 56632 (Oct. 4, 
2007); 78 FR 78751 (Dec. 27, 2013).
---------------------------------------------------------------------------

    Health care providers and others may voluntarily seek to comply 
with safe harbors so that they have the assurance that their business 
practices will not be subject to enforcement action under the anti-
kickback statute, the CMP provision for anti-kickback violations, or 
the program exclusion authority related to kickbacks. We note, however, 
that compliance with a safe harbor insulates an individual or entity 
from liability under the anti-kickback statute and the beneficiary 
inducements CMP \2\ only; individuals and entities remain responsible 
for complying with all other laws, regulations, and guidance that apply 
to their businesses.
---------------------------------------------------------------------------

    \2\ Pursuant to section 1128A(i)(6)(B), a practice permissible 
under the anti-kickback statute, whether through statutory exception 
or regulations issued by the Secretary, is also excepted from the 
beneficiary inducements CMP.
---------------------------------------------------------------------------

    Section 101 of the MMA added a new section 1860D to the Act, 
establishing the Part D prescription drug benefit in the Medicare 
program. Section 101(e) of the MMA amends section 1128B(b)(3) of the 
Act to permit pharmacies to waive or reduce cost-sharing imposed under 
Part D as long as specified conditions are met. In addition, section 
237 of the MMA added an exception to permit certain remuneration 
between MA organizations and FQHCs.
    The ACA also includes a number of provisions that could affect 
liability under the anti-kickback statute. Section 3301 of the ACA 
establishes the Medicare Coverage Gap Discount Program, codified at 
section 1860D-14A of the Act. Pursuant to this program, prescription 
drug manufacturers have entered into agreements with the Secretary to 
provide certain beneficiaries access to discounts on drugs at the point 
of sale. Section 3301(d) of the ACA amends the anti-kickback statute to 
protect the discounts provided for under the Medicare Coverage Gap 
Discount Program.
    In this final rule, we incorporate into our regulations safe 
harbors for payment and business practices permitted under the MMA and 
ACA, as well as new safe harbors pursuant to our authority under 
section 14 of the Medicare and Medicaid Patient and Protection Act of 
1987 to protect practices that we view as posing a low risk to Federal 
health care programs as long as specified conditions are met. We 
considered the factors cited by Congress in promulgating the safe 
harbors in this final rule. We believe the safe harbors in this rule 
further the goals of access, quality, patient choice, appropriate 
utilization, and competition, while protecting against increased costs, 
inappropriate steering of patients, and harms associated with 
inappropriate incentives tied to referrals.

B. Civil Monetary Penalty Authorities

1. Overview of OIG Civil Monetary Penalty Authorities
    In 1981, Congress enacted the CMP law, section 1128A of the Act, as 
one of several administrative remedies to combat fraud and abuse in 
Medicare and Medicaid. The law authorized the Secretary to impose 
penalties and assessments on persons who defrauded Medicare or Medicaid 
or engaged in certain other wrongful conduct. The CMP law also 
authorized the Secretary to exclude persons from Federal health care 
programs (as defined in section 1128B(f)(1) of the Act) and to direct 
the appropriate State agency to exclude the person from participating 
in any State health care programs (as defined in section 1128(h) of the 
Act). Congress later expanded the CMP law and the scope of exclusion to 
apply to all Federal health care programs, but the CMP applicable to 
beneficiary inducements remains limited to Medicare and State health 
care program beneficiaries. Since 1981, Congress has created various 
other CMP authorities covering numerous types of fraud and abuse.
2. The Definition of ``Remuneration''
    The BBA of 1997 and section 6402(d)(2)(B) of the ACA amended the 
definition of ``remuneration'' for purposes of the beneficiary 
inducements CMP at section 1128A(a)(5) of the Act, as discussed below. 
In this final rule, we are incorporating these changes into the 
definition of ``remuneration'' under Sec.  1003.110.

C. Summary of the 2014 Proposed Rulemaking

    On October 3, 2014, we published in the Federal Register (79 FR 
59717) a Notice of Proposed Rulemaking (Proposed Rule) setting forth 
certain proposed amendments to the safe harbors under the anti-kickback 
statute and proposed amendments to the CMP exceptions. With respect to 
the anti-kickback statute, we proposed a technical correction to the 
existing safe harbor for referral services; protection for certain 
cost-sharing waivers, including pharmacy waivers of cost-sharing for 
financially needy Medicare Part D beneficiaries and waivers of cost-

[[Page 88370]]

sharing for emergency ambulance services furnished by State- or 
municipality-owned ambulance services; protection for certain 
remuneration between MA organizations and FQHCs; protection for 
discounts by manufacturers on drugs furnished to beneficiaries under 
the Medicare Coverage Gap Discount Program; and protection for free or 
discounted local transportation services that meet specified criteria. 
With the exception of the proposed safe harbors for cost-sharing 
waivers for certain emergency ambulance services and for free or 
discounted local transportation, all of the proposed safe harbors 
already were statutory exceptions to the anti-kickback statute (or 
revisions to existing safe harbors). We proposed five new exceptions to 
the beneficiary inducements CMP related to copayment reductions for 
certain hospital outpatient department services; certain remuneration 
that poses a low risk of harm and promotes access to care; coupons, 
rebates, or other retailer reward programs that meet specified 
requirements; certain remuneration to financially needy individuals; 
and copayment waivers for the first fill of generic drugs. The latter 
four exceptions emanated from exceptions to the CMP included in the 
ACA, and some of them included multiple conditions.
    We solicited comments on interpretations of each of the anti-
kickback safe harbors and CMP exceptions to ensure that we protect low-
risk, beneficial arrangements without opening the door to abusive 
practices that increase costs or compromise patient choice or quality 
of care.
    In the Proposed Rule, we also proposed to add a regulation to 
reflect section 1128A(b) of the Act (the Gainsharing CMP). The 
Gainsharing CMP is a self-implementing law that, at the time we issued 
the Proposed Rule, prohibited hospitals and critical access hospitals 
(CAHs) from knowingly paying a physician to induce the physician ``to 
reduce or limit services'' provided to Medicare or Medicaid 
beneficiaries who are under the physician's direct care, and prohibited 
the physician from accepting such payments. As we have explained in 
various guidance documents over the years,\3\ the Gainsharing CMP 
prohibited payments to reduce or limit services, not only payments to 
reduce or limit ``medically necessary'' services. Without a change in 
the statute, we continued to believe that we could not read a 
``medically necessary'' element into the prohibition. However, in the 
Proposed Rule, we stated our intention to consider a narrower 
interpretation of the term ``reduce or limit services'' than we have 
previously held.
---------------------------------------------------------------------------

    \3\ See, e.g., the Special Advisory Bulletin titled 
``Gainsharing Arrangements and CMPs for Hospital Payments to 
Physicians to Reduce or Limit Services to Beneficiaries'', available 
at: https://oig.hhs.gov/fraud/docs/alertsandbulletins/gainsh.htm.
---------------------------------------------------------------------------

D. Summary of the Final Rulemaking

    In finalizing this rule, we are mindful of the impact of delivery 
system and payment reform on Federal health care programs and the 
changing relationships between providers in delivering better care, 
smarter spending, and improved health. Congress intended the safe 
harbors to evolve with changes in the health care system, and we 
believe this final rule balances additional flexibility for industry 
stakeholders to provide efficient, well-coordinated, patient-centered 
care with protections against fraud and abuse risks. We also believe 
this rule advances the needs of providers and patients in rural areas 
and expect that it will have a beneficial effect in promoting improved 
access to quality care in rural and other underserved areas. The 
transition from volume to value-based and patient-centered care 
requires new and changing business relationships among health care 
providers. Many of those new relationships do not implicate our 
statutes or may be structured to fit in existing exceptions and safe 
harbors, including those addressed in this final rule. We have taken 
changes in payment and delivery into account in this final rule. This 
final rule does not specifically address many emerging arrangements 
(though, as we note above, some of those arrangements can fit in 
existing protections). We intend to continue to monitor changes in the 
industry, technology, and clinical care and consider whether additional 
rulemaking is needed to foster high-quality, efficient, patient-
centered care. We will continue to seek stakeholder input as 
appropriate, and we will use our authorities, as appropriate, to 
promote arrangements that fulfill the goals of better care and smarter 
spending.
    Safe harbors and exceptions, along with advisory opinions, are 
long-standing tools for addressing the evolution of health care 
business arrangements under the fraud and abuse laws. More recently, 
Congress granted the Secretary limited authority to waive certain fraud 
and abuse laws under Title XI and XVIII of the Act as necessary to 
carry out and test new payment and delivery models and demonstration 
programs in Medicare and Medicaid. Specifically, under the ACA, the 
Secretary has such waiver authority for, among others, the Medicare 
Shared Savings Program (MSSP) pursuant to section 1899 of the Act and 
testing models under section 1115A of the Act.\4\ This waiver authority 
creates a new tool for addressing the application of the fraud and 
abuse laws to business arrangments in a changing health care landscape. 
Parties participating in these models may use available waivers, if all 
waiver conditions are met. Alternatively, they are free to look to any 
available safe harbors or CMP exceptions for protection of arrangements 
they may undertake. They would not need to comply with both sets of 
requirements.
---------------------------------------------------------------------------

    \4\ The waivers are posted on the CMS Web site, available at: 
https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Fraud-and-Abuse-Waivers.html.
---------------------------------------------------------------------------

    We are finalizing all of the anti-kickback statute safe harbors 
that we proposed, with certain modifications suggested by commenters. 
We also are finalizing all of the beneficiary inducement CMP exceptions 
that we proposed. Although we did not propose regulatory text in the 
Proposed Rule for the exception for remuneration that promotes access 
to care and poses a low risk of harm, we did propose and solicit 
comments on interpretations of the statutory terms ``promotes access to 
care'' and ``low risk of harm'' to programs and beneficiaries. We are 
finalizing these proposals as regulatory text, as explained in greater 
detail below. We also note that we are removing the ``or'' that 
previously appeared between the third and fourth exceptions, now that 
we are adding five exceptions to the end of the definition of 
``remuneration.''
    With respect to the Gainsharing CMP, approximately six months after 
the Proposed Rule was published, Congress amended the law. Congress 
passed the Medicare and CHIP Reauthorization Act of 2015 (MACRA) in 
April 2015. Section 512(a) of MACRA amended the language to insert the 
words ``medically necessary'' before ``services,'' so that now only 
payments to reduce or limit medically necessary services are prohibited 
by the law. Because of the amendment to the statute, we are not 
finalizing the regulation text, as proposed (nor are we finalizing the 
definition of ``hospital'' that we had proposed adding to section 
1003.101 (as proposed to be redesignated as section 1003.110) to 
complement the Gainsharing CMP proposal). We note that this statutory 
provision is self-implementing, and no regulatory action is required to 
make the change enacted

[[Page 88371]]

in MACRA effective. However, we may in the future codify the new 
statutory language in our regulations.

II. Summary of Public Comments and OIG Responses

A. General

    We received responsive comments from 88 distinct commenters, 
including, but not limited to, individuals, trade associations, 
providers, and suppliers. Many of these individuals and entities 
provided comments on multiple topics. Commenters generally supported 
our proposals, but many commenters recommended certain changes or 
requested certain clarifications. We have divided the public comment 
summaries and our responses into sections pertaining to the individual 
safe harbor or CMP exception to which they apply.

B. Anti-Kickback Statute and Safe Harbors

1. Referral Services
    We proposed to make a technical correction to the safe harbor for 
referral services, found at 42 CFR 1001.952(f). In 1999, we finalized a 
modification to the language of the safe harbor to clarify that the 
safe harbor precludes protection for payments from participants to 
referral services that are based on the volume or value of referrals 
to, or business otherwise generated by, either party for the other 
party. See 64 FR 63518, 63526 (Nov. 19, 1999). During subsequent 
revisions to the safe harbor by which we intended to make a technical 
correction clarifying that OIG's exclusion authority applied to all 
Federal health care programs rather than only to Medicare and State 
health care programs, the language in Sec.  1001.952(f)(2) 
inadvertently was changed to ``* * * or business otherwise generated by 
either party for the referral service * * *.'' See 67 FR 11928, 11929 
and 11934 (Mar. 18, 2002). Therefore, we proposed to make a technical 
correction and revert to the language in the 1999 final rule cited 
above. We received no comments on this proposal and intend to make the 
proposed revision in this Final Rule.
    Comment: We received one comment on a different aspect of this safe 
harbor. A commenter recommended that OIG modernize the safe harbor to 
permit the use of online, Internet-based tools, as these are the more 
common modes of communication and can better promote quality patient 
care.
    Response: The commenter's request is outside the scope of this 
rulemaking. We note, however, that the safe harbor does not exclude the 
use of online tools. Should we determine in the future that online 
referral sources need additional or different protection, we may 
consider revisions to the safe harbor to further facilitate the use of 
these tools at that time.
2. Cost-Sharing Waivers
    While reiterating our concerns about potentially abusive waivers of 
cost-sharing amounts under the anti-kickback statute, in the Proposed 
Rule, we proposed to modify Sec.  1001.952(k) by adding two new 
subparagraphs to protect certain cost-sharing waivers that pose a low 
risk of harm and make technical corrections to the introductory 
language to account for new subparagraphs. We also noted that 
subsection (k) is limited to reductions or waivers of Medicare and 
State health care program beneficiary cost-sharing and solicited 
comments about expanding this safe harbor to protect waivers under all 
Federal health care programs, if applicable, and subject to terms of 
each type of cost-sharing waiver in subsection (k).
    Comment: Several commenters supported the expansion of the safe 
harbor in subsection (k) of Sec.  1001.952 to protect waivers of cost-
sharing obligations for all Federal health care programs. One commenter 
stated that this expansion would increase patient access to care, 
treatment, and therapy.
    Response: We believe that expanding the scope of subsection (k) to 
all Federal health care programs, if applicable, is appropriate. We 
note that subsection (k) protects waivers of specific types of cost-
sharing, some of which cannot be read to apply to all Federal health 
care programs. For example, subparagraph (k)(1) protects only cost-
sharing waivers for inpatient hospital services paid on a prospective 
payment system. Thus, it would protect waivers of cost-sharing of that 
type, but the safe harbor might not apply to all Federal health care 
programs due to varying methods of payment. To make this and the change 
described below, we are republishing subparagraph (k) in its entirety.
    Comment: A commenter requested that we change the language in the 
first sentence of subparagraph (k) from ``coinsurance or deductible'' 
to ``copayment, coinsurance, or deductible.''
    Response: We had proposed to make certain technical corrections to 
this introductory paragraph to account for the new subparagraphs we 
proposed to add. Given that we proposed to include the language 
suggested by the commenter in new subparagraph (k)(3) regarding waivers 
of Part D cost-sharing, we believe it is reasonable to include this 
change in the introductory paragraph as well. We have revised the 
language accordingly in this final rule.
a. Part D Cost-Sharing Waivers
    In the Proposed Rule, we proposed a new paragraph at Sec.  
1001.952(k)(3) reflecting an exception to the anti-kickback statute at 
section 1128B(b)(3)(G) of the Act, which was added by section 101 of 
the MMA. Consistent with the statute, we proposed language that would 
protect a pharmacy waiving Part D cost-sharing if: (1) The waiver or 
reduction is not advertised or part of a solicitation; (2) the pharmacy 
does not routinely waive or reduce the cost-sharing; and (3) before 
waiving or reducing the cost-sharing, the pharmacy either determines in 
good faith 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. If, however, the waiver or reduction of cost-sharing 
is made on behalf of a subsidy-eligible individual (as defined in 
section 1860D-14(a)(3) of the Act), then conditions (2) and (3) above 
are not required. Because the statute incorporates by reference the 
three conditions stated above from section 1128A(i)(6)(A) of the Act, 
we proposed to interpret those conditions consistent with our 
regulations incorporating them in paragraph (1) of the definition of 
``remuneration'' at 42 CFR 1003.110. We also cautioned providers, 
practitioners, and suppliers that safe harbors protect individuals and 
entities from liability only under the anti-kickback statute and the 
beneficiary inducements CMP, and that they still must comply with other 
laws, regulations, and Centers for Medicare and Medicaid Services (CMS) 
program rules.
Scope of Safe Harbor
    Comment: Two commenters requested that the safe harbor for waivers 
or reductions of Part D cost-sharing obligations by pharmacies be 
expanded to the Medicaid program. These commenters noted that expanding 
the safe harbor to Medicaid beneficiaries would benefit low-income 
patients who often cannot obtain needed health care services because 
they cannot afford their cost-sharing obligations.
    Response: Because we have expanded subsection (k) to apply to all 
Federal health care programs, where applicable, we have determined that 
it is appropriate to expand this paragraph as well. Thus, we are not 
limiting the safe harbor to waivers of Part D cost-sharing. However, we 
emphasize that this is a safe harbor applicable to pharmacies and does 
not protect, for example, waivers by physicians for copayments

[[Page 88372]]

for Part B drugs. In addition, we are retaining the statutory 
requirement that pharmacies seeking to rely on this safe harbor may 
forego the individualized financial need assessment only for subsidy-
eligible individuals (as defined in section 1860D-14(a)(3) of the Act).
    Comment: One commenter suggested that the proposed safe harbor is 
more restrictive than the statutory exception. The commenter requested 
that we expand the safe harbor for waivers of cost-sharing obligations 
for covered supplies under Part B and for cost-sharing obligations for 
items and services imposed under Part C. The commenter stated that we 
have the statutory authority to apply the safe harbor beyond Part D, 
and asserted that by limiting the safe harbor to Part D plans we would 
create a competitive disadvantage for MA plans who cannot offer the 
same ``cost-saving programs.''
    Response: We respectfully disagree that the safe harbor that we 
proposed was more restrictive than the statutory exception; the 
language of the proposed safe harbor was entirely consistent with the 
statutory exception. Nevertheless, as we explained above, we are 
finalizing a safe harbor that protects reductions or waivers by 
pharmacies of Federal health care program cost-sharing, rather than 
limiting the protection to waivers of Part D cost-sharing, as long as 
all requirements of the safe harbor are met.
    In addition, we note that this safe harbor is not applicable to 
anything characterized as a ``cost-saving program'' as we understand 
the term. This safe harbor permits pharmacies to waive cost-sharing on 
an unadvertised, nonroutine basis after an individualized determination 
of financial need (or a failure to collect after reasonable collection 
efforts). It is not meant to, and would not, protect waivers that are 
advertised as part of a ``program'' to waive copayments. Finally, the 
safe harbor protects waivers given at the pharmacy level, not the plan 
level. Thus, there should be no effect on competition among plans. The 
safe harbor does not affect the ability of Part D plan sponsors, MA 
organizations offering Medicare Advantage prescription drug (MA-PD) 
plans, or other plans to reduce beneficiary cost-sharing obligations as 
a matter of plan design, nor does it affect their ability to share the 
cost of such reductions with pharmacies through negotiation of drug 
prices.
    Comment: One commenter suggested that we expand the safe harbor to 
permit MA plans and pharmacies to develop joint cost-sharing waiver 
initiatives for dual-eligible beneficiaries and that we allow these 
waivers for dual-eligible beneficiaries to be routine and advertised. 
The commenter asserted that its proposed expansion of the safe harbor 
would be at little or no cost to Federal health care programs.
    Response: We decline to accept the commenter's suggestion. The 
statute expressly states that the waivers cannot be advertised, even 
for the lowest-income patients. However, as also explained above, MA 
plans and pharmacies are free to negotiate reduced cost-sharing as part 
of benefit designs, and MA plans are free to market plan benefits 
consistent with CMS marketing guidelines.
    Comment: One commenter asserted that the regulatory safe harbor 
does not match the scope of the statute and suggested we broaden the 
safe harbor to implement congressional intent.
    Response: As explained above, despite the fact that we believe the 
proposed safe harbor was consistent with the statutory language, we 
have expanded protection in this final rule to include waivers by 
pharmacies under all Federal health care programs, as long as the 
waivers meet all elements of the safe harbor.
Advertising
    Comment: One commenter expressed concern that the proposed 
restrictions on advertising and solicitation violate pharmacies' First 
Amendment rights to free speech, and asserted that these restrictions 
therefore should be eliminated. As an alternative, the commenter 
recommended that OIG impose no more than the least restrictive limits 
on pharmacies' free speech that are necessary to advance a substantial 
government interest.
    Response: The regulatory safe harbor finalized in this final rule 
is intended to be consistent with subparagraph (G) added to section 
1128B(b)(3) of the Act by the MMA. Section 1128B(b)(3)(G) of the Act 
cites to the conditions specified in clauses (i) through (iii) of 
section 1128A(i)(6)(A) of the Act. In turn, clause (i) requires that 
the waiver or reduction of any cost-sharing obligation not be offered 
as part of any advertisement or solicitation. This prohibition on 
advertising of covered incentives, waivers, or other item or service 
has been in the statute since it was enacted in the Health Insurance 
Portability and Accountability Act of 1996. The safe harbor is 
consistent with the statutory exception, and we cannot ignore the 
conditions that Congress explicitly included. Moreover, we do not 
believe that the restriction on advertising, as a condition of an 
exception to a statutory provision, is unconstitutional. The exception 
does not require or prohibit any conduct. Advertising would not violate 
the anti-kickback statute by itself; any programs that are advertised 
simply would not be eligible for protection under the exception and 
would be subject to a case-by-case review under the anti-kickback 
statute. As explained elsewhere in this rulemaking, our interpretation 
of the statutory prohibition on advertising is no broader than 
necessary to preclude communications that create a high risk of abusive 
steering arrangements under the fraud and abuse laws.
    Comment: Several commenters that represent entities such as health 
centers designated by CMS as FQHCs assert that these types of FQHCs are 
required by section 330 of the Public Health Service Act to offer a 
schedule of fees or payments for the provision of their services as 
well as a corresponding schedule of discounts, which apply on the basis 
of a patient's ability to pay. In addition, according to the 
commenters, the Health Resources and Services Administration (HRSA), 
which administers the Health Center Program, requires these health 
centers (designated by CMS as FQHCs) to use multiple methods (e.g., 
signage and registration processes) to inform patients of the sliding 
fee discount programs. These commenters are concerned that certain 
activities that are necessary to meet these notification requirements 
could be construed as advertising, which would exclude these entities 
from protection under the safe harbor. The commenters suggest 
clarifying that communications about a FQHC's sliding fee discount 
program are not an advertisement or solicitation of Part D cost-sharing 
waivers for purposes of the safe harbor.
    Response: We understand HRSA obligates health centers to make 
patients aware of their sliding fee discount programs, and such 
communications would not constitute advertising for the purpose of this 
rule. However, depending where a patient falls on the sliding scale, he 
or she often still will have a copayment for items or services received 
at the FQHC. A FQHC would not need to avail itself of this safe harbor 
for waiving a pharmacy copayment unless it waives the amount that the 
patient would have been obligated to pay according to the FQHC's 
sliding scale. That potential waiver would not be protected by the safe 
harbor if it were advertised.
    Comment: Three organizations focused on access to health care for 
Alaska Natives and American Indians asserted that the restriction on 
advertisements prohibits providers from informing low-income patients 
and/or rural patients about affordable health

[[Page 88373]]

care options while they are receiving care at a health care facility. 
According to the commenters, these patients are difficult to contact 
because they are geographically isolated, elderly, and have limited 
means of communication, and these patients oftentimes are more likely 
to forgo services they cannot afford. To address their concerns, the 
commenters requested that OIG amend the regulation to exclude the 
following materials from the terms ``advertisement'' and 
``solicitation'' for all patients: (1) Information given by a provider 
to a patient in person; (2) a notice of patient rights on provider Web 
sites related to charity care or similar opportunities; and (3) any 
information transmitted directly to a patient as part of a reminder of 
upcoming appointments or a statement of benefits and coverage.
    Response: Although we appreciate the commenters' concerns, we 
decline to adopt their suggested language narrowing the scope of the 
terms ``advertisement'' and ``solicitation.'' We agree that it is 
important for patients to receive information about their health care 
options, and that not all information provided to beneficiaries is 
advertising or solicitation. Stakeholders should interpret the terms 
``advertisement'' and ``solicitation'' consistent with their common 
usage in the health care industry. This particular safe harbor relates 
to cost-sharing waivers by pharmacies. Information posted on Web sites 
regarding such waivers offered by pharmacies generally would be 
advertising, while responding to an inquiry from, or discussing 
financial need with, a particular patient in person generally would not 
be. However, whether a particular means of communication constitutes an 
advertisement or solicitation will depend on the facts and 
circumstances.
``Routine'' Waivers
    Comment: One commenter asked us to confirm that a pharmacy does not 
routinely waive cost-sharing obligations as long as the pharmacy does 
not automatically waive cost-sharing amounts for beneficiaries of 
government programs. The same commenter also recommended that OIG 
exclude any waivers provided to private-pay patients and subsidy-
eligible individuals in assessing whether a pharmacy routinely waives 
cost-sharing obligations. Finally, the commenter suggested that OIG 
provide flexibility for pharmacies when they establish protocols for 
employees to use in determining whether a cost-sharing waiver is 
appropriate. Three commenters asked for clarification as to what 
constitutes ``routine'' waivers of Part D cost-sharing obligations in 
the context of FQHCs. According to these commenters, waivers or 
reductions in cost-sharing obligations under Part D frequently occur at 
FQHCs because of the low-income populations served at these facilities.
    Response: In the Proposed Rule, we explained that we would 
interpret the conditions in section 1128A(i)(6)(A) of the Act 
consistent with the regulations interpreting these conditions in 
paragraph (1) of the definition of ``remuneration'' at Sec.  1003.110. 
Stakeholders would be well advised to review our guidance on routine 
waivers of cost-sharing obligations,\5\ as well as our guidance on the 
same condition in the first exception to the definition of remuneration 
at Sec.  1003.110.\6\ First, we do not confirm the commenter's 
suggestion that waivers are not routine unless they are ``automatic.'' 
We believe that a waiver or reduction could be common enough to be 
``routine'' without being automatic. We decline to adopt the 
commenter's recommendation to define whether waivers of cost-sharing 
obligations for private-pay patients and subsidy-eligible individuals 
count in analyzing whether a pharmacy is routinely waiving Federal 
health care program cost-sharing obligations. Because of the different 
makeups of different communities, we do not believe it is appropriate 
to assign a specific number or percentage of patients to the concept of 
``routine.'' While we agree that safe harbor protection would not be 
denied on the basis of waiving cost-sharing for privately insured or 
subsidy-eligible patients, if those waivers were advertised as, for 
example, ``insurance accepted as payment in full,'' then such a program 
would be suspect. We note, however, that waivers offered to subsidy-
eligible patients are exempt from the prohibition against offering 
routine waivers. This safe harbor sets forth the conditions pharmacies 
must satisfy to qualify for protection when waiving copayments; we are 
not mandating (or prohibiting) protocols pharmacies may develop to meet 
those conditions. Whether a pharmacy waives cost-sharing obligations 
routinely, and thus fails to satisfy a requirement of the safe harbor, 
depends on the facts and circumstances. We address waivers by FQHCs in 
response to a more specific comment above.
---------------------------------------------------------------------------

    \5\ See, e.g., Special Fraud Alert, 59 FR 65372 (Dec. 19, 1994), 
available at https://oig.hhs.gov/fraud/docs/alertsandbulletins/121994.html.
    \6\ 65 FR 24400, 24404 (Apr. 26, 2000).
---------------------------------------------------------------------------

Financial Need Assessments
    Comment: A commenter recommended that OIG provide pharmacies with a 
uniform, objective standard of financial need to use in meeting the 
requirement that pharmacies determine in good faith that a beneficiary 
has a financial need. The commenter requested that we require 
pharmacies to verify the beneficiary's income (e.g., by reviewing wage 
statements) prior to waiving his or her Part D cost-sharing 
obligations. Another commenter requested guidance from OIG as to the 
methods pharmacies may use to make good faith determinations that 
individuals are in financial need. According to this commenter, 
individual assessments are not practical because of the volume of 
prescriptions that pharmacies dispense, and the commenter asserted that 
the cost of these individualized assessments would oftentimes be 
greater than the copayment amount to be waived. For purposes of this 
safe harbor, the commenter suggested that OIG allow pharmacies to 
accept as true a patient's statement that he or she is in financial 
need. Three commenters asked that we confirm that a FQHC's annual 
assessment of an individual's eligibility for its sliding fee discount 
program would meet the safe harbor's requirement to make a good faith 
determination of financial need.
    Response: This safe harbor incorporates conditions (i) through 
(iii) of section 1128A(i)(6)(A) of the Act, and in the Proposed Rule we 
proposed to interpret them consistent with the regulations interpreting 
these conditions in paragraph (1) of the definition of ``remuneration'' 
at Sec.  1003.110. When we finalized that definition, commenters 
requested guidance as to what constitutes ``financial need,'' and we 
made the following observations:

    We are not specifying any particular method of determining 
financial need because we believe what constitutes ``financial 
need'' varies depending on the circumstances. What is important is 
that providers make determinations of financial need on a good 
faith, individualized, case-by-case basis in accordance with a 
reasonable set of income guidelines uniformly applied in all cases. 
The guidelines should be based on objective criteria and appropriate 
for the applicable locality. We do not believe that it is 
appropriate to apply inflated income guidelines that result in 
waivers of copayments for persons not in genuine financial need.

65 FR 24404 (Apr. 26, 2000). This guidance applies equally to the same 
requirement in this safe harbor. We decline to mandate specific 
guidelines, in part, to permit pharmacies the

[[Page 88374]]

flexibility to determine an appropriate method for their patient 
population and for their business. By way of example only, one pharmacy 
might choose to apply a multiple of the poverty guidelines, which take 
into account family size, for determining financial need, while another 
pharmacy might prefer to take into account a combination of the poverty 
guidelines, adjusted for the cost of living in the pharmacy's locality, 
plus family medical expenses. We emphasize, however, whatever guideline 
is applied by the pharmacy must be reasonable and applied uniformly. If 
an entity, such as a FQHC, conducts annual assessments of financial 
need that are performed on a ``good faith, individualized, case-by-case 
basis in accordance with a reasonable set of income guidelines 
uniformly applied in all cases,'' then the entity would not need to 
perform a second assessment to meet this criterion of the safe harbor. 
Finally, we find it unlikely that the commenter's suggestion that 
pharmacies that simply accept as true a patient's statement that he or 
she is in financial need would meet the criteria of an individualized, 
good faith determination that the patient is in financial need. We 
understand that there is a cost involved in performing a financial need 
assessment. We note that pharmacies are not required to waive 
copayments, nor are they required to perform financial need assessments 
for subsidy-eligible individuals. For all beneficiaries for whom the 
pharmacy desires to waive a copayment and be protected by this safe 
harbor, performing a financial need assessment is an important 
safeguard. A pharmacy might do this by verifying each applicant's 
financial resources through information provided by a third party 
service, collecting documentation of financial need from the applicant 
(e.g., pay stubs, tax forms, or evidence of other expenses), or some 
combination thereof. While we are not requiring any specific 
documentation of financial need, we do expect that entities offering 
these reductions or waivers would do so in accordance with a set policy 
that is reasonable and uniformly applied. Moreover, if an entity were 
under investigation and asserted this exception as a defense, it would 
have to be able to demonstrate compliance with the requirement to make 
an individualized, good faith determination of financial need. A 
written policy describing the reasonable standards and procedures used 
for establishing financial need, together with evidence that this 
written policy was followed, would be useful in making such a 
demonstration.
Reasonable Collection Efforts
    Comment: Under the second option in subsection (3)(ii)(B) of the 
safe harbor, a pharmacy must fail to collect the copayment, 
coinsurance, or deductible after making reasonable collection efforts. 
One commenter asserted that the `` reasonable collection efforts'' 
standard should account for the fact that many cost-sharing obligations 
are small and the costs associated with collection efforts would exceed 
the amount owed by the beneficiary. The commenter suggested that 
pharmacies be able to forgo collection efforts and still meet this 
condition of the safe harbor if the beneficiary has a ``smaller than 
average'' cost-sharing amount or when past collection efforts indicate 
the costs of collection efforts are greater than the projected recovery 
amounts.
    Response: Like the requirement for a pharmacy to conduct a good 
faith determination of a beneficiary's financial need, we indicated 
that we would interpret the reasonable collection efforts requirement 
consistent with our regulations interpreting that same condition in 
paragraph (1) of the definition of ``remuneration'' at Sec.  1003.110. 
In previous guidance on this condition, we stated that `` `reasonable 
collection efforts' are those efforts that a reasonable provider would 
undertake to collect amounts owed for items and services provided to 
patients.'' 65 FR 24404 (Apr. 26, 2000). In other contexts, we also 
have cited to the CMS Provider Reimbursement Manual's description of 
``reasonable collection efforts,'' which requires providers to issue a 
bill for the patient's financial obligations, and also includes: 
``other actions such as subsequent billings, collection letters and 
telephone calls or personal contacts with this party which constitute a 
genuine, rather than a token, collection effort.'' \7\ These concepts 
apply to this new safe harbor. We note that we cannot envision a 
scenario in which a preemptive decision by a pharmacy not to request 
payment from a patient (in the absence of a determination of financial 
need) or pursue any collection efforts could meet this condition. The 
amount of the copayment or historical inability to collect cost-sharing 
amounts for a particular beneficiary might be factors that are 
considered in determining what reasonable collection efforts are, but 
they do not justify forgoing all collection efforts.
---------------------------------------------------------------------------

    \7\ See Provider Reimbursement Manal (CMS Pub. 15-1) Sec.  310.
---------------------------------------------------------------------------

    Comment: According to three commenters, Indian Health Service (IHS) 
facilities are statutorily prohibited from charging cost-sharing 
amounts to Alaska Natives and American Indians, and the commenters 
further state that tribal health programs do not charge any cost-
sharing amounts to Alaska Natives and American Indians ``on 
principle.'' These commenters are concerned that creating a narrow safe 
harbor for pharmacies (and for ambulance services in subsection (4)) to 
waive or reduce cost-sharing obligations implies that tribal health 
programs are violating the Federal anti-kickback statute if they waive 
cost-sharing obligations for Alaska Natives and American Indians in 
other situations. The commenters requested that OIG include language in 
the safe harbor that would permit facilities operated by IHS, an Indian 
tribe, a tribal organization, or an urban Indian organization to waive 
cost-sharing amounts for any individual eligible to receive services 
from IHS and still comply with the Federal anti-kickback statute.
    Response: The language requested by the commenters regarding cost-
sharing waivers for other services is outside the scope of this 
rulemaking. This safe harbor is limited to implementing the exception 
in subparagraph (G) of section 1128B(b)(3) of the Act, which includes 
waivers or reductions of cost-sharing obligations imposed by pharmacies 
of IHS, Indian tribes, tribal organizations, and urban Indian 
organizations. We note, however, that if an entity is statutorily 
prohibited from collecting a copayment from a particular patient, there 
is no copayment to be ``waived'' and thus no protection needed for a 
copayment waiver.
    Comment: A commenter requested clarification that Sec.  
1001.952(k)(3) applies to reductions of cost-sharing obligations, not 
just waivers.
    Response: We agree with the commenter that subsection (3) applies 
to waivers or reductions of copayments, coinsurance, or deductible 
amounts, and we have revised the text accordingly.
b. Cost-Sharing Reductions or Waivers for Emergency Ambulance Services
    We proposed to establish a safe harbor to protect reductions or 
waivers of cost-sharing owed for emergency ambulance services for which 
Medicare pays under a fee-for-service payment system and meets the 
following conditions: (1) The ambulance provider or supplier is owned 
and operated by a State, a political subdivision of a State, or a 
federally recognized Indian tribe; (2) the ambulance provider or 
supplier is the

[[Page 88375]]

Medicare Part B provider or supplier of the emergency ambulance 
services; (3) the reduction or waiver is not considered the furnishing 
of free services paid for directly or indirectly by a government 
entity; (4) the ambulance provider or supplier offers the reduction or 
waiver on a uniform basis, without regard to patient-specific factors; 
and (5) the ambulance provider or supplier does not later claim the 
amount reduced or waived as bad debt or otherwise shift the burden to 
Medicare, a State health care program, other payers, or individuals. We 
solicited comments on these criteria and related issues. We are 
finalizing certain aspects of the rule as we proposed it, but we are 
making certain modifications in response to comments that we received.
Owned and Operated by the State
    We proposed to require that the ambulance provider or supplier be 
owned and operated by a State, a political subdivision of a State, or a 
federally recognized Indian tribe \8\ and be the Medicare Part B 
provider or supplier of the emergency ambulance services. We also 
proposed to limit the safe harbor protection to situations in which a 
provider's or supplier's reduction or waiver of cost-sharing amounts is 
not considered to be the furnishing of services paid for directly or 
indirectly by a government entity,\9\ subject to applicable exceptions 
promulgated by CMS. We solicited comments on these conditions.
---------------------------------------------------------------------------

    \8\ Section 104 of the Federally Recognized Indian Tribe List 
Act of 1994, Public Law 103-454, 108 Stat. 4791, requires the 
Secretary to publish a list of all federally recognized Indian 
tribes on an annual basis.
    \9\ See 42 CFR 411.8.
---------------------------------------------------------------------------

    Comment: Two commenters noted that the proposed waiver excluded 
ambulance services operated by tribal organizations authorized by 
federally recognized Indian tribes to carry out health programs on 
their behalf. The commenters stated that the Indian Self-Determination 
and Education Assistance Act (ISDEAA) permits Indian tribes to 
authorize tribal organizations and inter-tribal consortiums to carry 
out ISDEAA functions, which can include ambulance services. The 
commenters noted that tribal health organizations might be the only 
ambulance providers or suppliers in a tribal area. Thus, the commenters 
recommended using the phrase ``tribal health program, as that term is 
defined in section 4 of the Indian Health Care Improvement Act'' (25 
U.S.C. 1603) instead of ``federally recognized Indian tribe.''
    Response: We are accepting the commenter's recommendation and have 
revised the text accordingly. The ambulance services described by the 
commenters are the type that we intended to protect when we proposed to 
protect ambulance providers or suppliers owned and operated by a 
federally recognized Indian tribe.
    Comment: Some commenters requested that we expand the safe harbor 
to include nongovernmental ambulance providers or suppliers under 
certain conditions. Some commenters requested that we protect 
nongovernmental ambulance providers or suppliers when they contract 
with a State or municipality, and the State or municipality pays the 
cost-sharing amounts otherwise due from beneficiaries to the ambulance 
company through an actuarially determined amount of the residents' tax 
revenues. Another commenter asked us to protect nonprofit ambulance 
companies that otherwise comply with the safe harbor if they operate a 
waiver program under which beneficiaries pay an annual subscription fee 
that reasonably approximates what the ambulance company would have 
collected in cost-sharing amounts from subscribers. Another commenter 
requested that we protect hospital ambulance services that provide 
emergency transports.
    Response: We are finalizing our requirement (with the amendment 
discussed above) that protects only ambulance providers and suppliers 
owned and operated by a State, a political subdivision of a State, or 
tribal health program, as that term is defined in section 4 of the 
Indian Health Care Improvement Act. As we explained in the preamble to 
the Proposed Rule, municipalities cannot contract with private 
ambulance companies and require them to waive their residents' cost-
sharing. However, when a State or municipality contracts with a private 
ambulance company, and the State or municipality uses its residents' 
tax dollars to pay the ambulance company an amount that is actuarially 
equivalent to the residents' copayments, the anti-kickback statute 
would not be implicated. For an example of such an arrangement, please 
see OIG Advisory Opinion No. 13-11. If the anti-kickback statute is not 
implicated, no safe harbor is necessary. Subscription arrangements 
referenced by the other commenter are distinct from arrangements in 
which the State or municipality pays the ambulance company. We believe 
that these arrangements should be subject to a case-by-case 
determination, rather than protected by a safe harbor. Moreover, we did 
not contemplate these arrangements in the Proposed Rule and therefore 
could not finalize any regulatory text to protect them, even if we 
believed they should be protected. Likewise, we did not propose to 
protect waiver of cost-sharing by hospital-operated ambulance services.
Not Furnishing Free Services
    We proposed to include a requirement that the reduction or waiver 
not be considered the furnishing of free services paid for directly or 
indirectly by a government entity. We explained that items or services 
that are paid for directly or indirectly by a government entity 
generally are not reimbursable by Medicare. CMS has a policy holding 
that State or local government facilities (including ambulance 
providers or suppliers) that reduce or waive charges for patients 
unable to pay, or charge patients only up to their Medicare and other 
health insurance coverage, are not considered to be providing free 
services. We proposed to incorporate this condition into the safe 
harbor. In response to the following comment, we are modifying this 
condition.
    Comment: One commenter suggested that we eliminate the condition 
related to the waiver not constituting free services paid for by a 
government entity. The commenter gave several reasons for this 
recommendation, including the commenter's belief that inclusion of the 
requirement is superfluous, that ambulance providers and suppliers 
should not have to review authority quoted in other sources (such as 
advisory opinions) to interpret a rule, and that the language is vague.
    Response: We agree with the commenter's recommendation to an 
extent, but we reach our conclusion for different reasons. As the 
commenter correctly states, several of our advisory opinions regarding 
ambulance cost-sharing waivers include the cited language from CMS 
guidance. In the context of an advisory opinion, we generally are 
analyzing an arrangement that potentially implicates a fraud and abuse 
statute, such as the anti-kickback statute, but may not fit into an 
exception or safe harbor. As we stated in one such opinion, OIG 
Advisory Opinion No. 06-07, ``since Medicare would not require the 
Municipal Ambulance Provider to collect cost-sharing amounts from 
municipal residents, we would not impose sanctions under the anti-
kickback statute where the cost-sharing waiver is implemented by the 
Municipal Ambulance Provider categorically for bona fide residents of 
the Municipality.'' In other words, we relied on CMS guidance to ensure 
that the arrangement we approved was low

[[Page 88376]]

risk. In the context of a safe harbor, however, while we need not rely 
on other guidance, we also want to ensure that the conduct we are 
protecting is low risk and does not permit a practice that would be 
prohibited by a different law. Because we understand the conduct does 
not violate CMS requirements, as long as ambulance providers and 
suppliers are in compliance with the other provisions of this safe 
harbor, we believe this condition can be removed.
Offered on a Uniform Basis Without Regard to Patient-Specific Factors
    We proposed to require that the ambulance provider or supplier 
offer the reduction or waiver on a uniform basis, without regard to 
patient-specific factors. We are finalizing this condition, with 
certain textual revisions for additional clarity.
    Comment: We received one comment recommending that we eliminate the 
phrase ``without regard to patient-specific factors.'' The commenter 
suggested that OIG did not enumerate what such factor could be, and 
that the phrase is ambiguous.
    Response: While we agree that we did not provide a list of patient-
specific factors in the Proposed Rule, we decline to eliminate the 
concept from the safe harbor. However, we have modified the language, 
as explained below. This condition includes two prongs that should be 
read together: The waivers must be offered on a uniform basis, and the 
waivers (and the policy) should not be based on patient-specific 
factors. We intended ``patient-specific factors'' to include anything 
other than residency in the municipality or other governmental unit 
providing the ambulance service. We understand from the many advisory 
opinions we have issued in this context that tax revenue from residents 
is often attributed to cover residents' cost-sharing. We clarified the 
text of the final rule to eliminate any confusion on that point: an 
ambulance provider or supplier could waive cost-sharing amounts for all 
residents, but charge cost-sharing amounts to nonresidents. However, 
the ambulance provider or supplier cannot discriminate on the basis of 
any factor other than residency or, if applicable, tribal membership. 
For example, an ambulance provider or supplier cannot waive cost-
sharing amounts for patients transported for an emergency that required 
only outpatient treatment, but charge cost-sharing amounts for patients 
transported for a condition that requires hospitalization (or vice 
versa). They cannot choose whether to waive cost-sharing on the basis 
of the patient's age. Under this particular safe harbor, they cannot 
waive cost-sharing on the basis of insurance or financial status. In 
other words, this safe harbor protects only routine waivers of cost-
sharing by the entities specified, where the waivers do not take into 
account or require any case-by-case, patient-specific determinations 
(other than residency or tribal membership, as explained above).
No Cost-Shifting
    We proposed to prohibit claiming the amount reduced or waived as 
bad debt for payment purposes under Medicare or a State health care 
program or otherwise shifting the burden of the reduction or waiver to 
Medicare, a State health care program, other payers, or individuals.
    Comment: One commenter asked OIG to clarify what activities would 
be considered to be cost-shifting. The commenter suggested that 
ambulance providers or suppliers do not appear to have an opportunity 
to shift costs to Medicare, because Part B emergency ambulance services 
are paid on a fee-for-service basis. The commenter also requested 
clarification that prohibited ``cost-shifting'' would not include 
differentials in payment amounts based on a fee schedule (e.g., if a 
private insurer pays more for emergency ambulance transports than 
Medicare pays).
    Response: First, we confirm that commenter's understanding that 
accepting a higher fee schedule amount from a private insurer would not 
constitute cost-shifting (assuming the fee schedule is either a 
standard fee schedule for the insurer or was not specifically requested 
by the ambulance provider or supplier to recoup costs it may lose by 
waiving copayments). As for the larger question of cost-shifting, we 
can imagine many ways an ambulance provider or supplier could shift 
costs to a Federal health care program (e.g., by upcoding services, 
providing medically unnecessary services, or other illegal or 
inappropriate means). While each method of cost-shifting or making up 
for costs could be an independent ground for sanctions, we include it 
in the safe harbor to clarify that it would also result in the 
copayment waivers losing protection.
Definitions
    For purposes of this safe harbor, we proposed to interpret the term 
``ambulance provider or supplier'' as a provider or supplier of 
ambulance transport services that furnishes emergency ambulance 
services, which would not include a provider or supplier of ambulance 
transport services that furnishes only nonemergency transport services. 
We proposed to interpret ``emergency ambulance services'' in a manner 
consistent with the definition given to that term in 42 CFR 
1001.952(v)(4)(iv). After considering comments received, we are 
finalizing modified versions of these definitions.
    Comment: One commenter recommended that we expressly include 
ambulance providers and suppliers that are enrolled in Part A as well 
as Part B of Medicare.
    Response: We decline to adopt the commenter's specific 
recommendation. We understand that emergency ambulance services, as we 
use that term in this regulation, are covered under Part B. However, 
with respect to the Medicare program, Part A could cover transportation 
between facilities and not generally emergency calls that would result 
in service by the types of ambulance providers and suppliers included 
in this safe harbor. As we explain below, however, we are expanding 
this safe harbor to include other Federal health care programs. Thus, 
we are removing the clause that specified that the ambulance provider 
or supplier be the Medicare Part B provider or supplier of emergency 
ambulance services.
    Comment: One commenter suggested relying on a different definition 
for ``emergency ambulance services.'' Rather than cross-referencing a 
definition found in another safe harbor, the commenter recommended 
using the following definition of ``emergency response'' found in 
Medicare regulations: ``Emergency response means responding at the BLS 
or ALS1 level of service to a 911 call or the equivalent in areas 
without a 911 call system. An immediate response is one in which the 
ambulance entity begins as quickly as possible to take the steps 
necessary to respond to the call.'' 42 CFR 414.605. The commenter 
recommended revising the condition regarding emergency ambulance 
services as follows: ``The ambulance provider or supplier is the 
Medicare Part B provider or supplier of the emergency ambulance 
services, meaning the provider or supplier engaged in an emergency 
response, as defined in 42 CFR 414.605.''
    Response: We had solicited comments about interpreting ``emergency 
ambulance services'' in a manner consistent with the definition given 
to that term in 42 CFR 1001.952(v)(4)(iv). We believe that the 
commenter provided a helpful recommendation that we are incorporating 
into this final rule.

[[Page 88377]]

We agree that it makes more sense to include a definition directly 
within the text of this safe harbor, and that the definition proposed 
by the commenter, while capturing similar elements to the definition we 
proposed, is more aligned with the purpose of this safe harbor than the 
definition we proposed.
    Comment: One commenter requested that we protect psychiatric 
emergency transportation. Another commenter requested protection for 
cost-sharing waivers for ambulance transports that do not qualify as 
``emergency'' transports, but that are initiated based on a provider's 
judgement that the patient requires specialized transportation.
    Response: We decline to expand the safe harbor to protect cost-
sharing waivers for either of these suggested forms of transportation, 
to the extent that the transports do not meet the definition of 
``emergency response'' set forth in the regulation. As a threshold 
matter, we did not propose either of the suggested policies. The safe 
harbor is limited to waivers for emergency transports, and we believe 
waivers in connection with nonemergency transports are too high risk to 
be protected by a safe harbor at this time. We note, however, that the 
regulation does not necessarily exclude transportation of psychiatric 
patients. For example, if a psychiatric patient is a threat to himself, 
herself, or others, and an emergency transport is necessary (to a 
hospital emergency department or psychiatric hospital), cost-sharing 
waivers for the transportation could be protected.
Expansion to Other Federal Health Care Programs
    We solicited comments about whether to include reductions or 
waivers of cost-sharing amounts owed under other Federal health care 
programs (e.g., Medicaid) in the safe harbor. We are finalizing a safe 
harbor that includes such reductions and have made appropriate 
modifications to the proposed regulation.
    Comment: Several commenters supported expanding the safe harbor to 
apply to waivers of cost-sharing owed under other Federal health care 
programs, especially Medicaid. Commenters suggested that such an 
expansion would allow ambulance providers and suppliers to treat all 
patients equally. Certain commenters note that IHS facilities are 
statutorily prohibited from charging copayments to Alaska Natives and 
American Indians, and tribal health programs do not charge such amounts 
to Alaska Natives and American Indians on principle. The commenters 
asked that we clarify that those waivers do not violate the anti-
kickback statute.
    Response: We agree with the commenters that requested expansion of 
protection to all Federal health care program beneficiaries. We see no 
greater risk under the anti-kickback statute in allowing such waivers 
for beneficiaries of other programs, if they are allowed for Medicare 
beneficiaries. We note, however, the safe harbor protects practices 
only under the Federal anti-kickback statute; to the extent that such 
waivers are prohibited under a payment policy or other law or 
regulation (e.g., a particular State Medicaid program), this safe 
harbor would provide no protection for violations of those laws, 
regulations, or requirements. With respect to the prohibition on IHS 
facilities charging cost-sharing to Alaska Natives and American 
Indians, as we explain in response to a similar comment above, if an 
entity is statutorily prohibited from collecting a copayment from a 
particular patient, there is no copayment to be ``waived.''
Textual Revisions
    We received comments regarding two omissions in the Proposed Rule: 
(1) We inadvertently omitted ``provider or'' from the proposed text of 
subparagraph (iv); and (2) we inadvertently omitted tribes in one of 
the descriptions of ambulances operated by a State or a political 
subdivision of a State. We confirm that these were inadvertent and are 
corrected, as applicable, in this final rule.
3. Federally Qualified Health Centers and Medicare Advantage 
Organizations
    We proposed to incorporate into our safe harbors a statutory 
exception to the anti-kickback statute at section 1128B(b)(3)(H) of the 
Act, which was added by section 237 of the MMA. This exception protects 
``any remuneration between a federally qualified health center (or an 
entity controlled by such a health center) and a MA organization 
pursuant to a written agreement described in section 1853(a)(4) [of the 
Act].'' Section 1853(a)(4) of the Act (which should be read in 
conjunction with section 1857(e)(3) of the Act, as described below) 
generally describes the payment rule for FQHCs that provide services to 
patients enrolled in MA plans that have an agreement with the FQHC. We 
are finalizing the language that we proposed. Commenters generally 
supported the safe harbor, and specific comments are addressed below.
    Comment: One commenter did not support the Medicare requirement for 
MA plans to pay FQHCs at the same level and amount that they pay other 
providers. The commenter states that each provider gets different rates 
based on a variety of different factors, and the commenter does not 
support limiting the ability of a MA plan to weigh those factors and 
determine payment rates.
    Response: This comment is outside the scope of this rulemaking. The 
commenter is referencing a payment rule, while this rule relates to 
protecting certain remuneration under the anti-kickback statute.
    Comment: One commenter supports the safe harbor, but recommends two 
qualifications: (1) That the level and amount of payment to the FQHC 
not exceed levels or amounts for similar providers; and (2) that the 
safe harbor also apply to remuneration and payment whether the services 
are provided at the FQHC or by a provider who contracts to provide 
services through a contract with the FQHC.
    Response: With respect to the first suggestion, the safe harbor 
protects remuneration paid pursuant to an agreement described in 
section 1853(a)(4) of the Act between a MA organization and a FQHC. 
Section 237 of the MMA specifies that agreements described in section 
1853(a)(4) must provide for a level and amount of payment to the FQHC 
that is not less than the level and amount of payment that the MA 
organization would make for such services if the services had been 
furnished by an entity other than a FQHC. The safe harbor protects 
payments made pursuant to such agreements, and the law sets a minimum, 
but not a maximum, payment level to be specified in the applicable 
agreements. The additional qualification suggested by the commenter 
varies from this statutory requirement. With respect to the second 
suggestion, the statute specifically applies to remuneration between 
FQHCs and MA organizations that have certain written contracts; it does 
not reach remuneration between FQHCs and third-parties. However, if the 
arrangement between the FQHC and the third-party provider is consistent 
with the requirements of section 1853(a)(4), the fact that the services 
were provided by a third-party entity would not disqualify the 
remuneration between the FQHC and the MA organization from protection 
under the safe harbor.
    Comment: Two commenters request that we clarify whether four 
specific types of arrangements would be protected under this safe 
harbor: (1) All remuneration between a MA organization and a health 
center, without regard to amounts typically paid to other providers or 
fair market

[[Page 88378]]

value; (2) the provision of free space by the FQHC to the MA 
organization (e.g., free conference room space for the MA organization 
to offer sales presentations to potential enrollees); (3) financial 
support from the MA organization to the FQHC (e.g., for conducting 
outreach activities, purchasing health information technology, and 
funding infrastructure costs), even when the support is based on the 
number of health center patients enrolled in the MA organization; and 
(4) remuneration between a health center and an IPA when the IPA stands 
in the shoes of the MA organization pursuant to an indirect contract 
arrangement between a health center and MA organization recognized by 
CMS regulations.
    Response: Some of these examples would be protected by the safe 
harbor, but others would not be. We reiterate, however, that not every 
arrangement between two parties implicates the anti-kickback statute. 
If an arrangement does not implicate the statute, then no safe harbor 
is necessary to protect it. Moreover, entities seeking to provide 
remuneration to a FQHC should also consider whether the safe harbor at 
42 CFR 1001.952(w), which addresses transfers of certain items, 
services, goods, donations or loans to FQHCs, could apply. With that 
said, we address the potential protection of each example under this 
safe harbor in turn.
    The first example could be protected under this safe harbor, if the 
commenter's use of the term ``all remuneration'' is understood in the 
context of what the safe harbor protects (payment for certain FQHC 
services). The statutory exception was added by section 257(d) of the 
MMA. Section 257(c) of the MMA specified the following payment rule 
(added in 1857(e)(3)): ``in any written agreement described in section 
1853(a)(4) between [an MA organization] and [FQHC], for a level and 
amount of payment to the [FQHC] for services provided by such health 
center that is not less than the level and amount of payment that the 
plan would make for such services if the services had been furnished by 
[an] entity providing similar services that was not a [FQHC].'' The 
statute does not include a fair market value requirement; it provides 
for a minimum level of payment by the MA organization. Thus, the safe 
harbor protects payment for FQHC services that meet this requirement. 
It does not, however, protect ``all remuneration'' that the parties 
might exchange. The second example of remuneration--providing free 
space--would not be protected by this safe harbor. The safe harbor 
protects payments related to FQHCs treating MA plan enrollees, not 
arrangements unrelated to MA plan enrollees being treated at the FQHC. 
The same analysis applies to the third example: Financial support for 
the FQHC is outside the scope of what the safe harbor protects. 
Finally, we confirm that the fourth example would come within the ambit 
of the safe harbor with respect to the requirement that the FQHC have a 
written agreement with the MA plan. CMS has interpreted the 
requirements related to services provided to MA plan enrollees as 
including indirect contracts. Specifically, in a 2005 final rule, CMS 
stated: ``[w]e interpreted section 237 of the MMA to mean that any 
Medicare FQHC furnishing covered FQHC services to MA plan enrollees 
would be eligible for supplemental payments regardless of whether they 
have a direct contract with a MA organization or contract with another 
entity (for example, a medical group) that has a direct contract with 
the MA organization to treat its enrollees.'' 70 FR 70116, 70268 (Nov. 
21, 2005). Because this safe harbor is in place largely because of a 
payment rule, we believe it is reasonable to rely on the 
interpretations applicable to that payment rule.
4. Medicare Coverage Gap Discount Program
    Section 3301 of the ACA establishes the Medicare Coverage Gap 
Discount Program, codified at section 1860D-14A of the Act. Under this 
program, prescription drug manufacturers enter into an agreement with 
the Secretary to provide certain beneficiaries access to discounts on 
drugs at the point of sale. Section 3301(d) of the ACA amends the anti-
kickback statute by adding a new subparagraph (J) to section 
1128B(b)(3) of the Act to protect the discounts provided for under the 
Medicare Coverage Gap Discount Program, which we proposed to 
incorporate into our safe harbor regulations.
    We proposed to protect a discount in the price of an ``applicable 
drug'' of a manufacturer that is furnished to an ``applicable 
beneficiary'' under the Medicare Coverage Gap Discount Program under 
section 1860D-14A, as long as the manufacturer participates in and is 
in full compliance with all requirements of the Medicare Coverage Gap 
Discount Program. We proposed to incorporate by reference the 
definitions of the terms ``applicable beneficiary'' and ``applicable 
drug'' that were added by a new section 1860D-14A(g) of the Act. 
Commenters generally supported our proposal. Specific comments and 
recommendations are addressed below.
    Comment: Some commenters noted that a safe harbor is unnecessary, 
because the statutory exception is sufficient.
    Response: We acknowledged in the Proposed Rule that the statutory 
exception was self-implementing. However, for the sake of completeness, 
we generally incorporate and interpret statutory exceptions in our safe 
harbor regulations.
    Comment: Several commenters objected to our proposal to require 
that manufacturers be ``in full compliance with all requirements of'' 
the Medicare Coverage Gap Discount Program to qualify for safe harbor 
protection. Commenters expressed concern that minor administrative or 
technical non-compliance could open manufacturers up to liability. For 
example, one commenter provided hypotheticals under which a 
manufacturer met all requirements, except did so one day late. A 
commenter suggested that neither the ACA nor the anti-kickback statute 
support the requirement that a manufacturer be in compliance with the 
all requirements of the program. Another commenter asserted that we 
exceeded our rulemaking authority by including this requirement.
    Response: Although we disagree with the commenter who asserted that 
we do not have the authority to require compliance with the very 
program that this safe harbor aims to protect, we do agree with 
commenters who suggested that minor, technical instances of non-
compliance should not preclude safe harbor protection. Thus, we are 
revising the language to reflect that manufacturers must be in 
compliance with the Medicare Coverage Gap Discount Program. While we do 
not contemplate that missing a payment deadline by one day would 
subject a manufacturer to sanctions under the anti-kickback statute, 
the safe harbor only protects discounts offered in connection with this 
program. A manufacturer that knowingly and willfully provided discounts 
without complying with the requirements of the Medicare Coverage Gap 
Discount Program could be subject to sanctions, unless such discounts 
are protected by another safe harbor.
    Comment: One commenter suggested that the definitions of 
``applicable beneficiary'' and ``applicable drug'' are too narrow, 
because they apply only to beneficiaries enrolled in, and drugs that 
are covered by, prescription drug plans and MA-PD plans. The commenter 
asserts that the exception should be expanded to encompass Medicare 
reasonable cost contractors under

[[Page 88379]]

section 1876 of the Act that offer a Part D supplemental benefit.
    Response: We decline to adopt the commenter's suggestion at this 
time. We proposed to incorporate the statutory definitions used in 
establishing the Medicare Coverage Gap Discount Program into the safe 
harbor regulation, and we intend to rely on those definitions.
5. Local Transportation
    Pursuant to our authority at section 1128B(b)(3)(E) of the Act, we 
proposed to establish a new safe harbor at 42 CFR 1001.952(bb) to 
protect free or discounted local transportation services provided to 
Federal health care program beneficiaries.
    In the Proposed Rule, we proposed to protect free or discounted 
local transportation made available by an ``eligible entity'' to 
established patients (and, if needed, a person to assist the patient) 
to obtain medically necessary items or services. We also sought 
comments on a second form of transportation that would be akin to a 
shuttle service. We proposed a number of conditions on offering or 
providing protected free or discounted local transportation services, 
and proposed definitions of certain terms, such as ``eligible entity,'' 
``established patient,'' and ``local.'' Overall, we received 
substantial support for implementing a safe harbor to protect local 
transportation. Many commenters urged us to include (or decline to 
include) certain safeguards within the final regulation. With certain 
modifications described below in response to the comments we received, 
we are finalizing a safe harbor at Sec.  1001.952(bb) for local 
transportation for established patients.
General Comments
    We received a number of comments generally in support of the 
proposed safe harbor, and others requesting specific changes or 
clarifications.
    Comment: Several commenters expressed general support for the 
concept of free or discounted local transportation, and for proposing 
it as a safe harbor that would cover all Federal health care program 
beneficiaries. Commenters stated the proposal would increase access to 
care. Commenters gave examples of patients who would benefit, such as 
those who cannot drive or take public transportation after a procedure, 
or isolated/homebound patients. One commenter noted that Congress 
expressly stated that the beneficiary inducement prohibition was not 
intended to prohibit complimentary local transportation and urged OIG 
to consider the needs of certain patient populations (like mental 
health and substance abuse patients). One commenter supported our 
proposal to eliminate the nominal value restriction with respect to 
transportation.
    Response: We acknowledged in the Proposed Rule that Congress did 
not intend to preclude the provision of local transportation of nominal 
value in the context of the beneficiary inducements CMP. (See 79 FR 
59717, 59721). However, the anti-kickback statute does not have any 
exceptions for items or services of nominal value. With that 
clarification, we agree that a safe harbor is warranted to protect 
complimentary local transportation that meets certain requirements that 
limit the risk of fraud and abuse.
    Comment: One commenter recommended that we cover transportation 
whether planned in advance or for ad hoc services that arise 
unexpectedly, and whether provided directly or through vouchers. Other 
commenters requested that we expressly state that the safe harbor also 
protects transportation back to a patient's home.
    Response: We agree with the commenters. First, the safe harbor 
would protect transportation both to a provider or supplier of services 
and back to a patient's home, as long as all conditions of the safe 
harbor are met. Next, an eligible entity offering free or discounted 
local transportation need not require that transportation be planned in 
advance. Further, a transportation program could use vouchers rather 
than having the transportation provided directly by the eligible 
entity. However, we reiterate that the transportation cannot take the 
form of air, luxury, or ambulance-level service and must meet other 
requirements described herein to be protected under the safe harbor.
    Comment: One commenter requested that OIG clearly define the 
situations in which free transportation can be provided and clearly 
outline the process for determining patient eligibility.
    Response: We have set out the conditions under which free 
transportation will be protected in this final rule. We have provided 
explanations of each condition, and examples where we believe them to 
be helpful. Individuals and entities seeking to offer transportation 
and be protected by the safe harbor should apply these conditions and 
guidance to their desired program. We decline to mandate specific 
eligibility terms or a set list of situations under which 
transportation would be protected, beyond what we specify in this final 
rule.
    Comment: One commenter recommended a more narrowly defined safe 
harbor, particularly with respect to dialysis providers. The commenter 
expressed concern that larger, well-funded dialysis providers may 
increase their volume by routinely providing transportation, thus 
hurting smaller providers. The commenter recommended protecting 
transportation for dialysis patients only on an infrequent basis and in 
accordance with policies that the commenter believes the OIG should 
clearly outline. Some commenters asked that we clearly state that 
dialysis facilities would not be required to provide free 
transportation. Other commenters recommended that dialysis facilities 
should be allowed to offer transportation only in certain 
circumstances, such as when a beneficiary suddenly finds him- or 
herself without transportation to or from a dialysis facility, for 
beneficiaries with intermittent lack of reliable transportation, or for 
certain emergent purposes.
    Response: First, we reiterate that safe harbors are voluntary. This 
safe harbor does not require any individual or entity to offer free or 
discounted local transportation services; it sets forth conditions and 
limitations on providing such transportation. With respect to the other 
comments in the paragraph above, we decline to adopt the commenters' 
suggestions. We do not believe that this safe harbor should have 
additional restrictions tailored to a specific patient population, such 
as dialysis patients. Any time a provider or supplier is permitted to 
give something for free or reduced cost to beneficiaries, there is a 
risk that such a program will affect competition, because entities with 
greater financial resources might be in a better position to provide 
the ``extras.'' However, we believe that the combination of 
requirements in the safe harbor will mitigate that risk and 
appropriately balances the risks against the potential benefits of a 
well-designed and properly structured transportation program. For 
example, the prohibition on advertising constrains the use of free or 
discounted transportation as a marketing tool, and the mileage 
limitations serve to limit, to some degree, the cost of the 
transportation provided. In addition, we believe this safe harbor will 
save Federal health care programs money in the very population cited by 
the commenter; dialysis patients are a population that has been 
identified as contributing to the increasing costs of nonemergency 
ambulance transportation and would

[[Page 88380]]

benefit from local transportation furnished by providers.\10\
---------------------------------------------------------------------------

    \10\ See MedPAC, Report to the Congress: Medicare and the Health 
Care Delivery System (June 2013), Chapter 7, available at http://www.medpac.gov/documents/reports/chapter-7-mandated-report-medicare-payment-for-ambulance-services-%28june-2013-report%29.pdf?sfvrsn=2. 
In fact, the report notes that: ``[i[f there are concerns about the 
availability of transport to dialysis treatment, an approach other 
than using ambulance transport is needed. One possibility would 
involve dialysis facilities providing local transportation services 
to their patients'' and notes the necessity of a safe harbor to 
permit such transportation. Id. at 187.
---------------------------------------------------------------------------

    Comment: One commenter was concerned that eligible entities might 
demand concessions from their existing transportation vendors, despite 
the prohibitions on cost-shifting. The commenter requested that we 
clarify that contracts between eligible entities and transportation 
vendors are subject to existing ``OIG guidelines.''
    Response: While we are unsure which ``OIG guidelines'' the 
commenter is referencing, we do confirm that nothing in the safe harbor 
exempts contracts between eligible entities and transportation vendors 
from complying with all applicable fraud and abuse laws for terms of an 
arrangement that are not protected by this safe harbor. For example, an 
eligible entity may not require an ambulance company to provide free or 
discounted transportation to its patients as a condition of receiving 
referrals.
Eligible Entity
    We proposed that the safe harbor protect only transportation 
offered or provided by an ``eligible entity.'' We proposed to define 
``eligible entity'' as any individual or entity, except individuals or 
entities (or family members or others acting on their behalf) that 
primarily supply health care items (including, but not limited to, 
durable medical equipment (DME) suppliers or pharmaceutical companies). 
We specifically solicited comments on excluding other entities that 
provide primarily services, such as laboratories or home health 
agencies, that we posited might be more likely to offer transportation 
in return for referrals, resulting in both steering and 
overutilization. We stated we were considering excluding home health 
care providers from safe harbor protection when they furnish free or 
discounted local transportation to their referral sources, but not 
excluding them from protection when they provide such transportation to 
sources that do not refer to home health care providers, such as 
pharmacies.
    Comment: One commenter requested that we consider the competitive 
advantages/disadvantages to providers being able to provide free 
transportation (e.g., physical therapy providers who do in-home versus 
office visits). Another commenter asked that physical therapists 
expressly be allowed to provide free transportation. Commenters 
suggested including health plans, coordinated care entities, clinically 
integrated networks, managed care organizations (MCOs), and risk-
bearing entities as eligible entities, and urged that MA plans should 
be able to include transportation subsidies in their CMS bids. One 
commenter requested that pharmacies be included, to accommodate 
transportation to and from the pharmacy, and another asked that 
dialysis providers expressly be included.
    Response: We proposed to exclude from the definition of eligible 
entities suppliers of items, and potentially certain groups of 
providers or suppliers \11\ of services that might be more likely to 
offer transportation to their patients in exchange for referrals. 
Physical therapists and dialysis facilities provide services, and we 
did not propose to exclude them. Pharmacies, however, primarily provide 
items and thus would be excluded from the definition. Many types of 
entities that may not directly render health care services to patients, 
such as health plans, MA organizations, MCOs, accountable care 
organizations (ACOs),\12\ clinically integrated networks, and 
charitable organizations are not among the entities excluded from the 
definition of eligible entity and thus are eligible to provide 
transportation. However, one condition of the safe harbor prohibits 
shifting the cost of the transportation onto, inter alia, Federal 
health care programs. Thus, for example, to the extent that a MA plan's 
inclusion of the transportation program in its bid would affect costs 
to Federal health care programs or affect reimbursement, then we 
decline to adopt the commenters' suggestion. With that said, we 
recognize that MA organizations are permitted to include transportation 
as a supplemental benefit to its enrollees when such transportation 
meets certain requirements. As we have explained in other places, safe 
harbors do not create liability for parties; they protect arrangements 
that would otherwise be prohibited by the anti-kickback statute. To the 
extent that MA organizations are transparently offering transportation 
as a supplemental benefit, as permitted under the MA program, this safe 
harbor would not be necessary to protect those arrangements. With 
respect to effects on competition, we do not believe that the safe 
harbor will unfairly affect competition among providers and suppliers 
and, in fact, may encourage competition and improve patient access to 
care if transportation assistance enables patients to access a wider 
range of providers and suppliers from which to receive care.
---------------------------------------------------------------------------

    \11\ In this safe harbor, we use the term ``supplier'' as it is 
defined for purposes of Medicare. That is, ``a physician or other 
practitioner, or an entity other than a provider, that furnishes 
health care services under Medicare.'' 42 CFR 400.202. We are 
excluding suppliers of items, but including most suppliers of 
services (e.g., physicians), in the term ``eligible entity.''
    \12\ We note that the term ``ACO'' may be used differently in 
different sectors and programs to describe a variety of types of 
entities that consist of a collection of providers or suppliers 
working together to coordinate care. As explained elsewhere in this 
final rule, some ACOs participate in the MSSP or certain CMS 
demonstration programs or models that are subject to oversight and 
have waivers of certain fraud and abuse laws. Other entities called 
``ACOs'' do not participate in the MSSP or CMS demonstration 
programs or models and may not be subject to the same safeguards.
---------------------------------------------------------------------------

    Comment: One commenter recommended not permitting any health care 
providers or suppliers to provide transportation services, unless the 
provider or supplier is willing to transport the patient to other 
providers or suppliers of similar services. The commenter believes the 
safe harbor should protect only transportation services that transport 
a beneficiary to the provider or supplier of his or her choice.
    Response: We respectfully disagree with the commenter's proposal, 
to the extent that it would apply to a provider who offered 
transportation only to its own premises. First, we believe the fact 
that the patient is established with the provider or supplier of 
service implies that the patient has, in fact, chosen that provider or 
supplier. We discuss the limitations on constraining patient choice in 
the context of one eligible entity transporting the patient to another 
provider or supplier elsewhere in this final rule.
    Comment: Some commenters disagreed with our proposal to partially 
or fully exclude home health agencies from the definition of eligible 
entities. These commenters suggested that home health agencies are a 
critical link for patients to get to necessary appointments--some of 
which could be to referral sources. One commenter suggested that 
allowing home health agencies to provide transportation to a primary 
care provider will help patients who did not have a primary care 
provider before requiring home health services. One commenter stated 
that home health agencies are tasked with providing comprehensive care, 
and

[[Page 88381]]

providing transportation can help reduce hospital readmissions and help 
physicians comply with face-to-face requirements. A commenter stated 
that home health agencies also can help patients pick up prescriptions 
when caregivers are not available. One commenter suggested that home 
health agencies be required to develop and document eligibility 
criteria, which must be unrelated to referral source, supplier, or type 
of treatment. One commenter recommended allowing home health agencies 
to be eligible entities for certain circumstances, such as when a 
patient cannot transport himself or is exhibiting serious symptoms 
requiring transport to a doctor who already has been treating the 
patient. Another commenter agreed with the concept expressed in the 
Proposed Rule of excluding home health agencies from transporting 
patients to their referral sources. Similarly, another recommended a 
facts-and-circumstances analysis for home health agencies. One 
commenter suggested that excluding whole categories of providers and 
suppliers unfairly penalizes legitimate entities, and that the other 
requirements in the proposed safe harbor provide sufficient safeguards.
    Response: For many of the reasons cited by commenters, we have 
concluded that home health agencies should not be excluded from the 
definition of ``eligible entity.'' Individuals who provide home health 
services already travel to the patient's home and have regular 
communication with both the patient and the patient's health care 
providers or practitioners. In addition, patients eligible for home 
health services may be particularly in need of transportation, which 
home health agencies may be in a unique position to provide. We are 
aware, however, that home health agencies have historically posed a 
heightened risk of program abuse, and take this opportunity to remind 
all eligible entities that, to be protected by this safe harbor, the 
provision of transportation must be for medically necessary services 
and comply with all other conditions of the safe harbor. Moreover, the 
fact that transportation is potentially protected by this safe harbor 
would never insulate it from scrutiny as part of an investigation. For 
example, we have investigated schemes in which home health agencies 
recruited beneficiaries and transported them to physician offices to 
obtain prescriptions and renewals of prescriptions for home health 
services that they did not need. The provision of transportation, in 
such an instance, would be considered as part of a scheme to submit 
false claims for unnecessary services.
    Comment: One commenter supported excluding DME suppliers and 
pharmaceutical manufacturers for the reasons stated in the Proposed 
Rule. Another commenter recommended against excluding suppliers of 
items, but suggested imposing additional limitations on those suppliers 
to curtail fraud and abuse. One commenter opposed excluding 
pharmaceutical manufacturers, and provided examples of situations in 
which it argued pharmaceutical manufacturers should be permitted to 
provide local transportation (e.g., when patients should be accompanied 
home after receiving an infused drug treatment). One commenter objected 
to excluding suppliers of items, calling it an unjustified bias. This 
commenter believed that these suppliers and manufacturers do not pose a 
heightened risk of steering and suggested that OIG did not adhere to 
guidelines for establishing safe harbors. Despite agreeing with 
concerns we expressed, another commenter disagreed with excluding 
particular types of entities, suggesting that other safeguards in the 
safe harbor should offer sufficient protection. This commenter 
requested that, if we do exclude certain types of entities, we clarify 
that entities that offer both items and services (e.g., a hospital that 
also has laboratory or pharmacy) could transport its patients to 
receive those both the items and services.
    Response: We agree with the commenters that support excluding 
suppliers of items from the definition of ``eligible entity.'' Unlike 
physicians, hospitals, or other providers and suppliers of services, 
suppliers of items generally do not play a role in ensuring that 
patients have access to other providers and suppliers. They certainly 
can play a role in assisting a patient obtain transportation by 
bringing the need to the attention of, for example, the patient's 
physician, practitioner, or hospital. We are finalizing a rule that 
excludes only suppliers of items from the definition of eligible 
entity; we are not excluding home health agencies or laboratories. We 
respectfully disagree with the suggestion that we did not take into 
account the factors set forth by Congress to consider when developing 
safe harbors. We continue to believe, as we stated in the Proposed 
Rule, that allowing individuals and entities that primarily supply 
health care items to offer transportation to patients presents a 
heightened risk of using such transportation to generate referrals, 
potentially in a way that increases costs for patients and Federal 
health care programs. Entities that sell items, such as pharmaceutical 
manufacturers, generally do not need to furnish transportation to their 
own location. Offers by a pharmaceutical manufacturer to transport 
patients to physicians who are the manufacturer's referral sources 
could influence that referral source's decision to prescribe one drug 
over another. For example, a physician might be influenced to prescribe 
an expensive branded infusion drug in preference to a less expensive 
drug, if the manufacturer of the more expensive drug offered 
transportation to the patients who received it so that they can get to 
their appointments with the physician. Such a program could both 
influence the physician to choose a particular item and increase costs 
to Federal health care programs--two factors cited by Congress to 
consider when developing safe harbors--without necessarily increasing 
quality or patient choice. With respect to entities that primarily 
provide services, but also provide items, we confirm the commenter's 
understanding. That is, an entity, such as a hospital, could offer 
transportation to its established patients to its own location for 
items or services provided by the entity (such as for obtaining items 
at the hospital's on-site pharmacy).
Established Patients
    We proposed to require that the free or discounted local 
transportation services be available only to ``established patients.'' 
We proposed that a patient would be ``established'' once the patient 
had selected a provider or supplier and had attended an appointment 
with that provider or supplier. In contrast, we proposed not to protect 
transportation offered to new patients. We received a number of 
comments on this proposal and have decided to modify our interpretation 
of the term ``established'' as it is used in the safe harbor.
    Comment: Though acknowledging and agreeing with our efforts to 
prevent eligible entities from using free or discounted local 
transportation as a recruiting tool, a number of commenters asked us to 
consider the impact of the established patient requirement on patients 
who have not seen a primary care doctor in years, including patients 
who are newly insured or FQHC patients. Several commenters recommended 
that we deem a patient to be ``established'' once the patient selects 
the provider and calls to schedule an appointment. These commenters 
urged that many newly insured patients may need help getting to their 
first appointment, and that in some cases,

[[Page 88382]]

the first appointment may be critical or urgent (e.g., a mental health 
patient whose communication indicates a need for prompt treatment). 
Other commenters suggested that limiting transportation availability to 
established patients will deter patients from changing providers.
    Response: We agree with the thrust of the comments. The purpose of 
limiting the local transportation offers to established patients is to 
offer flexibility to improve patient care while limiting the risk of 
the transportation being used as a recruiting tool, or to bring 
patients in for unnecessary services. Because the eligible entity is 
not permitted to market the transportation services, we believe that 
making transportation available to new patients who contact the 
provider or supplier on their own initiative is sufficiently low risk 
to warrant safe harbor protection. Thus, a patient can be 
``established'' for purposes of this safe harbor after he or she 
selects and initiates contact with a provider or supplier to schedule 
an appointment. If a patient is unable to call a provider or supplier 
himself, or has otherwise given consent for a person (e.g., a family 
member, a case manager, or a provider or supplier where the patient is 
attending an appointment) to schedule appointments for him, then a 
request for an appointment made on behalf of the patient is sufficient 
to meet this criterion. We reiterate that transportation cannot be used 
as a recruiting tool. Thus, we view a case manager (i.e., someone 
coordinating a patient's care) reaching out to schedule an appointment 
and asking if transportation might be available as being entirely 
different than a provider or supplier reaching out to the patient (or 
to the patient's case manager) and asking to have a new patient come 
in, coupled with an offer of transportation. The former would be 
protected (if all other conditions of the safe harbor are met), and the 
latter would not be.
    Comment: We received questions about the scope of an entity with 
which a patient might be ``established.'' One commenter inquired 
whether a patient became established after a visit with a practice, or 
only as to the particular provider or supplier the patient had seen. 
Another thought the preamble suggested that a patient could be 
``established'' only with a practice, and suggested that the patient 
should be ``established'' within a health system or network of 
providers. Similarly, we received a question about whether a single 
visit to a hospital ``establishes'' the patient for all future visits. 
Commenters asked how the ``established patient'' requirement would work 
with integrated entities (e.g., whether a patient would be 
``established'' within a whole system). Another asked whether a patient 
would be established at one dialysis facility, or others under common 
ownership (e.g., if the patient usually receives dialysis at one 
facility but needs to reschedule an appointment at a different local 
facility). A commenter suggested that the safe harbor should protect 
both new and established patients of FQHCs. One commenter expressed a 
concern about steering, such as if a hospital or large practice could 
choose to offer transportation only to their own ancillary practices.
    Response: We understand the commenters' concerns and requests for 
clarity regarding the provider or supplier with whom a patient is 
established. We believe that some of these issues are resolved by our 
conclusion that a patient is ``established'' with any provider once an 
initial appointment is made. Thus when a patient makes an appointment 
(including a rescheduled appointment), an eligible entity may offer 
transportation regardless of whether the patient has received services 
from that eligible entity in the past. We recognize, however, that when 
and with whom a patient is an ``established patient'' remains pertinent 
with respect to the commenter's concern regarding steering. We also 
recognize that eligible entities that do not directly provide health 
care services (e.g., health plans, ACOs, health systems, etc.) would 
not have ``established patients,'' because patients do not receive 
health care from them. Such entities always would be considered to be 
providing transportation to another provider or supplier, and the 
patient must be ``established'' with that other provider or supplier. 
An eligible entity that is a health care provider or supplier may make 
transportation to its own location available to its own established 
patients, without offering transportation to the patients of other 
providers. However, the safe harbor requires that the availability of 
transportation not be determined in a manner related to past or 
anticipated volume or value of Federal health care program business. 
So, if an eligible entity chooses to make transportation available for 
services provided by others, it must provide the transportation to the 
provider or supplier of the patient's choice, subject to restrictions 
that an eligible entity can impose that are unrelated to referrals, as 
discussed below. Thus, if a patient is being discharged from the 
hospital, and the hospital is willing to transport the patient to 
followup visits with a cardiologist, the hospital cannot make that 
offer contingent on the patient choosing a cardiologist affiliated with 
the hospital. We note, the eligible entity can have various limits on 
transportation policies. For example, the eligible entity might be 
willing to transport patients only within a 10-mile radius of its 
location, or willing to transport patients only to primary care 
providers, or only for visits included in a discharge plan. These types 
of limitations are acceptable and do not limit patient choice or steer 
to particular providers or suppliers.
    We interpret the commenter's question about how the ``established 
patient'' requirement would work with integrated entities as asking 
whether a patient who is established with a particular physician 
practice, for example, is also established with respect to the entire 
integrated health care system of which that practice is a part. If so, 
then the system would be able to provide transportation limited to 
entities within the system. We understand that integrated entities, 
health systems, and others would prefer to transport patients only to 
their own affiliated locations. At this time, we are not protecting 
such limited transportation offers to individual patients. We will 
continue to monitor the changing landscape and could consider new or 
revised safe harbors in the future. We do note that shuttles protected 
under this safe harbor are not subject to the established patient 
requirement. Thus a health care system could offer a shuttle service to 
the public that made stops at its own facilities, but not at any health 
care facilities outside the system. We also note that an ACO or similar 
entity may assist its affiliates in providing transportation (e.g., by 
having a fleet of vehicles available for the use of its affiliates in 
transporting their patients). In this situation, the transportation 
would be provided by the affiliates, who could limit the transportation 
offers to their own patients. However, the safe harbor requires that 
eligible entities (in this case, the affiliates) bear the cost of the 
transportation they provide. This could be done by, for example, having 
the affiliates pay to the ACO a fixed amount per mile or per trip for 
their transported patients. We decline to require any particular method 
of calculating these costs, as long as the method reasonably 
compensates the ACO for the transportation provided. We note that, 
alternatively, ACOs in the MSSP and certain CMS demonstration programs 
may use waivers of the fraud

[[Page 88383]]

and abuse laws to cover some transportation arrangements, provided all 
waiver conditions are met.
    Comment: A number of commenters raised general concerns that the 
``established patient'' requirement was unnecessary, too restrictive, 
burdensome, or an arbitrary limit to care. One commenter suggested it 
should apply only to physicians, and another stated it should not apply 
to home health agencies. Others advocated it might prevent new patients 
from seeking care, or from attending new appointments, including 
hospital registration. An additional commenter urged us to consider 
that the requirement will create barriers to entry in the health care 
system, especially with Medicaid expansion. Several commenters 
expressed a concern that it would be burdensome or impossible to screen 
patients to ensure that only established patients used a shuttle around 
a hospital or extended campus.
    Response: We believe that the revised interpretation of 
``established'' should address many of these concerns. Further, except 
for the limited exception for ACOs and other eligible entities that do 
not have patients of their own, we do not see any reason to exempt 
certain categories of providers and suppliers from the requirement to 
offer transportation only to established patients. By allowing 
transportation to be offered to patients after the patient has an 
appointment, we believe we have removed the barriers to transportation 
to new patients that commenters described. We also note, most Medicaid 
programs include coverage for some form of non-emergency transportation 
services, which further reduces the likelihood that the established 
patient requirement will result in significant barriers to entry in the 
Medicaid program. As discussed in greater detail below, when 
transportation is in the form of a shuttle service, the established 
patient requirement does not apply.
    Comment: One commenter recommended we include family and friends of 
skilled nursing facility (SNF) patients, as we approved in OIG Advisory 
Opinion 09-01. The commenter suggests that such transportation 
facilitates SNF residents keeping community ties.
    Response: This section of the safe harbor is intended to address 
transportation for patients to obtain medically necessary services. 
While transportation of family and friends can serve important patient 
interests, as we recognized in OIG Advisory Opinion 09-01, we do not 
believe that this section of the safe harbor is the place to address 
that concern in the context of SNF patients, or other patients who 
would benefit from visits from family and friends. We are separately 
protecting shuttle services under this safe harbor. Thus a SNF or other 
provider would be able to offer a shuttle on a set route that could 
accommodate friends and family of residents. For other arrangements 
that do not meet all requirements of the safe harbor, the SNF could 
seek an advisory opinion.
    Comment: Commenters urged us to ensure that the safe harbor is 
available for post-acute patients. For example, one commenter asked 
whether a SNF could transport a patient to its facility after the 
patient selected the facility, but before signing the admission 
agreement. Another commenter asked us to confirm that hospitals could 
provide transportation to ensure that post-discharge followup care was 
received. Another commenter was concerned about patients who come to 
the Emergency Department (ED) by ambulance. The commenter asserted 
that, whether or not those patients are admitted, they may need a ride 
home.
    Response: We believe that each of the examples provided above could 
be protected by the safe harbor. Our revised interpretation of 
``established'' would permit the SNF to transport the patient to its 
facility, as long as the patient selected the facility first on his or 
her own initiative (or through the patient's representative), whether 
or not an actual agreement had been signed. However, transportation for 
marketing purposes, offered to a patient who has not yet selected the 
facility, would not be protected by the safe harbor. A hospital 
providing transportation to its discharged patients for followup care 
would be protected under either interpretation of ``established;'' if 
the patient was admitted to the hospital or received outpatient care 
there, then the patient was an established patient of the hospital. The 
Proposed Rule had proposed protecting, and we are finalizing a rule 
that will protect, transportation offered by one provider or supplier 
to convey patients to or from another provider or supplier (so long as 
other requirements are met). Likewise, the safe harbor could protect 
transporting a patient home from an ED visit: A patient who has 
received a service is an established patient, and transportation of 
such a patient could be protected by this safe harbor.
    Comment: One commenter requested that we define ``new patient,'' 
while other commenters asked whether one visit was sufficient to be 
established with the provider or supplier. Another commenter asked 
whether providers must document that transported patients are 
``established.'' Other commenters suggested that we establish an 
exception, or include fewer restrictions, for patients in MA plans 
because, the commenters assert, there is a lower risk of steering or 
overutilization in these plans.
    Response: We believe we have addressed most of these comments 
through the revised interpretation of ``established'' patient. We 
confirm here that the safe harbor does not require documentation that 
the patients receiving transportation are established patients. 
However, maintaining documentation that demonstrates compliance with 
the safe harbor may be best practice.
    Comment: Some commenters argued that the established patient 
requirement does not consider patients with emergent situations (e.g., 
an ESRD patient who needs to go to a new facility for a vascular access 
problem, or a patient who just discovered potential HIV infection). 
Commenters suggested that the safe harbor allow for transportation to 
be provided to new patients with emergent conditions because other 
safeguards mitigate risk. Another commenter specifically requested an 
exception process to address situations where one provider must 
transport a patient to another provider to reduce the risk of an 
emergency department visit or a hospital admission.
    Response: We believe that the safe harbor, as it is being 
finalized, is sufficient to cover emergent situations, including 
situations that would prevent a hospital visit. If a patient has an 
emergent condition, needs a service, and reaches out to a provider or 
supplier to schedule an appointment and expresses concern about his or 
her ability to get to that appointment, the provider or supplier can 
offer transportation. Using an example provided by commenters, if a 
patient is at an ESRD facility and needs to get to a vascular access 
clinic, but has no way to get there, the safe harbor would be available 
to protect transportation offered by either the ESRD facility or the 
vascular access clinic. First, because the patient is established with 
the ESRD facility, the ESRD facility could transport him to the 
vascular access clinic, provided all other conditions of the safe 
harbor are met. Second, the patient could call the vascular access 
clinic to make an appointment and ask if transportation is available 
(or a call could be made on the patient's behalf, at the request of the 
patient or the patient's representative). By reaching out and making 
the appointment, the patient would be established with the

[[Page 88384]]

clinic for purposes of being eligible for transportation.
Purpose of Transportation
    We proposed and solicited comments on conditions related to the 
purpose of the transportation and the location to which a patient could 
be transported. Specifically, we proposed that protected transportation 
be for ``the purpose of obtaining medically necessary items or 
services,'' but we solicited comments on whether eligible entities also 
should be protected under the safe harbor if they provide free or 
discounted local transportation for other purposes that relate to the 
patient's health care (e.g., to apply for government benefits, to 
obtain counseling or other social services, or to get to food banks or 
food stores). We proposed to allow an eligible entity to provide free 
or discounted local transportation services to the premises of another 
health care provider or supplier, as long as the eligible entity does 
not make the free or discounted local transportation available only to 
patients who were referred to it by particular health care providers or 
suppliers, and as long as the offer of transportation is not contingent 
on a patient's seeing particular providers or suppliers who may be 
referral sources for the eligible entity offering the transportation. 
We received several comments on these proposals.
    Comment: Several commenters recommended that transportation be 
allowed for purposes that relate to health care, and that such concept 
be interpreted broadly. For example, commenters recommended allowing 
transportation for non-clinical, but health-related activities (e.g., 
obtaining counseling or other social services, getting to food banks/
stores, applying for government benefits). Another commenter 
recommended allowing transportation for other services if the purpose 
of the services support care coordination and adherence to the 
patient's plan of care. One commenter supported the provision of 
transportation services for a variety of purposes, including those that 
are non-clinical but reasonably relate to an individual's health care 
and would be beneficial to the patient (e.g., a risk-bearing provider 
might offer transportation to an exercise program, mental health 
counselor, or healthy grocery store).
    Response: We decline to extend safe harbor protection to 
transportation for purposes other than to obtain medically necessary 
items or services at this time. A transportation program offered by a 
provider or supplier inherently poses a risk both of inducing patients 
to get items or services that they might otherwise not have obtained 
and to get the services from that provider or supplier. In the case of 
transportation for medically necessary items or services, we think that 
risk is acceptable. However, we believe the risk is too high when the 
transportation for an individual (as opposed to a shuttle) is for non-
health-related purposes.\13\ First, whether the patient's destination 
is really health-related would be difficult to determine, e.g., if it 
is a shopping center that includes, in addition to a food store, a 
movie theater and other retailers. Transportation for food shopping or 
other non-medical reasons also might be more frequent than 
transportation for medical appointments, which would give larger 
providers a significant competitive advantage over smaller entities or 
individual suppliers. Nevertheless, as described below, an eligible 
entity could operate a shuttle service that includes stops at locations 
that do not relate to a particular patient's medical care. In addition, 
we will continue to monitor new payment models and methods of 
coordinated care that increase quality and reduce costs, and we will 
consider whether permitting transportation to non-medical services that 
are part of coordinated care arrangements or are related to improving 
health care, would be appropriate in a future rulemaking.
---------------------------------------------------------------------------

    \13\ We note, however, transportation for non-medical purposes 
would not violate the statute if it is not for the purpose of 
inducing individuals to obtain federally reimbursable items or 
services.
---------------------------------------------------------------------------

    Comment: One commenter noted that we proposed prohibiting eligible 
entities from making transportation available only to patients referred 
by particular providers or suppliers. This commenter recommended that 
we also prohibit eligible entities from discriminating based on 
insurance type (e.g., limiting transportation to Medicare patients).
    Response: As the commenter correctly observed, we proposed 
prohibiting limiting transportation offers to patients referred by 
particular providers or suppliers. We also proposed requiring that the 
availability of the free or discounted transportation be determined in 
a manner unrelated to the past or anticipated volume or value of 
Federal health care program business. If transportation were offered 
only to Federal health care program beneficiaries, then it would be 
unlikely to meet this latter requirement. If an eligible entity 
transported only Federal health care program beneficiaries to itself, 
or only transported Federal health care program beneficiaries to other 
providers or suppliers, it would appear that the availability of the 
transportation took into account the volume, as well as possibly the 
value, of Federal health care program business. However, an eligible 
entity could take into account an individual patient's need for 
transportation, even if this resulted in the transportation being 
disproportionately made available to elderly or low-income patients who 
are more likely to be Federal health care program beneficiaries. It 
would be necessary for the determination of transportation to be made 
on an individual basis, however, and not on the basis of insurance 
type. For example, a geriatric practice might provide transportation 
almost exclusively to Medicare beneficiaries where most of its practice 
is Medicare beneficiaries, so long as the practice does not 
discriminate based on insurance type. In other words, any non-Medicare 
patients of the practice must be eligible for transportation assistance 
on the same terms as the Medicare patients.
    Comment: Some commenters suggested that allowing transportation 
from one provider to another is essential, and gave the example of a 
hospital transporting a patient to affiliated post-acute sites. Another 
commenter supported transportation from one provider to another, as 
long as the patient is established with one of the providers. According 
to one commenter, excluding transportation to referral sources would 
limit the availability of transportation, given how many organizations 
and providers are part of ``intertwined referral networks.'' Another 
commenter recommended that, if health systems, health plans, ACOs, or 
other integrated networks are permitted to be eligible entities, they 
should not be permitted to restrict transportation to providers or 
suppliers in their own networks. Another commenter suggested the 
opposite: That integrated care systems should not have to transport 
patients to non-network providers, and that such a requirement would 
discourage hospitals from offering transportation.
    Response: We agree with commenters that allowing one eligible 
entity to transport patients to another provider or supplier is 
important. We intend to protect this transportation, as long as it 
meets all other requirements in the safe harbor. We wish to clarify 
that, if the patient is being transported to a different provider than 
the eligible entity that is providing the transportation, and the 
eligible entity providing the transportation is itself a provider or 
supplier of federally payable services, then there must be an

[[Page 88385]]

established patient relationship between the eligible entity providing 
the transportation and the patient being transported, as well as an 
established patient relationship between the patient and the provider 
to which the patient is being transported. For example, a hospital that 
has discharged a patient (and therefore has an established relationship 
with the patient) may provide transportation for the patient to an 
appointment with a physician for followup care. In these circumstances, 
the hospital has an interest in ensuring that the patient is seen for 
followup care, in order to avoid complications and possible 
readmission. The hospital may not, however, offer to transport a 
patient with whom it has no established relationship (either as an 
inpatient or outpatient) either to the hospital's own facilities or to 
the facilities of a different provider or supplier. If a provider with 
no established relationship with a patient provides or offers to 
provide transportation,\14\ there is a risk that a purpose of the 
transportation is to market its own services to the patient or induce 
referrals from the provider to whom the patient is being transported. 
As explained above, an eligible entity that does not itself provide 
health care services (such as a charitable organization, health plan, 
ACO, or other entity) is not required to have an established 
relationship with a patient in order to provide transportation that is 
protected by this safe harbor.
---------------------------------------------------------------------------

    \14\ We note that the considerations are different, as explained 
below, in the context of a shuttle service.
---------------------------------------------------------------------------

    We did not propose to exclude transportation to referral sources, 
other than potentially in the context of entities that we were 
considering fully or partially excluding from the definition of 
``eligible entity'' (e.g., our proposal to exclude home health 
providers from providing transportation to their referral sources). 
Under the Proposed Rule, and as we are finalizing in this final rule, 
an eligible entity can transport patients to another provider or 
supplier that is a referral source; the transportation offer, however, 
cannot be contingent on the patient choosing a referral source. For 
example, a hospital could offer transportation services to its 
established patient diagnosed with cancer who needs to see an 
oncologist. The hospital would need to provide transportation to any 
oncologist that the patient chooses (subject to the hospital's policy 
on distance), not only to the oncologists who are referral sources for 
the hospital. This restriction holds true in networks. For example, if 
a hospital will transport a patient to a clinical laboratory, radiology 
provider, or specialist, the patient must have the freedom to choose 
the provider or supplier; the hospital cannot make the offer of 
transportation contingent on the patient using a clinical laboratory, 
radiology provider, or specialist in its network. The hospital can, 
however, set restrictions on the distance it is willing to transport 
the patient.
    Comment: One commenter disagreed with our proposal to exclude from 
safe harbor protection free or discounted local transportation that an 
eligible entity makes available only to patients who were referred to 
the eligible entity by certain providers or suppliers. The commenter 
recommended allowing an eligible entity to limit transportation only to 
patients from particular providers in the context of ACOs in the MSSP. 
The commenter notes that ACOs participating in the MSSP do not benefit 
from increased referrals or overutilization, because the goal of that 
program is to improve quality while lowering Medicare cost growth. The 
commenter suggested that this condition should not apply to MSSP ACOs 
because such ACOs are designed to reduce spending, not increase it. 
Thus, increased referrals should not be a concern.
    Response: We are not adopting the commenter's suggestion. CMS 
administers the MSSP pursuant to section 1899 of the Act. In addition, 
CMS operates a number of models pursuant to its authority under section 
1115A of the Act. The MSSP and some of the models operated pursuant to 
section 1115A of the Act have waivers of certain fraud and abuse laws, 
including the anti-kickback statute. Parties involved in the MSSP or 
models under 1115A authority may not need this safe harbor to provide 
transportation, if they meet all the conditions set forth in an 
applicable waiver for the program in which they are participating.
Need for Transportation
    In the Proposed Rule, we sought comments on whether we should 
require eligible entities to maintain documented beneficiary 
eligibility criteria. After consideration, we are finalizing a 
requirement that eligible entities have a set policy regarding the 
availability of transportation assistance, and must apply that policy 
uniformly and consistently. However, eligible entities are not required 
to maintain individualized documentation for each patient to whom 
transportation is provided. While not required to be protected under 
the safe harbor, maintaining such documentation would be a best 
practice to demonstrate compliance with the requirements of the policy 
and the consistent and uniform application.
    Comment: Some commenters maintained that providers should not be 
required to have established criteria that patients must meet to 
qualify for transportation. One commenter suggested it would be 
intrusive and would discourage patients from seeking transportation. 
One commenter suggested transportation should be available to all 
patients, plus family members and friends who are involved in a 
patient's care. Others agreed that it is acceptable, appropriate, or 
even crucial to require providers to have policies regarding financial 
or transportation need. One commenter supported community-based need 
criteria, rather than individual need. Another commenter believed that 
the criteria should be based on the availability of and access to 
transportation, or to a driver willing to transport the patient. 
Another agreed with requiring the provider to maintain criteria, but 
urged OIG to avoid burdensome requirements or extensive documentation 
(e.g., a provider should be allowed to use Medicaid as a proxy for 
showing financial need). This commenter also recommended allowing 
different ways to show need (e.g., risk of missing treatment, certain 
medications making them unable to drive). One commenter stated that 
eligible entities should be able to set caps on the amount of 
transportation provided (e.g., an annual cap on the use of 
transportation services).
    Response: As stated above, we have determined that eligible 
entities must maintain a consistent policy for offering free or 
discounted transportation. We decline to mandate the parameters for 
this policy, other than the fact that it must comply with other terms 
of this safe harbor (including distance, and the prohibition on 
transporting only to referral sources), and must be applied uniformly 
and consistently. For example, one practice might have a policy to ask 
any patient who schedules any procedure that inhibits the patient's 
ability to drive himself or herself home whether that patient needs 
local transportation assistance. Another practice might offer local 
transportation assistance to any patient who has a history of missing 
appointments. Other providers or suppliers might have specific need 
criteria. Another provider might have a policy of never offering 
transportation unless the patient specifically states that he or she 
cannot get to an appointment due to a lack of transportation. We 
believe that the other

[[Page 88386]]

requirements in this safe harbor should protect Federal health care 
programs and beneficiaries, and that eligible entities should have the 
flexibility to develop policies to suit their patient populations' 
needs within those requirements. However, certain eligibility criteria 
would not be appropriate. For example, we do not agree that a patient's 
status as a Medicaid (or Medicare) beneficiary should be used as a 
proxy for establishing transportation need, in part because this would 
result in transportation being offered on the basis of volume or value 
of Federal health care program business. If the eligible entity has a 
need-based policy, the fact that a patient is a Medicaid (or Medicare) 
beneficiary does not establish that he or she has a need for 
transportation; nor does the fact that a patient is not a Medicaid (or 
Medicare) beneficiary establish a lack of transportation need. For 
example, a Medicaid beneficiary may have ready access to affordable 
public transportation, while a patient with more financial resources 
may not. While eligible entities are free to tailor their 
transportation programs to the needs of their own patient populations 
and communities (including setting caps on available transportation), 
they may not do so in a way that is linked to status as a Federal 
health care program beneficiary.
    Comment: Several commenters stated that requiring eligibility 
documentation or a screening process for each patient would be 
burdensome and would cause delays in the availability of transport. 
Some commenters cited privacy concerns. Others stated that 
documentation requirements will deter providers from offering the 
transportation. Others agree with documentation of need, with one 
commenter suggesting it is necessary for OIG oversight. One commenter 
suggested that patient need should be established by patient self-
declaration, but that such need should be noted in the patient record 
or discharge plan. Another supported ``reasonable'' documentation of 
need.
    Response: As we explain above, an eligible entity offering 
transportation must do so consistently and uniformly, in accordance 
with its own policy. If an entity believes that an inquiry as to 
transportation need raises privacy concerns, the entity is free to 
offer transportation without regard to need, as long as it does so 
consistently. We agree with commenters that documenting need for each 
patient could be burdensome, particularly for eligible entities that 
have a more generous transportation assistance program. We are not 
requiring entities to document transportation assistance provided, if 
it is in compliance with the eligible entity's policy (but again, we 
suggest it might be best practice to do so).
Modes of Transportation
    We proposed to limit the form of permissible transportation by 
excluding air, luxury, and ambulance-level transportation from safe 
harbor protection. Commenters generally agreed with this proposal.
    Comment: Several commenters generally agreed with our proposals to 
exclude air, luxury and ambulance-level transportation. One commenter 
agreed with excluding those types of transportation, but recommended 
that we consider patient needs (e.g., some patients may be capable of 
riding a bus, while others might need a taxi). Some commenters 
requested clarification that the safe harbor extends to third-party 
public transport. One commenter noted that excluding air transport is 
limiting for patients who must travel long distances for quality care, 
while another commenter suggested we should protect air travel if that 
is the usual mode of transportation in the area. Another commenter 
suggested that unadvertised ambulance transport should be available 
when no other option is available. Some commenters requested that chair 
cars be permitted.
    Response: We are finalizing our original proposal. We agree that 
transportation in vehicles equipped for wheelchairs (other than 
ambulances) and third-party transportation, including public 
transportation, would be protected if it meets the other criteria of 
the safe harbor. While there may be individual cases (or communities) 
that justify air or ambulance-level transportation, those situations 
would need to be considered on a case-by-case basis. We recommend that 
providers or suppliers seeking to use alternate forms of transportation 
request an advisory opinion.
    Comment: One commenter generally supported the proposal to permit a 
shuttle service but suggested that few, if any, restrictions be placed 
on hospital shuttle service transportation offered in the 30-day post-
discharge or 7-day post-ED-visit timeframes.
    Response: We recognize the importance of post-discharge care for 
patients. While the commenter used the term ``shuttle service,'' 
transportation geared to post-discharge care is less likely to be in 
the form of a shuttle and more likely to be offered to the patient on 
an individualized basis. As described in detail below, we are 
separately protecting shuttle services, and those services are subject 
to fewer restrictions than transportation offered to a particular 
patient on an individualized basis.
    Comment: Several commenters expressed a concern that it would be 
burdensome or impossible to screen patients to ensure that only 
established patients used a shuttle around a hospital or extended 
campus.
    Response: In this final rule, we expressly state that eligible 
entities offering a shuttle service would not be required to limit the 
service to established patients.
Marketing
    We proposed several conditions related to marketing in connection 
with offering free or discounted local transportation. We proposed that 
the transportation assistance could not be publicly advertised or 
marketed to patients or others who are potential referral sources, that 
no marketing of health care items or services could occur during the 
course of the transportation, and that drivers or others involved in 
arranging the transportation could not be paid on a per-beneficiary-
transported basis. We are finalizing these proposals, with certain 
clarifications.
    Comment: Commenters noted that signage on vehicles is important for 
safety. One commenter suggested that vehicles should be allowed to 
include signs and pamphlets about services to be received.
    Response: As we stated in the Proposed Rule, we agree that signage 
designating the source of the transportation on vehicles used to 
transport patients (or shuttles available to non-patients) is an 
important safety feature and would not be ``marketing,'' for purposes 
of the safe harbor. However, we respectfully disagree that providers 
should be able to post signs or give patients pamphlets or other 
marketing or informational materials during transport. Any discussion 
of services that patients may receive should come from the health care 
provider or supplier, not the transportation provider. Information 
about other services that the provider or supplier might offer is 
precisely the type of marketing this restriction strives to prevent. We 
are willing to protect transportation that helps patients get the care 
they need; we are not willing to protect transportation that is used as 
a sales tool.
    Comment: One commenter recommended that MA organizations or other 
risk-bearing entities be allowed to

[[Page 88387]]

advertise publicly the availability of transportation. The commenter 
states that such advertisements would reduce costs, and may be the only 
way to get the information to low-income populations.
    Response: Individuals or entities seeking to avail themselves of 
this safe harbor may not advertise the availability of the 
transportation. However, as explained above, we do not believe that all 
transportation offered by organizations such as a MA organization would 
require the protection of this safe harbor (e.g., when the 
transportation is being provided as a supplemental benefit). Every 
entity would need to evaluate the terms of a transportation program, on 
a case-by-case basis to determine whether the statute is implicated. If 
it is not, safe harbor protection would be unnecessary.
    Comment: Several commenters requested that we clarify that 
providers are permitted to distribute information to patients who may 
need transportation but would not otherwise know it is available. 
Commenters variously suggested, for example, that providers be able to 
offer transportation proactively to patients who might need it, or 
permit statements that transportation is available subject to certain 
conditions. One commenter inquired whether information could be on the 
provider's Web site or in printed materials. Another suggested the 
requirement should be sufficiently flexible to allow patients to learn 
about opportunities for transportation.
    Response: We agree with commenters that informing patients that 
transportation is available is not marketing, if it is done in a 
targeted manner. For example, if a patient learns that he or she needs 
to come to a followup appointment, or is scheduling a procedure that 
might require a safe ride home, it would be permissible to ask if the 
patient has a reliable mode of transportation. However, providers and 
suppliers should not advertise the availability of free or discounted 
transportation (including on Web sites or in printed materials 
distributed to the public). As we explain below, this rule is slightly 
different for shuttle services.
    Comment: One commenter agreed that a provider or supplier could pay 
drivers or others involved in arranging the transportation on a mileage 
or other fixed-rate basis, but not per-beneficiary-transported. Another 
requested that the safe harbor permit providers or suppliers to offer 
nominal public transportation fees (e.g., bus fare) to individual 
patients. Another commenter advocated that we permit providers and 
suppliers to reimburse patients directly, through vouchers, or through 
cash reimbursement.
    Response: We agree with the commenters' suggestions, which largely 
support our proposals. If transportation is offered via a driver or 
private company hired by the eligible entity, that eligible entity 
cannot pay the driver or person/entity involved in arranging for the 
transportation on a per-patient-transported basis (although it could 
pay on the basis of total distance traveled by a vehicle). However, if 
transportation is provided in the form of nonprivate transportation 
(such as taxi or bus), the transportation would be paid for or 
reimbursed to individual patients through, for example, taxi vouchers 
or bus fare, or cash reimbursement if the patient has a receipt to show 
that he or she incurred the cost of the transportation.
    Comment: One commenter requested clarification as to whether 
acknowledging donors constitutes marketing (e.g., a sign in the vehicle 
saying ``donated by ABC Chevrolet'').
    Response: In the Proposed Rule, we proposed prohibiting the 
marketing of health care items and services. We are finalizing this 
proposal. If a donor is a health care provider or supplier, or makes, 
markets, or sells health care items or supplies, an acknowledgment of 
that donor's contribution would be prohibited. If the donor is not a 
health care provider or supplier, or does not sell or provide health 
care items or supplies, the acknowledgement would not violate that 
condition of the safe harbor.
``Local'' Transportation
    As we explained in the preamble to the Proposed Rule, this safe 
harbor is intended to protect ``local'' transportation. We proposed 
that if the distance that the patient would be transported is no more 
than 25 miles, then the transportation would be deemed to be ``local.'' 
We solicited comments on whether 25 miles is an appropriate distance, 
whether 25 miles should be a fixed limitation rather than a distance 
``deemed'' to comply with the safe harbor, and other reasonable methods 
for interpreting the term ``local.'' In response to comments, and as 
described in more detail below, we have decided to have separate 
distance limits for rural areas and urban areas. We defined ``rural 
area'' as an area that is not an ``urban area,'' as defined in this 
rule. We defined ``urban area'' as: (a) A Metropolitan Statistical Area 
(MSA) or New England County Metropolitan Area (NECMA), as defined by 
the Executive Office of Management and Budget; or (b) the following New 
England counties, which are deemed to be parts of urban areas under 
section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-
21, 42 U.S.C. 1395ww (note)): Litchfield County, Connecticut; York 
County, Maine; Sagadahoc County, Maine; Merrimack County, New 
Hampshire; and Newport County, Rhode Island. These definitions are 
intended to be consistent with the physician self-referral law 
definitions of the same terms.
    Comment: Some commenters proposed specific distances that are 
farther than 25 miles. Proposals included 35 miles, 50 miles, and 100 
miles. Some of these commenters proposed allowing the transportation at 
least within this expanded distance or to the closest facility capable 
of providing the necessary care. Many commenters recommended 
considering a greater distance than 25 miles for providers and 
suppliers in rural or underserved areas, where patients travel much 
greater distances to access appropriate care. Commenters noted that 
CAHs must be at least 35 miles away from the nearest hospital or other 
CAH. Certain commenters suggested that providers serving rural or 
medically underserved communities should be exempt from any mileage 
limits. One commenter gave this example: In a rural area, a patient 
might go to a hospital for an outpatient procedure that could be done 
in an office; if the office is farther away than the hospital but 
transportation is allowed, the patient could receive care in a less 
expensive setting.
    Response: This final regulation maintains the proposed 25-mile 
distance for patients in an urban area but expands the definition of 
``local'' to 50 miles for patients in a rural area, as defined in this 
rule. The mileage can be measured directly (i.e., ``as the crow 
flies''), which would include any route within that radius (even if 
such route is more than 25 or 50 miles when driven).
    We arrived at our determinations of 25 and 50 miles after 
considering input from commenters and additional consultation with our 
government partners. We reviewed the United States Department of 
Agriculture (USDA) Economic Research Service's (ERS) data on Frontier 
and Remote (FAR) ZIP code areas, developed using data from the 2010 
census. In an article describing these FAR levels (of which there are 
four), ERS explained that ``[h]ealth care access is the primary policy 
issue motivating this research.'' \15\ FAR level

[[Page 88388]]

one includes ZIP codes in which the majority of the population lives 60 
minutes or more from an urban area \16\ of 50,000 or more people. FAR 
level four breaks down the travel time to other areas: not only are the 
majority of those residents 60 minutes or more from urban areas with 
50,000 or more people, they are 45 minutes or more from urban areas of 
25,000-49,000 people, 30 minutes or more from urban areas of 10,000-
24,999 people, and 15 minutes or more from urban areas of 2,500-9,999 
people. According to the article, 6.5 percent of the U.S. population is 
classified as FAR level one, while 1.7 percent is classified as FAR 
level four (and thus, 93.5 percent of the population would not be 
classified as FAR). We note, MSAs contain at least one urbanized area 
of 50,000 or more people. In conjunction with this data, we reviewed a 
Working Paper titled ``Geographic Access to Health Care for Rural 
Medicare Beneficiaries'' that presented research and data on how far 
rural patients had to travel to access health care.\17\ This paper 
included both median distance in miles and median time in minutes and 
presented the data in different categories: Selected diagnoses (e.g., 
dementia, congestive heart failure, fractures, malignant neoplasms) and 
procedures (e.g., intubation for emergency, cardiac surgery, radiation 
oncology, general medical exam, dialysis). All diagnoses presented 
showed a median distance under 50 miles. Only two procedures showed a 
median distance over 50 miles, and those were for patients considered 
``isolated rural,'' defined in this paper as ``in or associated with a 
rural town of fewer than 2,500.'' We believe that expanding the 
distance to 50 miles for patients in rural areas should protect 
transportation that meets the vast majority of patients' needs, while 
still being ``local'' for their communities.
---------------------------------------------------------------------------

    \15\ John Cromartie, David Nulph, and Gary Hart, Mapping 
Frontier and Remote Areas in the U.S., Amber Waves, Dec. 2012, Vol. 
10, Issue 4, available at: http://www.ers.usda.gov/media/960626/datafeature.pdf.
    \16\ The cited research uses the term ``urban area'' as 
described in this preamble, which is not necessarily the same as 
``urban area'' as defined in the final regulation.
    \17\ Leighton Chan, MD, MPH, L. Gary Hart, Ph.D., David C. 
Goodman, MD, Geographic Access to Health Care for Rural Medicare 
Beneficiaries (WWAMI Rural Health Research Center, Working Paper 
#97, April 2005).
---------------------------------------------------------------------------

    We believe that a 25-mile distance should be sufficient for 
patients in urban areas to access quality health care, and can be 
fairly characterized as ``local.'' We recognize that there may be areas 
within urban areas, as we are definining that term in this regulation, 
that are generally underserved, or underserved as to particular types 
of health care services. However, we believe using definitions of 
``rural area'' and ``urban area'' in this safe harbor that are 
consistent with definitions of the same terms used in connection with 
the physician self-referral law at 42 CFR 411.351 and 412.62(f)(1)(ii) 
will be simplest for providers to work with and encourage the widest 
use of this safe harbor.
    Individuals and entities anticipating a need to transport over 
longer distances and believing that they have sufficient safeguards in 
place to avoid abusive outcomes, such as steering of patients and 
inducements to obtain unnecessary care, may seek an advisory opinion 
for a determination on whether the program is sufficiently low risk.
    We are sensitive to the fact that patients living in rural areas 
may have fewer health care providers and suppliers in their immediate 
areas, and that transportation might provide these patients with more 
choices and better access to quality care. We note that the requirement 
for a longer distance is that the patient resides in a rural area. 
Thus, the eligible entity (or the provider or supplier to whom the 
patient is transported) may or may not be in a rural area.
    We believe that other suggestions provided by commenters are not 
appropriate for a safe harbor. For example, eliminating any kind of 
mileage or other limit would not give providers any kind of certainty 
as to whether they were offering ``local'' transportation, as required 
by the safe harbor. We also do not believe that a requirement that 
transportation be to the closest facility capable of providing 
treatment is appropriate. There is likely to be uncertainty as to 
whether any facilities were closer to the patient, whether those 
facilities provide the needed service, whether such service is 
available within the time needed by the patient, and the like. We 
believe the two mileage limits that we are finalizing are sufficient to 
help patients access care while giving eligible entities a definite 
test to apply to determine whether their transportation assistance 
meets the ``local'' requirement of the safe harbor.
    Comment: Several commenters proposed allowing a hospital or other 
provider to transport patients to the nearest facility capable of 
providing medically necessary items or service. Some commenters 
specifically cited specialized care (such as radiation oncology) or a 
specific facility type (e.g., for IHS beneficiaries, Indian tribe, 
tribal organization, or urban Indian organization health facility), 
which could be farther than 25 miles away. Some commenters proposed 
including the nearest facility as an alternate (i.e., 25 miles or to 
the nearest provider or supplier who can provide the care).
    Response: As explained above, we have retained our proposed 25-mile 
limit for patients in an urban area, but have modified our original 
proposal to protect transportation up to 50 miles for patients located 
in rural areas. As we also explain above, a condition that limits 
transportation to the nearest provider or supplier could unnecessarily 
limit patient choice, and application of such a standard could create a 
burden for patients or providers.
    Comment: Certain commenters expressed a concern that a 25-mile 
limit could impede clinically integrated systems that span a greater 
distance from providing transportation among facilities in their 
systems.
    Response: The purpose of this safe harbor is to protect free or 
discounted local transportation. We do not consider distances greater 
than 25 miles to be ``local'' in urban areas, or 50 miles in rural 
areas, for purposes of this safe harbor. We understand that there may 
be beneficial, low-risk transportation arrangements that the mileage 
limit will exclude from protection under the safe harbor. Entities 
desiring to implement an arrangement that implicates the statute and 
does not meet the terms of the safe harbor may submit an advisory 
opinion request so that we can determine, on a case-by-case basis, 
whether the arrangement is sufficiently low risk to be protected.
    Comment: We received comments with a range of reasons to eliminate 
any fixed mileage limit. Commenters suggested that providers are in the 
best position to develop mileage criteria that reflect local 
characteristics; the distance is irrelevant, but transportation should 
be allowed only in certain circumstances (e.g., severe weather); any 
time or distance limit is arbitrary, prescriptive, or too stringent; 
and any time or distance could be appropriate, depending on the facts 
and circumstances. Some commenters proposed using the provider's 
primary service area, or using longer distances for rural or medically 
underserved areas.
    Response: While we understand that a set mileage limit is not a 
one-size-fits-all solution, we believe that a bright-line rule is 
easier for all parties to apply. Eligible entities will benefit from 
having the confidence that their arrangements fit within the safe 
harbor. We discuss our rationale for not implementing certain 
alternatives proposed by commenters elsewhere in this rule.

[[Page 88389]]

    Comment: A number of commenters supported an approach referenced in 
the Proposed Rule of permitting transportation offered to patients 
within the primary service area of the provider or supplier (or other 
location) to which the patient would be transported. One of these 
commenters suggested defining ``primary service area'' as any 
jurisdiction from which the provider or supplier receives at least 10 
percent of its patients. Some commenters noted that time or distance 
measurements vary too much in different areas (e.g., it could take an 
hour to travel 25 miles through an urban area, but only 20 minutes to 
cover the same distance in a rural area). Likewise, argued a commenter, 
most of a provider's patients might be within a 25-mile radius in an 
urban area, but that same radius might include less than half of a 
provider's patients in a rural area.
    Response: We considered this approach, but we maintain that using a 
mileage limit is more appropriate. We agree that time and distance 
measurements, and providers, suppliers, and patients within those time 
or distance limits, vary by region. However, we believe that by using a 
set mileage limit, which now includes the original 25-mile proposal as 
well as a 50-mile distance for patients in rural areas, we are 
balancing the need for patients to get local transportation for 
services, and the certainty that comes with a bright-line rule.
    Comment: Certain commenters support the 25-mile limit as a 
``deeming'' provision. In other words, 25 miles would always be 
acceptable, but greater distances would be permissible under 
appropriate circumstances (e.g., a rural or specialized facility that 
is farther than 25 miles away).
    Response: While we have adopted fixed mileage limits for the 
reasons specified above, rather than the deeming concept that we 
proposed in the Proposed Rule, we did expand the distance to 50 miles 
for patients in rural areas. Again, these distance limits preserve the 
concept of ``local'' transportation, while accommodating transportation 
needs greater than our original proposal of 25 miles for patients in 
rural areas. We may consider other types of transportation arrangements 
in future rulemaking.
    Comment: One commenter does not believe ``rural'' or 
``underserved'' should be defined, both because the commenter claims 
that federal definitions of ``rural'' fail to address communities' 
unique barriers, and because ``local'' should include the service 
line's service area.
    Response: We are relying on a definition of ``rural'' for the rule 
that includes anything outside of an urban area, which is consistent 
with the definition of ``rural area,'' as defined in the physician 
self-referral law.
Prohibition on Cost-Shifting
    We proposed that the eligible entity bear the costs of the free or 
discounted local transportation services, and not shift the burden of 
these costs to Medicare, a State health care program, other payers, or 
individuals. Many commenters supported this requirement, but some asked 
for specific clarifications.
    Comment: One commenter asked that we clarify that transportation 
offerors cannot shift costs to third-party vendors (e.g., ambulance 
providers). One commenter recommended that transportation offerors be 
required to report incurred costs on cost reports to CMS.
    Response: We do not believe it is feasible or necessary to require 
specifically in this final rule that transportation offerors not shift 
costs onto third-party transportation vendors. First, we believe that 
our proposed prohibition on shifting costs and requiring the 
transportation offeror to bear costs itself covers the commenter's 
concern. Moreover, this safe harbor protects only the offering, giving, 
soliciting, and receiving of the transportation. It does not protect 
behind-the-scenes arrangements to implement the transportation. Thus, 
if a hospital were to shift the costs of its transportation program to 
an ambulance provider under an explicit or implicit threat of 
withholding future referrals, such activity could still violate the 
anti-kickback statute and would not be protected under this safe 
harbor. Whether transportation costs should be reported on cost reports 
is outside the scope of this rulemaking; however, any reporting of the 
cost of transportation that would serve to shift such costs to Federal 
health care programs would take the transportation out of the 
protection of this safe harbor.
    Comment: One commenter suggested that providers should be permitted 
to enter into cost-sharing arrangements with local or state entities, 
or with nonprofit organizations or charities. This commenter believes 
providers should not be required to bear the ``full'' costs. Another 
commenter noted that smaller practices should be able to pool resources 
to offer transportation.
    Response: We agree that providers and suppliers should not have to 
bear the full cost of transportation, if they can get donations or 
contributions from appropriate sources. However, in the absence of an 
agreement among entities to share costs, entered into voluntarily and 
without any tie to referrals, the costs should not be shifted to any 
payer, individual, or other provider or supplier. This prohibition is 
not intended to bar entities from voluntarily joining together to offer 
transportation. Investing in transportation is not necessarily 
different than making any other investment (and donating transportation 
is not different than making any other donation). For example, a 
charity might donate a vehicle to a hospital, or a health system or an 
ACO might purchase vehicles that would be available for use by its 
providers or suppliers (at their cost pursuant to the safe harbor 
requirement that the eligible entity bear the costs of the 
transporation) to transport their patients (i.e., the ACO or health 
system would not be acting as the eligible entity; the transporting 
provider or supplier would be). Any agreement parties enter into to 
make this investment would not be covered under this safe harbor (which 
protects the transportation itself), but it also would not disqualify 
the transportation from the protection of this safe harbor, as long as 
the terms of the agreement would not result in transportation that 
fails to meet the conditions of the safe harbor (e.g., if the agreement 
involved tying the availability of transportation to referrals). 
Parties would need to ensure that the agreement does not violate the 
anti-kickback statute or other fraud and abuse laws.
Shuttle Transportation
    We sought comments on whether we should separately protect a second 
form of transportation akin to a shuttle service. We received a number 
of comments about offering a shuttle service, and which of our proposed 
safe harbor criteria should, or should not, apply to that form of 
transportation. In short, this final rule separately protects a shuttle 
service under the safe harbor. Some safeguards will be the same, and 
others will be different, compared to the more personalized form of 
transportation contemplated by this safe harbor. First, we interpret 
the term ``shuttle'' to be a vehicle (not air, luxury, or ambulance) 
that runs on a set route, on a set schedule. Second, the ``established 
patient'' requirement will not apply to shuttle services. Third, we are 
not mandating where the shuttle can or cannot make stops, other than 
continuing to require that the shuttle transportation be local. Because 
we anticipate that shuttle routes may include multiple stops, ``local'' 
would mean that there are no more than 25 miles between any stop on the 
route and any stop at a location where health care

[[Page 88390]]

items or services are provided, when measured directly. If any stop is 
in a rural area, the distance would be up to 50 miles from that stop. 
Thus, if a health system runs a shuttle that stops at a hospital, a 
public transportation stop (the only stop in a rural area), a grocery 
store, and a clinic, all stops other than the public transportation 
stop must be within 25 miles of the hospital and the clinic (if 
measured directly, without regard for intervening stops), and the 
hospital and the clinic must be within 50 miles of the transportation 
stop in the rural area. Fourth, the marketing prohibitions apply to 
shuttle services, except that the schedule and stops can be posted. The 
rest of the requirements of the safe harbor (e.g., eligible entity 
requirements, other marketing, and the prohibition on cost-shifting) 
all apply to shuttle services. We summarize the comments received below 
and provide additional details.
    Comment: A number of commenters expressly agreed with our proposal 
to allow shuttles, and others implicitly agreed by commenting on other 
requirements (such as the established patient requirement) in the 
context of a provider running a shuttle. One commenter requested that 
we clarify that providers and suppliers can contract with third parties 
to run shuttles. Another commenter requested protection of a shuttle, 
bus, or van route that includes neighborhoods served by a hospital, 
public transportation stops, and the hospital campus or other hospital 
campuses. One commenter urged us to require that a shuttle must 
transport patients to providers other than those affiliated with the 
eligible entity running the shuttle.
    Response: We agree that shuttle vans or buses should be permitted 
under this safe harbor, and that some different safeguards should 
apply. We offer the following responses to specific comments. (1) We 
would not mandate who runs the shuttles (whether it is the eligible 
entity or a contractor of the eligible entity operating the shuttle 
service). (2) For various reasons, we are not requiring that the 
shuttle be limited to established patients. Unlike door-to-door 
transportation in which a driver is sent to pick up a specific patient, 
a shuttle would run on a regular route. We believe it would be 
burdensome if we required shuttle drivers to determine whether 
individuals using the shuttle were established patients of one of the 
facilities where the shuttle would stop. Also, a shuttle service may be 
used for reasons other than to obtain healthcare items or services, or 
to obtain such items or services from a particular provider, 
practitioner, or supplier. For example, we expect many shuttles would 
be available to employees of the eligible entity or visitors to one of 
the eligible entity's facilities as well as to patients. If the entity 
furnishing the shuttle service chooses also to make it available to the 
general public, we do not believe that this would materially increase 
the potential for abuse. Other safeguards (e.g., restrictions on 
marketing) limit the risk that the shuttle would be used to recruit new 
patients. Should an eligible entity prefer to limit shuttle services to 
established patients, such a limitation would not be prohibited under 
this safe harbor. However, it is not a requirement. (3) We decline to 
adopt the recommendation that the shuttle be required to stop at 
providers unaffiliated with the provider or supplier offering the 
shuttle service. We are also not approving (or disapproving) particular 
types of stops as appropriate for a shuttle service. We believe that 
such requirements would be unworkable in a safe harbor. For example, if 
a hospital in an urban area offered a shuttle in roughly a 10-mile 
radius around the hospital, there could be dozens, if not hundreds, of 
unaffiliated providers, practitioners, or suppliers on or near that 
route, as well as a variety of stops that are included primarily as 
patient pick-up locations. We believe the eligible entity offering the 
transportation is in the best position to determine the types of 
shuttle stops that are appropriate for the applicable community and 
that the safeguards included in the final rule are sufficient to 
mitigate risks associated with offering shuttle transportation.

C. Civil Monetary Penalty Authorities: Beneficiary Inducements CMP

    When reviewing comment summaries and responses below, it is 
important to remember what the beneficiary inducements CMP prohibits, 
in contrast to certain other fraud and abuse laws, such as the anti-
kickback statute. First, the beneficiary inducements CMP prohibits 
inducements only to Medicare and State health care program \18\ 
beneficiaries. Second, it prohibits inducements to those beneficiaries 
only if the offeror knows or should know the inducement is likely to 
influence the beneficiary to receive a reimbursable service from a 
particular provider, practitioner, or supplier. Unlike the anti-
kickback statute, which prohibits offering or giving remuneration to 
induce beneficiaries to order an item or service, the beneficiary 
inducements CMP is triggered if the person providing the remuneration 
knows or should know that it is likely to induce the beneficiary to 
order the item or service from a particular provider, practitioner, or 
supplier. For example, if a hospital were to offer a beneficiary 
remuneration post-discharge to follow up with a physician (without 
regard to who that physician might be, and without recommending a 
particular physician or group), the beneficiary inducements CMP would 
not be triggered and no exception would be necessary. In contrast, an 
entity like a pharmaceutical manufacturer, which is not a provider, 
practitioner, or supplier, could nonetheless implicate the statute if 
it offered or gave remuneration to a beneficiary that it believed would 
be likely to induce the beneficiary to order an item or service from a 
particular provider, practitioner, or supplier (e.g., to choose a 
particular physician or pharmacy). With that background, the following 
section summarizes the comments we received on each of the exceptions 
proposed in the Proposed Rule.
---------------------------------------------------------------------------

    \18\ All references to ``State health care program'' in this 
final rule rely on the definition of that term found at section 
1128(h) of the Act.
---------------------------------------------------------------------------

1. Copayment Reductions for Outpatient Department Services
    We proposed to incorporate the statutory exception set forth at 
section 1128A(i)(6)(E), which permits hospitals to give reductions in 
copayment amounts for certain outpatient department (OPD) services. The 
statutory cite to the definition of ``covered OPD services'' was 
outdated, so we proposed to use the current statutory reference. We 
received no comments on this proposal, and we are finalizing it, as 
proposed.
2. Promotes Access/Low Risk of Harm
    Section 1128A(i)(6)(F) of the Act includes an exception that 
protects ``any other remuneration which promotes access to care and 
poses a low risk of harm to patients and Federal health care programs 
(as defined in section 1128B(f) and designated by the Secretary under 
regulations).''
    We note that other exceptions to the beneficiary inducements CMP, 
and some safe harbors to the anti-kickback statute (which are 
incorporated by reference as exceptions to the beneficiary inducements 
CMP), may cover activities or arrangements that arguably ``promote 
access to care and pose a low risk of harm to patients and Federal 
health care programs.'' This exception should be read in the context of 
those more specific exceptions and safe harbors: We would look to other 
applicable exceptions to consider whether the remuneration in question

[[Page 88391]]

poses a low risk of harm. Thus, activities and arrangements that are 
addressed by another beneficiary inducements CMP exception or a safe 
harbor and meet the elements of the applicable safe harbor or exception 
would be considered to be low risk under this exception. For example, 
one type of remuneration cited by numerous commenters that could 
promote access to care is free transportation. We have set out 
conditions in the anti-kickback statute safe harbor for local 
transportation that we believe are necessary for such transportation to 
be ``low risk.'' If a local transportation arrangement did not meet the 
requirements of the safe harbor (e.g., it would be long-distance 
transportation, or transportation that is advertised), it would be 
unlikely to be low risk under this exception. However, we recognize 
that each arrangement should be subject to an analysis of the facts and 
circumstances. For example, if a transportation arrangement did not 
meet all conditions of the safe harbor, but had different safeguards in 
place, it could be low risk under this exception. We note, however, 
that this exception does not apply to the anti-kickback statute. 
Entities desiring to enter into transportation arrangements that do not 
meet the requirements of the anti-kickback safe harbor may wish to seek 
an advisory opinion.
    For activities and arrangements that are not addressed by a more 
specific safe harbor or exception, anyone asserting this exception as a 
defense will have the burden of presenting sufficient facts and 
analysis for OIG to determine that the arrangement promoted access to 
care and posed no more than a low risk of harm to patients and the 
Federal health care programs, as described in this Final Rule.
    In the Proposed Rule, we proposed certain interpretations of the 
statutory language to inform our development of regulatory text. We 
also solicited comments on a number of specific aspects of the 
statutory language. The responsive comments fall into three general 
categories: (1) What constitutes ``care;'' (2) what it means to 
``promote access'' to care; and (3) what type of remuneration poses a 
low risk of harm to patients and Federal health care programs. We also 
received questions about types of programs or arrangements that might 
meet the exception, or other general questions. We address these 
comments in turn, and we intend to strictly interpret the language of 
this exception, as described in detail below.
a. Promotes Access to Care
The Term ``Care''
    In the Proposed Rule, we characterized ``care'' as ``medically 
necessary health care items and services.'' 79 FR 59717, 59725 (Oct. 3, 
2014). We also solicited comments on whether we should interpret 
``care'' more broadly to include nonclinical care that is reasonably 
related to medical care, such as social services. Id.
    Comment: Some commenters supported protecting remuneration that 
promotes access to nonclinical care that is reasonably expected to 
affect the patient's health (e.g., dietary counseling, social 
services). One commenter suggested that we should broaden our 
interpretation to include nonclinical care and protect any activity 
related to care that is encouraged through CMS's Medicare Star Ratings 
system. Another commenter recommended that the exception should include 
access to nonclinical services reasonably related to treating, 
managing, or preventing a condition identified in a published 
recommendation of the U.S. Preventive Services Task Force. Another 
commenter suggested that promoting access to nonclinical care fosters 
efficiency and quality improvement goals of integrated care 
arrangements.
    Response: At a high level, we agree with the commenters who suggest 
that certain types of nonclinical items and services can improve 
overall health and help meet quality-improvement goals. However, after 
considering comments that expressly addressed this question, in 
combination with how this term affects other aspects of the exception, 
we do not agree that the term ``care'' in this exception should be 
expanded beyond items and services that are payable by Medicare or a 
State health care program. For clarity, because some State health care 
programs (such as Medicaid) cover some services that are not strictly 
medical (such as personal care services for beneficiaries who are 
unable to care for themselves), we are revising the standard to 
encompass items and services that are payable by Medicare or a State 
health care program, rather than by reference to medical necessity. 
Thus, when we refer to ``care'' in the context of ``access to care'' 
throughout the following discussion, we mean access to items and 
services that are payable by Medicare or a State health care program 
for the beneficiaries who receive them.
    In response to the comment regarding the Medicare Star Ratings 
system, we note that the activities encouraged under this system 
include many types of care, such as health screenings, vaccines, and 
managing chronic conditions. If the remuneration promotes access to 
care, and is low risk, it would be protected. The exception applies to 
a prohibition on remuneration that is likely to influence a beneficiary 
to order or receive items or services from a particular provider, 
practitioner, or supplier for which payment may be made by Medicare or 
Medicaid. As explained above, we believe it therefore follows that the 
``care'' alluded to in the exception is care provided by the particular 
provider, practitioner, or supplier, which is payable by Medicare or a 
State health care program. As further noted above, we are defining the 
term ``access to care'' as access to items or services payable by 
Medicare or a State health care program. We decline to define ``care'' 
more broadly because the statutory exception provides no guidance as to 
what constitutes ``care,'' beyond that which is covered by these 
programs, or what other kinds of care should be included. 
Notwithstanding our conclusion on this point, we will continue to 
monitor the changing payment and health care delivery landscape for 
possible future exceptions. In addition, we emphasize that individuals 
and entities can still help and encourage beneficiaries to access 
nonpayable care without implicating the beneficiary inducements CMP. 
For example, individuals and entities can provide patients with 
objective information (such as educational materials or other 
resources) about community resources. Moreover, when items or services 
are not reimbursable by Medicare or State health care programs, the 
statute would be triggered only if the offeror of the remuneration knew 
or should have known that the remuneration was likely to influence a 
Medicare or State health care program beneficiary to receive 
reimbursable services from a particular provider, practitioner, or 
supplier. For example, a MA organization or a Part D plan could provide 
remuneration to its enrollees to help them access nonpayable care, 
without implicating the beneficiary inducements CMP; MA organizations 
and Part D plans are not providers, practitioners, or suppliers, and 
under ordinary circumstances remuneration from them to access 
nonpayable items or services would not be likely to induce a 
beneficiary to use a particular provider, practitioner, or supplier for 
an item or service payable by Medicare. Likewise, an employee in a 
physician's office could work with Medicare or State health care 
program patients to refer them to resources in

[[Page 88392]]

their communities (e.g., for assistance with housing, food, or domestic 
violence counseling). Providing these educational or informational 
services to patients would not implicate the beneficiary inducements 
CMP.
    Comment: Commenters requested that the exception protect 
remuneration in the form of the provision of nonclinical items that 
improve medical care or are reasonably related to medical care. Among 
the nonclinical items commenters suggested should be permitted are 
health and wellness-related technology hardware and software, computer 
and smartphone applications, home monitoring devices, telemedicine 
capability, nutritional services (i.e., meals or meal preparation 
services), health and wellness coaching, mental or physical activity 
initiatives, social services, legal services, Internet classes, 
language instruction, and discount programs that tie health and 
wellness achievements to the receipt of retail items and services.
    Response: We note that the question of whether the form of 
remuneration can be a payable item or service is a different question 
from the ``care'' to which access is promoted by the remuneration. A 
number of commenters provided suggestions of beneficial items or 
services (i.e., forms of remuneration) that are nonpayable by Medicare 
or State health care programs. It is possible that any of the examples 
of remuneration above would not violate the CMP under appropriate 
circumstances. If the provision of an item or service is not likely to 
influence a beneficiary to choose a particular provider, practitioner, 
or supplier, it does not implicate the statute. The provision of 
remuneration that does implicate the statute could be protected by this 
or another exception, if all conditions of the exception are met. In 
evaluating a particular arrangement for the provision of remuneration 
to beneficiaries under this exception, we would consider whether the 
arrangement promotes access to care (i.e., items or services payable by 
Medicare or a State health care program) and is a low risk of harm to 
patients and Federal health care programs, in accordance with the 
guidelines set forth here.
    Comment: Some commenters disagreed with limiting the exception to 
access to care in the form of items and services that are medically 
necessary. One commenter suggested that tying access to care to 
``medically necessary items and services'' would exclude items or 
services given before seeing a doctor, because the provider would not 
necessarily know what services the beneficiary would require or whether 
such services are medically necessary. Two commenters suggested that 
the standard would be burdensome for health plans, pharmacy benefit 
managers, and OIG because it would require patient-specific reviews by 
individuals with medical expertise, and would exclude items that are 
``reasonably related'' to medical care.
    Response: We did not propose limiting the exception to remuneration 
that is medically necessary; the remuneration must increase the 
beneficiary's ability to obtain care and pose a low risk of harm. We do 
not believe the restriction we proposed would exclude items or services 
given before seeing a doctor. Remuneration may come from any individual 
or entity to facilitate a beneficiary's obtaining care, as defined 
herein, from a provider, practitioner, or supplier for the first time. 
For example, if a patient makes an appointment with a physician 
practice, the practice may send the patient a monitoring device (such 
as a blood pressure cuff, heart rate monitor, or purchase code for a 
smartphone app) to collect health data before the appointment. As we 
explain above, we revised our interpretation of ``care'' from medically 
necessary items or services to items or services payable by Medicare or 
a State health care program. We do not believe it would be burdensome 
for health plans or others to be familiar with the types of items or 
services that are payable by these programs. Further, as we explain in 
greater detail below, we believe programs can be developed at the 
beneficiary-population level for greater efficiency. With that said, we 
would not protect remuneration that would be likely to influence a 
patient to access unnecessary care from a particular provider, 
practitioner, or supplier. As a separate matter, as we explain above, 
the remuneration itself does not need to be payable items or services; 
the remuneration must promote access to such care.
    Comment: One commenter suggested that restricting the exception to 
remuneration that promotes access to medically necessary care conflicts 
with the suggestion that the remuneration could promote access to 
nonclinical care and is not required by statute.
    Response: We agree that we could not adopt both standards. The 
standard that we are adopting protects remuneration that promotes 
access to care (items and services that are payable by Medicare or a 
State health care program); we solicited comments on whether our 
proposal should be expanded to apply to remuneration that promotes 
access to nonclinical care (and poses a low risk of harm). For purposes 
of this exception, we believe a necessary safeguard to protect both 
patients and Federal health care programs is to limit the scope of the 
exception to remuneration that promotes access to items and services 
that are payable by Medicare or a State health care program. As we note 
elsewhere, we will continue to monitor the changing health care 
delivery and payment landscape, as well as changing understandings of 
the relationship between traditional health care services and non-
traditional services that improve health, and consider whether 
additional or revised exceptions are necessary in the future.
The Term ``Promotes Access''
    We proposed that the exception would include only remuneration that 
``improves a particular beneficiary's ability to obtain medically 
necessary items and services.'' We solicited comments on multiple 
aspects of this proposal. We asked whether we should interpret 
``promotes access'' more broadly, to include encouraging patients to 
access care, supporting or helping patients to access care, or making 
access to care more convenient than it otherwise would be. As we 
explain in greater detail below, many of the comments that we received 
proposing a broader interpretation sought protection for remuneration 
that could fit within our original proposal. After considering all of 
the comments, we decline to adopt a broader interpretation of 
``promotes access'' than we proposed (subject to our revised definition 
of ``care''), but we note that items or services that support or help 
patients to access care, or make access to care more convenient than it 
otherwise would be often would meet our original proposed 
interpretation. We also asked whether the remuneration would have to 
promote access to a particular beneficiary or whether it should also 
apply to a defined beneficiary population. We have determined that the 
exception should apply to remuneration that promotes access either to a 
particular individual or to a defined beneficiary population.
    Comment: Some commenters supported protecting remuneration 
(including what some commenters characterized as programs to offer 
remuneration) to promote access to care for a particular beneficiary 
population, as well as individual beneficiaries. One rationale offered 
to expand the protection to remuneration that promotes access to care 
for a beneficiary population is to facilitate use of the exception 
operationally; the commenter suggested that lines can be blurred 
between what is offered on an

[[Page 88393]]

individual basis versus what is offered to a defined group. One 
commenter noted that a broader interpretation of the individual(s) for 
whom a program might promote access to care allows for the development 
of innovative programs. One commenter supported population-specific 
programs for free or discounted services, such as participation in 
smoking cessation, nutritional counseling, or disease-specific support 
groups.
    Response: We agree with the commenters that the exception should 
apply to remuneration that promotes access to care for a defined 
beneficiary population, and not be limited to remuneration offered on 
an individual patient-by-patient basis. With that said, the form of 
remuneration does not matter (as long as it is an item or service, and 
not cash or a cash equivalent, and not a copayment waiver), and could 
include participation in smoking cessation, nutritional counseling, or 
disease specific support groups, but the remuneration would have to 
comply with the other prongs of the exception: It must promote access 
to items or services that are payable by Medicare or a State health 
care program (and pose a low risk of harm to patients and Federal 
health care programs). Such an analysis would depend on the facts and 
circumstances. For example, a primary care group practice might 
purchase and make available to its diabetic patients a subscription to 
a Web-based food and activity tracker that includes information about 
healthy lifestyles. Depending on the cost of this subscription, it 
could constitute remuneration to the patient. This remuneration would 
promote access to care because it would help the patient understand and 
manage the interaction between lifestyle, disease, and prescribed 
treatment and would create a record that would facilitate interactions 
with the physician for future care-planning. In other words, the 
service is a tool that patients would use to access care and treatment 
because it helps them access improved future care-planning by their 
physican. In contrast, an ophthalmologist could not offer a general 
purpose $20 debit card to every patient who selected him as a surgeon 
to perform cataract surgery because the debit card does not help the 
patient access care, and remuneration that is cash or a cash equivalent 
\19\ is not low risk.
---------------------------------------------------------------------------

    \19\ OIG considers ``cash equivalents'' to be 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 or for a certain purpose, like a gasoline 
gift card).
---------------------------------------------------------------------------

    Comment: We received numerous comments generally supporting the 
concept of broadly interpreting the definition of ``promotes access to 
care'' to encompass encouraging patients to access care, supporting or 
helping patients to access care, or making access to care more 
convenient for patients than it otherwise would be. Commenters 
suggested that the broader definition is justified, in light of the 
shift toward coordinated or integrated care that depends on patient 
engagement. Commenters further suggested that a more narrow definition 
could exclude many types of beneficiary incentives that would help 
patients to access care. Another commenter expressed concern with a 
broad definition, and recommended that OIG adopt a standard for medical 
necessity similar to the one Medicare uses and clarify how it would be 
enforced. Commenters suggested specific examples of types of 
remuneration that should fit into the definition of ``promotes access'' 
to care, such as transportation, self-monitoring tools, post-discharge 
contacts, and incentives to be proactive for health care needs.
    Response: We believe that interpreting ``promotes access to care'' 
as improving a particular beneficiary's [or, as noted above, a defined 
beneficiary population's] ability to obtain items and services payable 
by Medicare or a State health care program is sufficiently broad. We 
appreciate the commenters' desire for a broad definition of ``promotes 
access,'' and upon review of the comments, we have determined that some 
of the phrasing about which we solicited comments (e.g., ``helping 
patients to access care'' or ``making access to care more convenient'') 
could be included in the concept of improving a beneficiary's ability 
to access care. We recognize that there are socioeconomic, educational, 
geographic, mobility, or other barriers that could prevent patients 
from getting necessary care (including preventive care) or from 
following through with a treatment plan. Our interpretation of items or 
services that ``promote access to care'' encompasses giving patients 
the tools they need to remove those barriers. As we discuss below, this 
interpretation would not, however, incorporate the concept of rewarding 
patients for accessing care; the exception protects items or services 
that should improve a patient's ability to access care and treatment, 
not inducements to seek care. Thus, some suggestions from commenters 
would not fit into our definition. Incentives to be proactive for 
health care needs might not improve a beneficiary's ``ability'' to 
access care (though we note, the preventive care exception \20\ does 
protect incentives to seek preventive care). For example, if a patient 
had a health condition for which a smoking-cessation program was a 
payable service, under this exception, a provider could offer free 
child care to the patient so that the patient could attend the program, 
but the provider could not give the patient movie tickets or any other 
reward for attending a session or series of sessions. A patient might 
not be able to attend the appointment without child care assistance, 
but the movie tickets do not improve the patient's ability to attend 
the appointment. Other examples provided by commenters could fit in the 
exception, under appropriate circumstances. Transportation assistance 
was a common request from commenters. If a provider, practitioner, or 
supplier offered local transportation or parking reimbursement to 
patients for appointments for items or services payable by Medicare or 
a State health care program, such remuneration would improve a 
beneficiary's ability to access that care.\21\ Self-monitoring tools 
also could promote access to care. For example, a hospital might send a 
patient home with an inexpensive device to record data, such as weight 
or blood pressure, that could be transmitted to the hospital or the 
patient's physician. This remuneration could increase the beneficiary's 
ability to capture information necessary for followup care and to 
comply with the treatment plan. Post-discharge contacts limited to 
communications with the patient ordinarily would not constitute 
remuneration and thus would not require the protection of an exception 
to the CMP.
---------------------------------------------------------------------------

    \20\ The ``preventive care exception'' is a statutory exception 
at section 1128A(i)(6)(D), and an exception to the definition of 
``remuneration'' at 42 CFR 1003.110.
    \21\ Note, however, that the remuneration must also be low risk. 
In this final rule, we have included a safe harbor to the anti-
kickback statute that protects local transportation that meets 
certain requirements. As noted above, any remuneration that meets 
the requirements of a safe harbor is also excepted from the 
beneficiary inducements CMP. The safeguards set forth in that safe 
harbor would help ensure that the remuneration is low risk.
---------------------------------------------------------------------------

    We also believe that the definition we are finalizing is broad 
enough to facilitate coordinated or integrated care. A goal of 
coordinated care is to improve the delivery of medically necessary care 
(and eliminate medically unnecessary care). If remuneration associated 
with a coordinated care arrangement meets the requirement of being low 
risk and helps the patient to access necessary care, the remuneration 
could fit in this exception.

[[Page 88394]]

We recognize that the exception does not include inducements to seek 
care. However, we note that items of nominal value do not require an 
exception. See Special Advisory Bulletin: Offering Gifts and Other 
Inducements to Beneficiaries, August 2002 (2002 Special Advisory 
Bulletin), available at: http://oig.hhs.gov/fraud/docs/alertsandbulletins/SABGiftsandInducements.pdf. In the 2002 Special 
Advisory Bulletin, we stated our interpretation that the CMP permits 
inexpensive gifts (other than cash or cash equivalents) of no more than 
$10 in value individually or $50 in value in the aggregate annually per 
patient. Concurrently with the issuance of this final rule, we are 
announcing an increase in these limits, based on inflation, to $15 for 
an individual gift and $75 in value in the aggregate annually per 
patient. We are mindful that some CMS models permit incentives to seek 
care through waivers of the beneficiary inducement CMP. At the present 
time, methods used in these models are being tested to learn what might 
improve quality and patient outcomes without increasing costs. We will 
continue to monitor the results of such programs and will consider 
whether new or expanded exceptions are warranted in the future.
    Comment: One commenter suggested that the definition of ``promotes 
access to care'' should require compliance with a particular treatment 
plan, and prohibit suggestions of specific providers and suppliers.
    Response: We respectfully disagree with both suggestions. First, 
the commenter seems to imply that the exception is available only after 
the patient has an established care plan. However, the exception also 
would protect remuneration that promotes access in the first instance, 
and thus no treatment plan would exist. With respect to the second 
suggestion, if there is no likelihood of influencing a beneficiary to 
use a specific provider or supplier, the statutory prohibition would 
not be triggered, and complying with an exception would not be 
necessary.
Compliance With a Treatment Plan
    As we explain in responses to the various comments below, rewards 
for accessing care, including compliance with a treatment plan, do not 
``promote access'' to care. However, remuneration that helps a patient 
comply with a treatment plan (i.e., removes an impediment or otherwise 
facilitates compliance with a treatment plan) could promote access to 
care. The following comments and responses address these issues.
    Comment: Several commenters recommended that the definition of 
``promotes access'' should permit remuneration that promotes compliance 
with a treatment plan, or programs that promote adherence to medication 
therapy (in contrast to the previous comment, which suggested that a 
treatment plan should be required as a condition of any remuneration 
permitted by this exception). One such commenter said that, if 
permitted, the remuneration to promote compliance with a treatment plan 
must be part of a written followup plan.
    Response: We agree that some forms of remuneration that remove 
impediments to compliance with a treatment plan could constitute 
promoting access to care and could fit within the exception (as long as 
the remuneration also is low risk, as explained below). Items that are 
mere rewards for receiving care, as opposed to items or services that 
facilitate access to that care, would not meet the definition of 
``promotes access'' to care. For example, remuneration in the form of 
an item that dispenses medications at a certain time for a patient 
could meet the exception because it is a tool that enables the patient 
to access the right drugs at the appropriate dosage and time. 
Reimbursing parking expenses or providing free child care during 
appointments also could promote access to care and help a patient 
comply with a treatment regimen. In contrast, offering movie tickets to 
a patient whenever the patient attends an appointment would not fit in 
the exception; such remuneration would be a reward for receiving care 
and does not help the patient access care, or remove a barrier that 
would prevent the patient from accessing care. We do not intend to 
require that remuneration that removes an obstacle to a patient's 
ability to comply with a treatment plan be part of a written followup 
plan because we do not believe that remuneration with this purpose 
should be different than any other remuneration permitted under the 
exception. In other words, if remuneration promotes access to care--
whether the patient is at the beginning of the course of care or is in 
the middle of a treatment plan--and is low risk as described below, the 
remuneration can meet the exception.
    Comment: We received a number of comments addressing our stated 
concern that rewards offered by providers or suppliers to patients 
purportedly for compliance with a treatment regimen pose a risk of 
abuse. Some commenters supported allowing remuneration that encourages 
patient participation and compliance. One commenter specifically 
requested that the exception include pharmacy programs that promote 
compliance with medication regimens. Some commenters suggested that 
allowing targeted incentives would promote adherence and reduce 
utilization of high-cost services and support similar goals articulated 
in the ACA. Another commenter recommended that we avoid imposing 
specific safeguards, as long as the incentives do not steer patients to 
a particular provider or supplier. Some commenters note that incentive 
programs are effective in particular settings (e.g., the Alaska Native 
and American Indian community and in medication adherence programs). 
One commenter noted that similar programs, using incentives of nominal 
value, have been effective. Other commenters proposed specific 
safeguards, discussed further below.
    Response: As we address above, we have determined that inducements 
to comply with treatment or rewards for compliance with treatment do 
not ``promote access to care'' and thus are not protected by this 
exception. We note however, that some of the comments above relate to 
activities that might not trigger liability under the statute. For 
example, if an incentive would not be likely to influence a patient to 
use a particular provider, practitioner, or supplier, the incentive 
would not implicate the beneficiary inducements CMP. Likewise, if the 
remuneration is of nominal value, it would not implicate the statute 
(again, because items and services with a low retail value are unlikely 
to influence the beneficiary to choose a particular provider, 
practitioner, or supplier). If an individual or entity desires to offer 
a program that it believes would be beneficial but might implicate the 
beneficiary inducements CMP, the advisory opinion process remains 
available.
    Comment: Some commenters submitted examples of remuneration that 
they believed should be allowed as incentives to comply with a 
treatment regimen. One commenter suggested that incentives such as 
computer/smartphone apps, gift cards, and fitness trackers would 
encourage compliance and that similar rewards were approved in advisory 
opinions, citing OIG Advisory Opinion Nos. 12-14 and 12-21. One 
commenter gave an example of a lottery: Only patients who are in 
compliance with a treatment regimen may enter, and then even fewer will 
win (though the payout could be significant). Commenters offered a 
variety of examples of incentives or rewards that they believed should 
be protected under

[[Page 88395]]

the exception, such as: Rewards for routine exercise, gifts by health 
plans to incentivize enrollees to obtain preventive services or achieve 
benchmarks for controlling chronic conditions, discount programs that 
tie health and wellness achievements to the receipt of retail items and 
services, or rewards for positive outcomes (such as smoking cessation, 
losing weight). Another commenter requested that we specify that the 
exception covers rewards for actual access to care, not just promoting 
access to care.
    Response: We believe many of the examples offered could meet the 
exception, but we respectfully disagree with the commenter that 
suggests that the exception covers rewards for accessing care as 
opposed to promoting access to care. For example, smartphone apps or 
low-cost fitness trackers could, depending on the circumstances, 
promote access to care; they could be used to track milestones and 
report back to the treating physician. Gift cards that relate to 
promoting access to care (e.g., a gift card specifically for an item 
that would monitor the patient's health) could potentially fit into the 
exception as well. However, the examples structured as rewards (e.g., 
rewards for routine exercise) would not be covered. Similarly, it is 
unlikely that a lottery or raffle system that rewards compliance would 
promote access to care, as we interpret the term.\22\ We will continue 
to monitor patient engagement incentives as they develop in the 
industry, including new CMS models, and may propose future rulemaking 
as results become known. We again note that no exception is necessary 
if remuneration offered to patients is not likely to induce the patient 
to select a particular provider, practitioner, or supplier, including 
items and services of nominal value, and that incentives to seek 
preventive care could be covered under the preventive care exception.
---------------------------------------------------------------------------

    \22\ A raffle, however, could be of nominal value and not 
implicate the statute. For example, if the prize would be worth 
$100, and there were 20 participants with an equal chance to win 
that prize, we would consider each chance to be worth only $5. 
Although the winner would receive the prize worth $100, that patient 
had only a 1 in 20 chance of winning it, so the chance was worth 
only $5. If lottery tickets are available for purchase by the public 
(e.g., a state lottery), however, we would consider the value be the 
purchase price.
---------------------------------------------------------------------------

    In responding to various aspects of the Proposed Rule, some 
commenters asked about health plans providing incentives to their 
members to seek preventive health services, or to achieve certain 
health-related benchmarks. If health plans (or other entities that are 
not providers, practitioners, or suppliers) offer these incentives to 
seek particular services without influencing members to use particular 
providers or suppliers, the beneficiary inducements CMP is not 
implicated. If the incentives would influence members to use a 
particular provider or supplier, then the same conditions and 
interpretations of this exception would apply to health plans that 
apply to providers, practitioners and suppliers. However, all 
individuals and entities remain subject to the anti-kickback statute, 
and remuneration not prohibited under the CMP could be prohibited under 
the anti-kickback statute. For example, if a pharmaceutical 
manufacturer offered rewards or incentives for treatment compliance 
(without regard to any provider or supplier furnishing treatment), it 
might not implicate the beneficiary inducements CMP because the rewards 
would not incentivize the beneficiary to receive items or services from 
a particular provider or supplier, but it would implicate the anti-
kickback statute because the remuneration could induce the beneficiary 
to purchase a federally reimbursable item.
    Comment: Several commenters addressed the question of whether risk-
bearing providers should be able to provide incentives for compliance 
with a treatment regimen. One commenter recommended that fee-for-
service providers and suppliers should be allowed to provide 
remuneration to incentivize compliance, as certain ACO entities can. 
Another commenter recommended that providers taking on financial risk, 
such as some providers in ACOs, should be able to offer incentives. One 
commenter recommended that providers in fee-for-service alternative 
models (such as full or partial capitated models, ACOs outside of MSSP, 
medical homes, and others) be allowed to offer any kind of incentive 
(including cash equivalents) because the providers are rewarded on the 
basis of results rather than volume, and because patients are often 
assigned to providers (so the incentive wouldn't influence choice of 
provider).
    Response: We believe that all individuals and entities seeking to 
rely on this exception should be required to meet the same standards. 
We agree that the incentives are different with risk-bearing providers 
and suppliers and ACOs than they are with traditional fee-for-service 
providers and suppliers. However, those characteristics should make it 
easier for those entities to meet the standards of the exception. If 
they are accountable for cost and quality, it is more likely (but not 
guaranteed) that the remuneration would be low risk. We do not believe 
that they should be exempted from the standards by virtue of their 
organization as an ACO or risk-bearing provider, nor should they be 
permitted, by virtue of this exception, to provide incentives that do 
not promote access to care. Once again, however, we note that if the 
incentive would not influence the beneficiary to receive services from 
a particular provider, practitioner, or supplier, then it would not 
implicate the statute. In addition, if the incentive were to encourage 
a beneficiary to access preventive care, that remuneration could be 
protected under the preventive care exception.
    Comment: Several commenters addressed the question of whether 
certain safeguards should apply to incentives given for compliance with 
a treatment regimen. One commenter disagreed with safeguards, 
especially dollar limits, on incentives for compliance with treatment 
regimens. The commenter said some entities cannot track dollar limits 
for coupons. Another commenter recommended a $500 per beneficiary 
limit. One commenter proposed no dollar limit if the incentive is 
linked to health and wellness and has a reasonable connection to 
medical care, or a $100 limit if the item is not so linked. Another 
commenter generally suggested that the dollar amount should not be 
disproportionate to the patient's benefit from treatment. Another 
commenter suggested that dollar limits are arbitrary: An inexpensive 
app or device might be helpful for one patient, while another patient 
might need legal services or social services to get housing. One 
commenter recommended that the incentive should have a reasonable 
relationship with the treatment regimen. Commenters proposed a host of 
other safeguards for remuneration to incentivize or reward compliance 
with a treatment regimen. Some recommendations relate to documentation 
requirements (e.g., milestones reached, evidence of past 
noncompliance). Other commenters recommended that the incentives 
themselves must be related to care management. One commenter suggested 
that we require offerors to submit plans to CMS to evaluate 
effectiveness; if not shown to increase compliance, it would not be 
protected. Other commenters recommended against particular safeguards. 
For example, one commenter did not believe that the form of an 
incentive should be limited, or that the incentive itself should have 
to relate to medical care. Another commenter recommended against 
quality or performance metrics. Another generally requested guidance on 
how the exception would protect incentives

[[Page 88396]]

to engage in wellness or treatment regimens.
    Response: Because we are not permitting incentives or rewards for 
compliance with a treatment regimen under this exception, some of the 
comments regarding incentives related to medically necessary care or 
treatment are moot. However, to the extent that some of the suggestions 
could apply to remuneration or programs that could fit within the 
exception, we address them in turn. First, we do not propose to include 
a specific dollar limit on remuneration to deem it ``low risk.'' We 
agree with the commenter that noted that a very low value item might be 
appropriate for one patient, while the cost of an item or service that 
promotes access to care for a different patient could be more 
expensive. We also do not believe it is appropriate to require any kind 
of plan to be submitted to CMS, or to require any kind of reporting to 
qualify for the exception. Because the exception applies only to 
remuneration that promotes access to care (i.e., increases a 
beneficiary's ability to obtain items or services payable by Medicare 
or Medicaid), we assume the items or services, if obtained by the 
beneficiary, would be reflected in the beneficiary's medical record 
(whether remuneration was provided to the patient or not). We include 
further discussion about the form of remuneration below.
b. The Term ``Low Risk of Harm''
    We proposed that for remuneration to be a ``low risk of harm to 
Medicare and Medicaid beneficiaries and Medicare and Medicaid 
programs,'' the remuneration must: (1) Be unlikely to interfere with, 
or skew, clinical decision making; (2) be unlikely to increase costs to 
Federal health care programs or beneficiaries through overutilization 
or inappropriate utilization; and (3) not raise patient-safety or 
quality-of-care concerns. We received general support from commenters 
regarding our approach to defining what it means to be a ``low risk of 
harm'' to patients and Federal health care programs. We also received a 
number of more specific comments and requests for clarification, which 
we detail below.
    Comment: One commenter believed that strict controls were 
unnecessary for pharmacy programs for various reasons. First, the 
commenter noted that pharmacies ordinarily cannot dispense a 
prescription drug to a beneficiary unless a prescriber has determined 
that the drug is medically necessary and issued a prescription order, 
thus reducing the risk of unnecessary orders. The commenter further 
asserted that the risk of a pharmacy program increasing costs is also 
low in the pharmacy context because pharmacy programs that promote 
medication adherence result in lower overall healthcare costs, and most 
pharmacy reimbursement rates are established by prescription drug plans 
(PDPs), MA plans and Medicaid Managed care plans, or are capped by 
Federal and State reimbursement limits. Finally, the commenter asserted 
that patient safety and quality of care issues are much less of a 
concern in the pharmacy context, because the Food and Drug 
Administration (FDA) ensures that medications dispensed by pharmacies 
satisfy stringent quality control requirements.
    Response: We respectfully disagree that pharmacy programs should be 
subject to any fewer safeguards than other programs. Pharmacies are no 
less likely to try to induce beneficiaries to use their services (over 
the services of another pharmacy) than other providers or suppliers, 
and they also may encourage overutilization by unnecessarily refilling 
prescriptions or inappropriate utilization by encouraging switching to 
more expensive drugs. Controls on reimbursement and FDA requirements 
might place some limits on medically unnecessary services, but we 
remain concerned about quality of care and inappropriate utilization 
leading to increased costs.
    Comment: One commenter was concerned that the second element 
(regarding increasing costs) might be too narrow with respect to Part D 
and requested that costs should be viewed in the context of the 
totality of the patient's care.
    Response: We understand the commenter's point and agree with its 
general premise. If a program promotes access to care, then care is 
more likely to be obtained. Therefore, some costs will increase, while 
others may decrease. For example, if a patient is discharged from the 
hospital with a prescription to manage newly diagnosed diabetes, cost 
to the Part D program might increase because of the new prescription, 
but overall health care costs may decrease because the patient will be 
managing a condition with the drug rather than having a higher chance 
of being rehospitalized. Thus, we agree that the harm to be avoided is 
an overall increase in health care costs. However, the condition we 
proposed was not that the remuneration be unlikely to increase costs at 
all, but that it be unlikely to increase costs through overutilization 
or inappropriate utilization. Incentives to access a higher level of 
care than necessary, or to use a higher cost brand name drug instead of 
a lower cost generic drug would not be low risk.
    Comment: Some commenters generally agreed that valuable gifts in 
connection with direct or indirect marketing are not low risk. One 
commenter requested bright-line guidance regarding the distinction 
between educational activities and marketing. The commenter suggested 
that ``educational programs'' focusing on the skills or qualities of 
particular providers should be excluded from protection under this 
exception, but that nonmarketing, bona fide educational materials 
should not considered marketing simply because they included a logo of 
a provider.
    Response: As we discuss in various guidance documents, such as the 
2002 Special Advisory Bulletin, we agree that remuneration given in 
connection with marketing is not low risk and therefore would not be 
protected under this exception. Such remuneration is, almost by 
definition, given for the purpose of influencing the choice of a 
particular provider, practitioner, or supplier, and may induce 
overutilization or inappropriate utilization. However, we do not 
consider educational materials alone (even educational materials that 
include information about the qualifications of a particular provider) 
to be remuneration. Thus, a provider or supplier may offer educational 
materials (such as written materials about disease states or 
treatments), or informational programs (such as a program to help 
patients with asthma or diabetes learn more about controlling their 
diseases) to patients or prospective patients without implicating the 
beneficiary inducement CMP. However, if a provider, supplier, or other 
entity offered patients attending such a program an item or service (of 
more than nominal value), that the offeror knows or should know is 
likely to influence the patient to choose that provider or supplier, 
such remuneration would not be protected under this exception.
c. Other Examples and Comments
    Comment: We received a number of comments providing examples of 
items or services that commenters believed should be protected by the 
exception. One type of remuneration could be categorized as health-
care-related services. A sampling of remuneration that commenters 
suggested that we protect includes free- or reduced-cost health 
screenings (e.g., blood pressure or fall-risk screenings); charitable 
dental care; education programs (e.g., regarding diabetes or 
nutrition); post-discharge support; family support services; chronic 
condition management; education about insurance or medical leave 
benefits; lodging provided by a

[[Page 88397]]

hospital the night before procedures; transportation to appointments; 
other services that help patients live within their own communities; 
discounts for copayments; and gift cards for ongoing medications. Some 
commenters recommended that screenings should not be conditioned on 
obtaining other services from the provider or supplier and should not 
be selectively offered (e.g., based on insurance type).
    Response: We agree with the commenters' suggestions that free or 
reduced-cost health care screenings and services and discounts for 
drugs promote access to care and may be low risk. However some forms of 
remuneration (including cash or cash equivalents) would not be low 
risk, as we have indicated in previous guidance, such as the 2002 
Special Advisory Bulletin. In addition, copayment waivers generally are 
not low risk. We note, however, that copayment waivers that meet 
certain conditions are separately protected under section 
1128A(i)(6)(A) of the Act and 42 CFR 1003.110 and 42 CFR 1001.952(k). 
We also agree with comments suggesting that providing education or 
information about medical leave or insurance benefits would promote 
access to care and be low risk (and we believe that education or 
information alone would not qualify as ``remuneration'' at all.) 
Lodging before a procedure, or transportation to appointments, also 
could be protected under appropriate circumstances.\23\ The local 
transportation safe harbor to the anti-kickback statute included in 
this rulemaking sets forth a number of factors that, taken together, 
would render transportation low risk. It would be prudent to structure 
any free or reduced-cost transportation arrangements to comply with the 
safe harbor because transportation to obtain Federal health care 
program-covered items and services generally will implicate the anti-
kickback statute. We note that many forms of free or reduced-cost 
services (e.g., free screenings at a health fair or charitable dental 
program, post-discharge support, chronic care management) could lead 
the patient to seek followup care with the provider or supplier that 
offered the free service.\24\ Assuming the free screenings or health 
care services are not simply marketing ploys but rather identify or 
assist with necessary care, they could fit in the exception and be 
protected. Individuals and entities seeking to offer any of the listed 
items or services must determine, as an initial matter, whether they 
promote access to care (and if so, whether they are also low risk). For 
example, ``family support services'' could promote access to care 
(e.g., if they are in the form of child care offered during an 
appointment), but that term also could be more broad and include 
services that are not directly related to the patient accessing care. 
The same is true for ``services that help patients live within their 
communities.'' Services such as transportation could be protected; 
services unrelated to helping the patient access care would not be.
---------------------------------------------------------------------------

    \23\ For an example of an arrangement that included both lodging 
and transportation that we analyzed and found to be low risk, see 
OIG Advisory Opinion No. 11-01.
    \24\ In addition, to the extent the services qualify as 
preventive services, the preventive care exception could be 
available. That exception to the beneficiary inducements CMP 
specifically permits the provision of preventive care as a form of 
incentive, as long as it is not tied to the provision of other 
reimbursable services. See Sec.  42 CFR 1003.110.
---------------------------------------------------------------------------

    Comment: Commenters suggested a wide variety of tangible items that 
the commenters believe should be protected, such as health- or 
wellness-related technology (e.g., apps, or other items that would help 
patients record and report health data); discounted over-the-counter 
medication or medical supplies; free or discounted access to food 
services (e.g., Meals on Wheels); educational materials; food vouchers; 
mattress covers; vacuum cleaners; scales; air conditioners; medical 
devices (such as blood pressure cuffs); programmable tools that help 
with medication dosage, refill reminders, medical appointment 
reminders, or dietary suggestions; home monitoring devices; 
telemedicine capability; free or discounted glucose meters; incentives 
for scheduling (e.g., a dialysis facility giving an incentive to a 
retired patient to move his dialysis appointment earlier in the day so 
that a working patient can have an evening spot); and items that help 
manage clinical outcomes. Other commenters suggested that some items 
might not be low risk, such as a smartphone with a health data app. One 
commenter would like us to require a comparison of cost versus utility 
of the device for medical care.
    Response: Many of these commenters' suggestions promote access to 
care, or remove obstacles to compliance with treatment regimens (e.g., 
free or discounted medications, supplies, or devices; technology for 
reporting health data; scales; or programmable tools to help with 
medication dosage or refill reminders; telemedicine capability; certain 
incentives for scheduling, in extenuating circumstances \25\), and can 
be low risk under appropriate circumstances. Others promote access to 
healthy living (e.g., vacuum cleaners, air conditioners, mattress 
covers, food vouchers), but not necessarily access to ``care.'' \26\ If 
an individual or entity is unsure whether a particular item or service 
would fit in the exception, or knows that the program does not fit in 
the exception but nevertheless believes it should be protected, the 
advisory opinion process is available. We reiterate, however, if the 
remuneration is not likely to induce a patient to select a particular 
provider, practitioner, or supplier, no exception is needed with 
respect to the beneficiary inducements CMP.
---------------------------------------------------------------------------

    \25\ An inducement to one patient to move an appointment in 
order to promote access by a different patient could be protected by 
the exception, in limited circumstances. Under the commenter's 
example, Patient A is retired, and Patient B works during business 
hours. Patient A receives the incentive to remove a barrier (an 
appointment that conflicts with Patient B's job) to Patient B's 
access to care. Thus the incentive promotes Patient B's ability to 
receive care. However, offering remuneration to all of a provider's 
patients who agreed to accept appointments at certain times would 
not necessarily promote access to care and could pose more than a 
low risk of harm to Federal health care programs.
    \26\ We note that these forms of remuneration might be protected 
by a different exception if provided to beneficiaries in financial 
need. See discussion of proposed regulation interpreting section 
1128A(i)(6)(H), below.
---------------------------------------------------------------------------

    Comment: Some commenters recommended allowing in-kind, but not 
cash, incentives of nominal value, as described in the 2002 Special 
Advisory Bulletin. Others generally supported having some limits on the 
form or value of the incentive, but recommended considering what those 
limits would be in light of possible savings through the effective use 
of incentives. Other commenters recommended limiting the exception to 
providers who mainly serve low-income and rural patients so that other 
providers can't lure patients away without offering higher quality 
care.
    Response: Consistent with our long-standing guidance, we agree with 
commenters who recommend that the remuneration cannot be cash or cash 
equivalents (such as checks or debit cards). We also explained above 
that the remuneration cannot take the form of copayment waivers (under 
this exception). We respectfully disagree that offerors should be 
limited to the monetary limits suggested in the 2002 Special Advisory 
Bulletin or the higher limits on nominal value we are announcing 
concurrently with this rule; we believe that higher-value remuneration 
can be warranted to promote access to care for some patients while 
remaining low risk. We also do not believe that the incentives 
protected

[[Page 88398]]

by this exception should be limited to low-income and rural patients. 
While patients in those categories might be more likely to need 
remuneration to facilitate their access to care, many other patient 
populations also could have such a need. For example, regardless of 
income or geography, patients might need a device that reminds them to 
take medication. Thus, we do not believe these suggested limitations 
would be appropriate.
    Comment: One commenter was concerned that use of the term 
``patient'' might not allow the exception to cover plan sponsors or 
Medicaid MCOs (the plan-enrollee relationship). The commenter requested 
that the exception specifically recognize the role played by sponsors 
or MCOs and protect these efforts from the prohibition.
    Response: The statutory exception uses the term ``patient,'' and 
the beneficiary inducements CMP prohibits influencing individuals to 
order or receive items or services payable by Medicare or a State 
health care program from a particular provider or supplier. At the time 
the individual would receive such item or service, the individual would 
be a ``patient.'' As we explained above, plan sponsors or other 
insurers may not raise the same concerns as providers and suppliers 
that bill Federal health care programs. If incentives given by these 
entities are not likely to induce the patient to use a particular 
provider, practitioner, or supplier, the beneficiary inducements CMP 
would not apply. (We note that differentials in coinsurance and 
deductible amounts as part of benefit plan designs that encourage 
patients to use in-network providers are protected by section 
1128A(i)(6)(C) of the Act.)
    Comment: Commenters expressed differing views on whether incentives 
offered in connection with CMS programs or models to which a waiver of 
the CMP does not apply should be separately protected. One commenter 
suggested a specific exception for participants in payment and delivery 
models, including medical homes, bundled payments, or other care 
coordination models. Another suggested an exception for all risk-
bearing entities (such as MCOs) because they are already accountable 
for cost. One commenter generally supported extending this exception to 
CMS demonstration programs. Another commenter disagreed, stating that 
separately protecting ACOs would cause an uneven playing field with 
large ACOs compared to smaller provider groups. Another commenter 
suggested a middle ground, noting that new payment models do not always 
meet the terms of the exception (promoting access and being low risk). 
Therefore, the commenter recommended, if the exception were to 
generally extend to these models, that the models must incorporate key 
principles to qualify as low risk, including quality metrics, 
transparency requirements, and mechanisms to support patient access to 
a full range of treatment options.
    Response: We recognize that the Department is testing different 
models and methods for improving quality while reducing cost. We 
acknowledge that CMS's new models and demonstration programs have 
additional or different oversight and accountability than some other 
programs, such as traditional fee-for-service Medicare. Participants in 
some of these programs, such as the MSSP or the Bundled Payment for 
Care Improvement initiative have access to waivers of certain fraud and 
abuse laws, including the beneficiary inducements CMP, for certain 
arrangements. If a program does not have an applicable waiver, we 
believe that all entities seeking to rely on the exception must meet 
its terms. Parties with access to waivers may still elect to avail 
themselves of this exception if they meet all conditions.
    Comment: A number of commenters noted that CMP exceptions are not 
incorporated into the anti-kickback safe harbors and requested a 
parallel safe harbor for this exception. One commenter specifically 
requested that adherence support incentives be included in a safe 
harbor, with suitable safeguards. Another commenter requested that a 
safe harbor be developed for certain MCOs that would be similar to the 
patient incentive waiver in MSSP. Another commenter requested that the 
exception be expanded to allow remuneration to providers (e.g., for 
remote patient monitoring). Another requested that the exception allow 
hospitals to help skilled nursing facilities or other long-term-care-
facilities with portions of the cost of dispensing expensive 
medication.
    Response: Commenters are correct that beneficiary inducements CMP 
exceptions do not provide protection under the anti-kickback statute. 
For a number of reasons, however, we decline to create a parallel safe 
harbor in this final rule. First, we did not propose such a safe harbor 
during this rulemaking and decline to adopt such a safe harbor without 
additional public comment. Further, this exception applies only to 
remuneration offered to beneficiaries, and we believe that the risk of 
fraud and abuse would be too high to generally protect remuneration 
offered to providers or suppliers under these standards. However, some 
such arrangements could be protected under existing safe harbors. For 
example, we proposed and are finalizing in this rule a safe harbor for 
local transportation. Commenters frequently mentioned transportation as 
needed for access to care. We will continue to monitor the changing 
health care delivery landscape and will consider appropriate safe 
harbors in the future. Any future proposals regarding additional safe 
harbors to protect specific types of remuneration that promote access 
to care and pose a low risk of harm to Federal health care programs and 
beneficiaries would be made through notice and comment rulemaking. In 
the meantime, individuals or entities are able to request protection 
from sanctions under the anti-kickback statute for specific 
arrangements through our advisory opinion process.
3. Retailer Rewards
    In the Proposed Rule, we proposed to incorporate into our 
regulations the statutory exception added by section 6402(d)(2)(B) of 
the ACA, which creates an exception to the beneficiary inducements CMP 
for retailer rewards programs that meet certain criteria. We proposed 
to use the statutory language as the text for our regulation, and we 
proposed interpretations of the terms ``retailer'' and ``coupons, 
rebates, or other rewards;'' what it means to transfer items or 
services on equal terms to the general public; and what it means for 
items or services to not be ``tied to the provision of other items or 
services'' reimbursed in whole or in part by the Medicare or Medicaid 
programs. We are finalizing the language, as proposed, and we set forth 
responses to comments received below.
General Comments
    Comment: One commenter referred to OIG's existing guidance 
permitting gifts of nominal value, which permits items worth $10 or 
less, or items valued at $50 in the aggregate for a beneficiary on an 
annual basis. The commenter believes that, for a retailer rewards 
program that meets the three criteria for this exception set forth in 
section 6402(d)(2)(B) of the ACA, OIG could adopt a higher and more 
flexible standard than the existing nominal value standard. This 
comment appears to imply that the retail reward exception would be 
subject to some monetary value limit.
    Response: As we have explained in previous rulemakings and 
guidance, and as we discuss in greater detail above, if remuneration 
(other than cash or cash equivalents) is ``nominal in value,'' then

[[Page 88399]]

it is not prohibited by the statute, and therefore no exception is 
necessary.\27\ Thus, remuneration that meets the criteria set forth in 
the retailer rewards exception need not be nominal in value, and 
remuneration that is nominal in value need not meet the criteria of an 
exception.
---------------------------------------------------------------------------

    \27\ See, e.g., the explanation of ``nominal in value'' concept 
in connection with the preventive care exception. 65 FR 24400, 
24410-11 (Apr. 26, 2000).
---------------------------------------------------------------------------

    Comment: A commenter wanted OIG to clarify that this provision of 
law preempts any analogous state restrictions on retailer rewards.
    Response: The retailer rewards exception creates a pathway for 
retailers to include Medicare and Medicaid beneficiaries in their 
rewards programs without violating a specific Federal law: the 
beneficiary inducements CMP. It does not create an exception to or 
preempt any other Federal law or any State law (unless such State law 
incorporates the Federal law by reference).
    Comment: One commenter argued that OIG should eliminate all 
penalties for the use of retailer rewards because the benefit to the 
beneficiary outweighs any benefit to the retailer. Another commenter 
suggested that OIG should clearly permit and protect incentives that 
combine components of different exceptions within the Proposed Rule. As 
an example, the commenter suggested that a patient adherence tool could 
be linked with a retailer reward program.
    Response: The beneficiary inducements CMP prohibits certain 
inducements to Medicare and Medicaid beneficiaries and includes certain 
exceptions to that prohibition. The statute and its exceptions are 
designed to protect beneficiaries and Federal health care programs. The 
retailer rewards exception eliminates penalties under this law for 
reward programs that meet each of the exception's criteria; we decline 
to eliminate penalties for rewards programs that do not meet all of the 
criteria of the exception. The same is true for other exceptions: 
remuneration that meets each of the criteria of any other exception are 
also protected. However, remuneration that implicates the statute and 
does not meet all criteria set forth in an exception may be subject to 
penalties. Further, remuneration will not be protected if it meets some 
criteria of one exception, and some criteria of a different exception. 
The remuneration needs to qualify for protection under only one 
exception, but it must meet all of that exception's criteria. It is 
possible that a patient adherence tool (depending on the type of 
``tool'') could be a reward permitted under a retailer rewards program. 
However, it would have to meet all of the criteria, including not being 
tied to the provision of other items or services reimbursable by 
Medicare or State health care programs. Certain common items could be 
useful in patient adherence (e.g., scales, pill dispensers, books) and 
could be protected under the exception. A more detailed discussion of 
what might constitute ``other rewards'' appears below.
Coupons, Rebates, or Other Rewards From a Retailer
    The first criterion of the statutory exception provides that the 
free or less-than-fair-market-value items or services must ``consist of 
coupons, rebates, or other rewards from a retailer.'' We proposed to 
interpret these terms as follows: We proposed to interpret ``retailer'' 
as an entity that sells items directly to consumers. We also proposed 
that individuals or entities that primarily provide services (e.g., 
hospitals or physicians) would not be considered ``retailers,'' and we 
solicited comments on whether entities that primarily sell items that 
require a prescription (e.g., medical equipment stores) should be 
considered ``retailers.'' We proposed to interpret a ``coupon'' as 
something authorizing a discount on merchandise or services, such as a 
percentage discount on an item or a ``buy one, get one free'' offer. We 
proposed to interpret ``rebate'' as a return on part of a payment, with 
the caveat that a retailer could not ``rebate'' an amount that exceeds 
what the customer spent at the store. We proposed to interpret ``other 
rewards'' primarily as describing free items or services, such as store 
merchandise, gasoline, frequent flyer miles, etc.
``Retailer''
    Comment: Many commenters raised concerns or sought clarification 
about the proposed interpretation of ``retailer.'' Commenters suggested 
that ``retail community pharmacies'' (as defined at section 1927(k)(10) 
of the Act \28\) and entities that interact with or serve beneficiaries 
(including independent or small pharmacies and other suppliers) be 
included in the interpretation of ``retailer'' because excluding these 
entities would place them at a disadvantage compared to big box 
pharmacies. Others wanted clarification as to whether online retailers 
qualify as ``retailers.'' Further, a commenter recommended that the 
term ``retailer'' not exclude any entity that sells a single category 
of products directly to individuals. Commenters asserted that the 
definition of ``retailer'' should not exclude entities that primarily 
sell items that require a prescription. Commenters were concerned that 
entities that sold a mix of items and services, including retail 
pharmacies, would have difficulty in determining whether they are 
retailers.
---------------------------------------------------------------------------

    \28\ The Medicaid statute states that the term ``retail 
community pharmacy'' means an independent pharmacy, a chain 
pharmacy, a supermarket pharmacy, or a mass merchandiser pharmacy 
that is licensed as a pharmacy by the State and that dispenses 
medications to the general public at retail prices. Such term does 
not include a pharmacy that dispenses prescription medications to 
patients primarily through the mail, nursing home pharmacies, long-
term- care-facility pharmacies, hospital pharmacies, clinics, 
charitable or not-for-profit pharmacies, government pharmacies, or 
pharmacy benefit managers.
---------------------------------------------------------------------------

    Response: We intend to finalize our proposal to interpret 
``retailer'' in accordance with its commonly understood meaning: an 
entity that sells items directly to consumers. We continue to believe 
that a ``retailer'' does not include individuals or entities that 
primarily provide services. We believe that this interpretation can 
include independent or small pharmacies (and that pharmacies do not 
``primarily'' provide services) and online retailers, and that it can 
include entities that sell a single category of items. However, we 
reiterate that the retailer rewards program must meet all of the 
exception's criteria to be protected. We believe that it may be 
difficult for an entity that primarily sells a single category of 
products to meet the criterion that the offer of items or services not 
be tied to other reimbursable services if, for example, the entity 
sells only (or mostly) items that are reimbursable by Federal health 
care programs.
    Comment: One commenter sought clarification as to whether retailers 
are the only entities that can provider retailer rewards. Specifically, 
the commenter asked whether manufacturers could offer or transfer to 
patients any retailer rewards acquired or paid for by the manufacturer.
    Response: As set out by Congress, the exception protects items or 
services ``from a retailer.'' Thus, nonretailers, including 
manufacturers, may not provide retailer rewards under this exception.
    Comment: Another commenter understood that physicians were not 
retailers but encourages efforts that allow physicians to understand 
when rewards would be available to their patients.
    Response: Unlike some exceptions to the beneficiary inducements 
CMP, the

[[Page 88400]]

retailer rewards exception does not prohibit advertising or marketing. 
Retailers are free to inform physicians directly or through media 
outlets about the availability of their rewards programs.
    Comment: Some commenters disagreed with interpreting retailer to 
exclude entities that primarily provide services. Specifically, some 
commenters stated that there is no statutory justification to 
differentiate retailers that primarily provide services and those that 
do not. These commenters believe that the distinction between the two 
groups is therefore unjustified and puts big box retailers at a 
competitive advantage over pharmacies that also provide services. In 
addition, a commenter stated that it is unclear whether the retail 
components of hospital systems (e.g., retail pharmacies) would be 
retailers. Another commenter had concerns about beneficiaries being 
excluded from rewards programs based strictly on their choice of 
pharmacy.
    Response: As we explain above, we consider pharmacies to be 
retailers, whether the pharmacy is part of a ``big box'' retailer or is 
a stand-alone pharmacy. Most common definitions of ``retailer'' refer 
to selling ``goods'' to the public, not services. We did not propose to 
exclude entities that provide both items and services; we proposed to 
exclude individuals and entities that primarily provide services and 
thus typically would not be considered to be retailers, such as 
physicians or hospitals. If a hospital system has a separate retail 
component, whether it is a convenience store or a pharmacy, then that 
component could have its own rewards program if it met the exception's 
remaining criteria.
``Reward''
    Comment: Commenters supported a broad and flexible definition of 
``other rewards.'' One commenter believes that the proposed 
interpretation of ``other rewards'' as ``primarily . . . describing 
free items or services'' is too limited and should also include 
reduced-price items and services. Another commenter recommended that 
``other rewards'' include in-kind benefits, including gift cards, 
educational information or programs, preventive care services, and 
retail-based initiatives to increase access to care (e.g., providing 
diabetes educational events to customers).
    Response: Our Proposed Rule stated our belief that ``other 
rewards'' would ``primarily'' be in the form of free items or services; 
this was not a strict limitation. We believe the majority of reduced-
price items or services would fall under the proposed interpretation of 
coupon or rebate. The concept of ``other reward'' is broad: if the item 
or service meets the three criteria listed in the regulation, it can be 
protected. As we stated in the Proposed Rule, ``other rewards'' can 
include rewards such as gasoline discounts, frequent flyer miles, and 
items purchased in the retailer's store. To address specific examples 
provided by commenters, there is no reason why educational information 
or programs could not be ``other rewards'' (if they would be 
remuneration at all). Health care items or services can be ``other 
rewards,'' but the reward cannot be in the form of a copayment waiver; 
copayment waivers would not meet the third criterion of the exception, 
as explained below.
Offered or Transferred on Equal Terms
    The second criterion requires that the items or services be offered 
or transferred on equal terms to the public, regardless of health 
insurance status. We proposed that this criterion would exclude 
programs that are targeted to patients on the basis of insurance status 
(e.g., if a reward could be obtained only by Medicare beneficiaries).
    Comment: Generally, commenters sought clarification as to the 
extent of the availability of the retailer reward to the general public 
that the OIG would require. Specifically, a commenter wanted 
clarification that it is appropriate for retailers to require consumers 
to complete an enrollment process as long as the related retailer 
rewards are offered on equal terms to the general public. One commenter 
recommended that this criterion be interpreted in a manner that 
prohibits targeting individuals of a particular health plan. Similarly, 
another commenter stated that retailers should be allowed to mail or 
email retailer rewards to existing customers as long as the 
communication is not specifically targeting government beneficiaries 
(e.g., the commenter suggested that retailers should be able to offer a 
promotion targeted to patients with a particular disease state). Other 
commenters stated that the program should be broadly available to 
patients to discourage cherry picking and offered equally to the public 
regardless of health insurance status.
    Response: The retailer reward must be offered to everyone 
regardless of health insurance status. The general public must have the 
same access to, and use of, the retailer reward as the retailer's 
insured customer base. This criterion does not, however, prohibit a 
retailer from having an enrollment process --as long as the terms of 
enrollment, and the terms of earning and redeeming rewards, do not vary 
based on insurance status or plan. A rewards program targeted to 
patients with a particular disease state would need to meet the 
requirement that the reward not be tied to other reimbursable items or 
services, as described below.
Not Tied to Other Reimbursable Items or Services
    The third statutory criterion, which we are finalizing here, 
requires that the offer or transfer of the items or services not be 
tied to the provision of other items or services reimbursed in whole or 
in part by Medicare or an applicable State health care program. We 
proposed that this criterion require the rewards program to attenuate 
any connection between federally reimbursable items or services both in 
the manner in which a reward is earned and in the manner in which the 
reward is redeemed. Thus, we proposed that the reward could not be 
conditioned on the purchase of goods or services reimbursed in whole or 
in part by a Federal health care program and should not treat federally 
reimbursable items and services in a manner that is different from that 
in which nonreimbursable items and services are treated. On the 
``redeeming'' end of the transaction, we proposed that rewards programs 
in which the rewards themselves are items or services reimbursed in 
whole or in part by a Federal health care program would not be 
protected.
    Comment: Some commenters believed that OIG's interpretation of the 
third criterion is overly restrictive. One commenter stated that this 
criterion should be interpreted to prohibit a retailer reward that 
focuses on health care items and services only when a discount on one 
covered health care item or service is tied to the purchase of a second 
``other'' covered health care item or service. Specifically, the 
commenter asserts that the statute does not require the reward to be 
equally applicable to health care and non-health care items or 
services. The commenter also does not believe that nonreimbursable 
items or services must be treated the same as reimbursable items or 
services when earning rewards. Therefore, the commenter disagreed with 
the statement in the preamble to the Proposed Rule that the reward (how 
it is earned or redeemed) should not treat federally reimbursable items 
and services in a manner that is different from that in which 
nonreimbursable items and services are treated. One commenter 
recommended that we not interpret the criterion to prohibit the reward 
from being tied to the provision of the same service. Another commenter

[[Page 88401]]

asserted that the proposed interpretation would prohibit entities from 
offering rewards for adhering to therapy or drug regimens. With respect 
to prescriptions, another commenter believed that having the criterion 
apply to both the earning and redeeming side of the transaction to be 
unnecessary and counterproductive because patients should be encouraged 
and incentivized to obtain prescribed medicines and other medical 
products.
    Response: We respectfully disagree with several of the commenters' 
interpretations of, and recommendations with respect to, this 
criterion. The statutory criterion, which we adopt here, limits the 
exception as follows: ``the offer or transfer of the items or services 
is not tied to the provision of other items or services reimbursed in 
whole or in part by the program under title XVIII or a State health 
care program (as defined in section 1128(h)).'' The ``reward'' cannot 
be tied to the provision of other reimbursable items. If a customer 
accumulates rewards (or preferentially accumulates rewards) based only 
on purchases of federally reimbursable items, the reward is tied to the 
provision of other reimbursable items because without purchasing those 
reimbursable items the customer would not earn a reward. Thus, for 
example, this criterion would not be met if a pharmacy had a rewards 
program that offered two points for every dollar spent on prescription 
copayments, but one point for every dollar spent elsewhere in the 
store. Likewise, if the reward were to take the form of a copayment 
waiver (or a $20 coupon off of a copayment), the reward would be tied 
to the purchase of a reimbursable item (the item for which the 
copayment is waived or discounted). In contrast, if the reward were a 
$20 coupon to be used on anything in the store, the coupon could, 
without violating the criterion, be redeemable a copayment. The coupon 
cannot, however, be limited to a reduction in price on a reimbursable 
item or service.
    Comment: One commenter stated that the statute permits retailer 
rewards in the form of free or discounted health care items and 
services, not just non-health care items and services. A commenter 
asserted that the statute provides that retailer rewards may be offered 
as long as they are not tied to other covered items or services. The 
commenter sought confirmation that retailer rewards may take the form 
of discounts on covered health care services.
    Response: As discussed above, the reward may not take the form of 
discounts specific to health care items or services that are reimbursed 
in whole or in part by Medicare or a State health care program. The 
reward can be a discount that could be used on anything in the store 
(including covered items or services), or can be specific to 
nonreimbursable items. If the retailer offered or gave a reward that 
was a free or discounted item or service covered by Medicare or a State 
health care program, but did not seek reimbursement for the item or 
service, the reward could be protected (as long as it was not tied to 
another reimbursed item). For example, a retailer could not have as a 
``reward'' a free box of test strips that a patient could obtain only 
when filling an insulin prescription. However, if a retailer offered a 
rewards program such that if a patient spent a certain amount of money 
in the store over the course of the year, the patient could obtain a 
blood pressure monitor for free, that blood pressure monitor could be a 
protected reward as long as the retailer did not bill Medicare or a 
State health care program for it.
    Comment: One commenter supported OIG's proposal that offering a $20 
coupon to transfer prescriptions would not meet this criterion because 
such a reward influences beneficiaries who may accept less effective 
medication, substandard service, or be unduly overcharged by the 
retailer.
    Response: We agree with the commenter that coupons to transfer 
prescriptions would not be protected under this exception. However, we 
do not agree with the commenter's analysis. The commenter asserts that 
the remuneration should not be protected because it might influence the 
beneficiary to choose a particular provider. However, all rewards 
programs might influence a beneficiary to choose a particular provider 
or supplier; if the remuneration wouldn't be likely to influence a 
beneficiary to choose a particular provider or supplier, no exception 
would be necessary because the remuneration would not implicate the 
beneficiary inducements CMP. Thus, the exception, which mirrors the 
statutory language, protects rewards programs that meet specific 
criteria, even though they might influence a beneficiary to choose a 
particular provider or supplier, because the criteria set forth in the 
exception provide sufficient safeguards to make the remuneration low 
risk. The remuneration used as an example by the commenter could not be 
protected by the exception because it fails to meet the criteria that 
prohibits tying the remuneration to purchasing a reimbursable item or 
service.
    Comment: One commenter believed that OIG was inconsistent in its 
interpretation of similar criteria between the retailer rewards 
exception and the financial-need exception. According to the commenter, 
the financial-need exception requires the remuneration to have a 
connection to the patient's medical care and focus on health care items 
and services. With retailer rewards, the commenter stated that OIG did 
not focus on health care items and services. Instead, it applies the 
criterion to all items and services, including non-health care items 
and services.
    Response: The financial-need-based exception has different criteria 
than the retailer rewards exception; both exceptions are statutory, and 
the statutory criteria are being finalized here. Both have a 
requirement that prohibits tying the offer or transfer of an item or 
service to the purchase of another reimbursable item or service. But in 
the financial-need-based exception, the item or service given must be 
reasonably related to the patient's medical care. The statute does not 
include such a requirement in the retailer rewards exception. In the 
retailer rewards exception, a program could involve a rebate, a coupon 
for health and beauty items, or a free toy. As long as the customer is 
not required to purchase a federally payable item or service to earn or 
redeem the reward, the type of item or service is not limited. The 
section below on the financial-need-based exception explains the 
different requirements that apply to the remuneration protected under 
that exception.
4. Financial-Need-Based Exception
    We proposed to incorporate a third new statutory provision, added 
at 1128A(i)(6)(H) of the Act, which excepts from the definition of 
``remuneration'' the offer or transfer of items or services for free or 
less than fair market value if the items and services are not 
advertised or tied to the provision of other items or services 
reimbursed by the Medicare or State health care programs (including 
Medicaid); there is a reasonable connection between the items or 
services and the medical care of the individual; and the recipient has 
been determined to be in financial need. We proposed, and are 
finalizing, regulatory text that mirrors the statutory language. We 
will continue to assess the need for additional flexibility in the 
future.
    Several commenters generally supported the proposed exception and 
the approach OIG took when interpreting the statutory terms in the 
Proposed Rule. Others, while generally supporting the exception, urged 
OIG to interpret it more expansively, allow additional flexibility, and 
not include

[[Page 88402]]

certain restrictive criteria. We discuss these comments further below.
General
    Comment: Some commenters noted that there could be overlap between 
this exception and the exception for remuneration that promotes access 
to care and poses low risk.
    Response: We agree that there can be some overlap among exceptions. 
In addition to the exception cited by the commenter, the preventive 
care exception defined at 42 CFR 1003.110 shares some similarities with 
the financial-need-based exception. However, there are also 
distinctions among these exceptions. For example, the financial-need-
based exception does not require that the remuneration ``promote access 
to care,'' or ``promote the delivery of preventive care,'' and those 
two other exceptions do not require that the recipient of the 
remuneration have a financial need. Remuneration might meet some 
criteria of multiple exceptions, but it is protected only if it meets 
all criteria of any one exception.
    Comment: One commenter requested that the exception be carefully 
tailored to make clear that providers and suppliers are not required to 
provide free items or services to patients.
    Response: The financial-need-based exception, like all other 
exceptions to the beneficiary inducements CMP, carves out certain 
things that otherwise would be prohibited remuneration from the 
definition of ``remuneration,'' when certain conditions are met. The 
exceptions do not impose any affirmative obligations on providers or 
suppliers to provide free items or services, waive copayments, or 
implement any program that involves giving anything of value to 
beneficiaries; rather, the exceptions describe the circumstances under 
which such gifts or benefits are not prohibited by the beneficiary 
inducements CMP.
``Items or Services''
    We proposed to interpret the term ``items or services'' to exclude 
cash or instruments convertible to cash.
    Comment: One commenter expressly supported precluding providers 
from paying cash to patients.
    Response: We agree with the commenter and intend to interpret 
``items or services'' as excluding cash, or cash equivalents 
(instruments convertible to cash or widely accepted on the same basis 
as cash, such as checks and debit cards).
Prohibition on Advertising
    We proposed to include the statutory requirement that the items or 
services offered or transferred under the exception may not be offered 
as part of any advertisement or solicitation. We received some comments 
and questions about this requirement.
    Comment: One commenter, though recognizing that the prohibition on 
advertising is statutory, recommended that OIG not include it in the 
regulation, claiming that it violates the First Amendment to the 
Constitution. The commenter suggested that there is no legitimate 
reason to prohibit informing the public about programs that could 
reduce costs for financially needy patients. The commenter stated that 
if OIG keeps the prohibition, it should impose the least restrictive 
means necessary (e.g., allowing an entity to announce the availability 
and nature of the assistance, and directing the patient to other 
resources (such as a Web site or phone number) for more information.
    Response: The prohibition on advertising of the incentive, 
copayment waiver, or other item or service has been in the statute for 
other exceptions since section 1128A(a)(5) was enacted in 1996. For the 
same reasons set forth above in connection with the safe harbor for 
Part D cost-sharing waivers, we respectfully disagree with the 
commenter's view that the advertising prohibition violates the First 
Amendment. As we explain below, we believe this exception is intended 
to protect remuneration given on a case-by-case basis, when a need is 
identified. It is not intended to encourage patients to seek care (in 
contrast to the exception for remuneration that incentivizes preventive 
care). In the section above regarding the local transportation safe 
harbor, we explain that the prohibition on advertising does not 
prohibit a provider or supplier from informing patients that an item or 
service is available, when done in a targeted manner. For example, if a 
physician learns that a financially needy patient lives alone and has 
trouble remembering which medication to take at what time, the 
physician can offer the patient a tool or service to help. However, 
providers and suppliers wishing to avail themselves of the protection 
offered by this exception cannot advertise in the media, or post 
information for public display or on Web sites about the availability 
of free items or services that the provider or supplier would seek to 
have this exception protect.
    Comment: Some commenters requested that OIG clarify that the 
sliding fee discount programs that FQHCs are required to communicate do 
not constitute marketing.
    Response: As we acknowledge elsewhere in this final rule, we 
understand that health centers that have a FQHC designation are 
required to make patients aware of the sliding fee discount program. 
Such required communications would not constitute marketing (for 
purposes of this exception), nor would the required discount program be 
prohibited remuneration under the CMP.
Not Tied to the Provision of Other Reimbursed Services
    The statutory exception provides that the item or service being 
offered or transferred must not be tied to the provision of other 
reimbursed services. We proposed interpreting this limitation as not 
protecting offers or transfers of items or services that a provider or 
supplier conditions on the patient's use of other services that would 
be reimbursed by Medicare or a State health care program. We received 
comments and questions about this criterion.
    Comment: Commenters requested clarification about how this 
condition applies to FQHCs and asked that we clarify that it does not 
extend to service discounts required from health centers designated as 
FQHCs. Another commenter noted that health centers designated as FQHCs 
are required to provide discounts on the basis of a patient's ability 
to pay, and asked that OIG clarify that FQHCs can continue to provide 
reimbursable services after providing such discounts.
    Response: As we explain elsewhere in this final rule, we understand 
that health centers designated as FQHCs are required by law to 
establish sliding fee discounts for patients below certain income 
levels. Such billing policies were not prohibited before, and this 
exception would not change that. This exception only expands upon what 
providers and suppliers can do to help their patients in financial 
need.
    Comment: Commenters asked about remuneration, such as lodging or 
transportation, that is expressly tied to receiving a service from a 
particular provider.
    Response: Programs that offer lodging or transportation that is 
conditioned on receiving a particular service are ``tied'' to the 
particular service and would not be protected under this exception. 
However, other exceptions, such as the exception that allows 
remuneration that promotes access to care and poses a low risk of harm 
could apply, as could the anti-kickback safe harbor related to local 
transportation.

[[Page 88403]]

    Comment: Some commenters requested clarification of ``other'' 
reimbursed services. One suggested that the remuneration can be 
connected to a reimbursable item or service, but can't be conditioned 
on the purchase of a second covered service. Another commenter asked us 
to clarify that the provider could continue to provide treatment in the 
future, even after giving remuneration in the past.
    Response: The statute, and the regulation text, as it is being 
finalized, does not protect offering or giving items or services that 
are tied to the provision of other reimbursable services. As discussed 
in greater detail below, the item or service must be reasonably 
connected to the patient's medical care. Thus, at a high level, we 
agree with the comment that the remuneration can be connected to a 
reimbursable service as long as it is not conditioned on the purchase 
of a reimbursable service. With the exception of items or services 
provided by FQHCs or certain other entities that are required by law to 
be discounted, it seems unlikely that the remuneration offered under 
this section would be discounted reimbursable items or services 
themselves. Other than waiving the copayment amount (which would not be 
protected by this exception but could be protected by the exception at 
section 1128A(i)(6)(A) of the Act), there is no easy way to discount a 
reimbursable item or service. It is possible that the provider or 
supplier could give the item or service for free, and not bill 
Medicare, a State health care program, or the beneficiary for it. For 
example, if a financially needy diabetic patient were to run out of 
test strips and needed an immediate supply before a refill could be 
authorized, the pharmacist could give the patient an extra package of 
test strips and not bill the patient or payor for them. This free 
supply is not tied to another item or service, because, in the example, 
the patient could not get a refill at that time. The free supply does 
not require the patient to purchase a prescription or anything else 
from the pharmacy at that time or in the future. In other words, we 
recognize that providers or suppliers may have ongoing relationships 
with the patients to whom they may give free or discounted items or 
services under this exception. What this limitation prohibits is tying 
the purchase of a reimbursable item or service to the offer of the free 
item or service. Thus, using a different version of the example above, 
if the pharmacy had a practice of offering financially needy patients a 
free package of test strips (or any other item, whether or not it is 
reimbursable) each time the patient filled a prescription there, the 
remuneration would not be protected under this exception because it 
would be tied to filling the prescription.
Reasonable Connection to Medical Care
    We explained in the Proposed Rule that the requirement that 
remuneration offered have a ``reasonable connection to the medical care 
of the individual'' must be interpreted in the context of this 
particular exception. This exception is not designed to induce the 
patient to seek additional care, but rather to help financially needy 
individuals access items or services connected to their medical care. 
We proposed interpreting ``medical care'' as the treatment and 
management of illness or injury and the preservation of health through 
services offered by the medical, dental, pharmacy, nursing, and allied 
health professions. We also proposed that for remuneration to be 
``reasonably connected'' to medical care, it must be reasonable from a 
medical perspective and reasonable from a financial perspective. We 
received comments on each of these concepts.
Reasonable From a Medical Perspective
    Comment: Some commenters argued that OIG should broadly interpret 
the idea of reasonable connection to medical care for FQHCs, in 
particular, since they provide their patients a wide variety of items 
(e.g., diapers, car seats, strollers, baby formula, school supplies, 
toys, food, clothing, books, weight monitors, gas cards, and glucose 
monitors).
    Response: In the context of this particular condition, we decline 
to treat FQHCs any differently than other providers or suppliers. We 
recognize both that FQHCs treat a particularly vulnerable population 
and that the distribution of items mentioned by commenters very likely 
benefits that population. However, this exception serves a particular 
purpose, the advancement of medical care for the financially needy 
individual, and therefore protects only remuneration related to a 
particular patient's medical care. Some of the examples above would not 
qualify (strollers, school supplies, and usually toys or clothing). 
Others possibly could qualify, depending on individual circumstances. 
It is possible, for example, that car seats, diapers, specialized 
clothing, baby formula or particular food items, books, weight 
monitors, gas cards, and glucose monitors could be reasonably connected 
to a particular patient's medical care (as explained in more detail in 
response to a later comment below). However, we note that other 
exceptions and published guidance could be applicable to items that do 
not qualify for this exception. For example, non-monetary remuneration 
of nominal value (as announced herein, $15 per item or $75 in the 
aggregate per year) is not prohibited. Likewise, under section 
1128A(i)(6)(D), a health center (or other provider or supplier) can 
offer items or services to incentivize preventive care. Thus, a 
stroller or school supplies, among other items, can be offered to 
patients who attend necessary preventive care appointments.
    Comment: Commenters urged us to deem remuneration to be reasonably 
connected to medical care when a medical professional (e.g., a 
pharmacist, physician, care management team, or a generally accepted 
professional practice) determines it is connected to medical care, is 
important to patient success, or would benefit treatment or adherence 
to treatment.
    Response: We agree that a medical professional is generally in the 
best position to determine that an item or service is reasonably 
connected to the care that professional is providing, including 
achieving a favorable treatment outcome. However, we emphasize that the 
medical professional must keep in mind the purpose of this exception 
when judging whether a reasonable connection to the patient's treatment 
exists. For example, the medical professional cannot give patients 
sporting equipment (such as a bicycle or basketball hoop) on the basis 
that the patient needs more exercise. Likewise, it would not be 
reasonable for a provider to give tickets to an entertainment event or 
a gift card for a spa on the basis that the patient is suffering from 
anxiety or depression.
    Comment: Commenters made specific requests for a determination that 
certain items and services are reasonably connected to medical care, 
including transportation and lodging for a transplant patient and 
companion, bicycle helmets and other safety devices for children 
treated for injuries, and provision of most items connected to the 
wellness and health needs of patients, such as blood pressure cuffs, 
patient engagement apps, biomonitoring devices, and mobile devices as 
necessary to meet patients' various health needs.
    Response: All of the listed items or services could be reasonably 
connected to a particular patient's medical care. However, they might 
not meet other prongs of the exception. For example, providing lodging 
to a transplant patient might be reasonably connected to his or

[[Page 88404]]

her medical care, but it also makes the offer of the free item or 
service (the lodging) contingent on receiving another service (the 
transplant) from the provider. This exception is designed to be 
patient-specific, so whether something is reasonably connected to a 
patient's medical care must be determined on a case-by-case basis. 
Further, the offer or transfer of the item or service must meet all 
criteria of the exception to be protected. We again note, however, that 
if the remuneration is nominal in value (as, for example, a patient 
engagement app might be), then it would not implicate the statute and 
would not need an exception to protect it.
    Comment: Commenters made suggestions about general circumstances 
that would indicate remuneration is reasonably connected to medical 
care. One commenter agreed with circumstances we proposed (treatment 
benefit, lack of access to treatment absent payment resources, and 
others). The commenter also recommended permitting remuneration that is 
likely to enhance treatment outcomes. Others recommended remuneration 
that could lead to preservation of health and avoidance of injury, or 
improvement of nutritional status. Similarly, some commenters 
recommended preventive measures and items that support the structure 
and function of the body. Others recommended interpreting the medical 
connection requirement broadly, to encompass anything that could 
advance or improve care. Some commenters supported our suggestion in 
the Proposed Rule that we develop criteria that take into account a 
patient's unique physical, behavioral, and financial circumstances. 
Another commenter noted that imposing specific standards to define 
``reasonably connected'' would be detrimental to the goal of the 
exception, because ``reasonable'' is a subjective standard and should 
involve patient-specific determinations.
    Response: We believe that the phrase ``reasonable connection to 
medical care of the individual'' can be interpreted broadly. It can 
include items related to prevention of illness or injury, if 
specifically pertinent to a particular patient's medical care, as well 
as items related to medical treatment (e.g., extra bandages for wound 
care). Items crucial to a patient's safety (such as car seats for 
infants) are reasonably connected to medical care. However, not 
everything beneficial to a patient is connected to medical care. For 
example, school backpacks, while beneficial to the children, are not 
connected to medical care. Those types of items might be permissible 
under a different exception (e.g., the preventive care exception, if a 
practice offered backpacks to children who come in for required 
vaccines), but not under this one. Sometimes it is clear that an item 
is not connected to medical care, while in other circumstances that 
same item might be covered. For example, giving toys to children 
typically will not be reasonably connected to medical care. However, 
for certain children (e.g., children experiencing developmental delays 
or recovering from certain illnesses or injuries that require therapy 
for fine motor skills), ``toys'' that reinforce treatment or aid in 
improving a health condition could be reasonably related to that 
individual patient's medical care. As we explain above, we believe that 
the medical professional working with the patient is in the best 
position to determine what is reasonably connected to his or her 
patient's medical care, but we emphasize that this exception does not 
protect items and services that are essentially for entertainment or 
other nonmedical purposes.
Reasonable Connection From a Financial Perspective
    Comment: Some commenters recommended that we abandon the concept of 
remuneration having a reasonable connection to medical care from a 
financial perspective. One commenter suggested that this criteria does 
not appear in the statute, and financial criteria should affect only 
eligibility. Another commenter thought that the limit on 
``disproportionately large'' remuneration would stifle the provision of 
assistance, and that we should rely on the medical aspect of reasonably 
connected to care.
    Response: We decline to adopt the commenters' suggestion to abandon 
the condition of financial reasonableness. If a provider or supplier 
gives remuneration that has a high financial value, it is less likely 
to be ``reasonably'' connected to the medical care (and also unlikely 
to be given in the absence of a tie to additional services). For 
example, if a practitioner is treating an obese patient, the patient 
might benefit from an item or service connected to weight loss. An item 
such as an expensive electronic tablet with a weight loss program app 
(along with all of the other functionality available on such a tablet) 
would not be reasonable financially, but a less expensive item 
(electronic or paper-based), with similar information for the patient 
related to his or her medical care, might be. Moreover, the concept of 
excluding remuneration of disproportionately high value is not new; our 
regulatory exception to allow incentives for preventive care excludes 
``[a]n incentive the value of which is disproportionally large in 
relationship to the value of the preventive care service (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).'' 42 CFR 1003.110.
    Comment: Some commenters requested clarification of what it means 
to be disproportionately large. One asked that we provide detailed 
retail value limits, compared to the medical benefit to a beneficiary. 
Another commenter suggested that the term is ambiguous and asked about 
specific examples, such as providing disease management services or 
having a nurse follow up with a patient by telephone. Another commenter 
agreed that disproportionately large items and services could lead to 
inappropriate inducements but questioned where to draw lines. If the 
lines are too specific, they might disrupt the incentive to innovate 
(new technology might be developed that would meet congressional intent 
but would be precluded by use of certain language/restrictions).
    Response: We decline to provide specific retail value for something 
that is disproportionately large. We also agree that we do not want to 
draw specific lines because needs vary among patients, and technology 
changes over time. Something that is very expensive today might be 
inexpensive (but still useful) in 10 years. Moreover, certain items or 
services could prevent much larger medical costs in the long (or short) 
run. For example, following a hospital discharge, particularly in a 
post-surgical context, a hospital might provide a financially needy 
beneficiary with items or services to ensure his home is safe for his 
recovery. It is important to consider whether the cost of the item or 
service is proportional to the possible harm it is designed to prevent. 
For example, offering a diabetic patient compression stockings could be 
reasonable from a financial perspective, but paying for a subscription 
to a long-term meal preparation and delivery service for such a patient 
would not be. On the other hand, providing meal deliveries for a 
limited period of time after a patient is discharged after a 
debilitating procedure might be reasonable from both a medical and 
financial perspective. Disease management programs could fit in the 
exception. For example, if a physician practice or clinic had a disease 
management program for asthma, and gave asthma patients free items to 
monitor or manage their breathing or

[[Page 88405]]

oxygen levels, or provided other services, and the free items or 
services met the other criteria of the exception, they would be 
protected.
Individualized Determination of Financial Need
    We proposed to incorporate the statutory requirement that the items 
or services may be provided only ``after determining in good faith that 
the individual is in financial need.'' We proposed to interpret this 
provision as requiring an individualized assessment of the patient's 
financial need, in good faith, on a case-by-case basis. We proposed 
that such an assessment would require the use of a reasonable set of 
income guidelines, based on objective criteria that would be uniformly 
applied. We further proposed that the individual or entity offering the 
items or services should have flexibility to consider relevant 
variables in setting standards. We noted that we were considering 
whether to require documentation of the financial need assessment as a 
condition of the exception.
    Comment: Commenters who addressed the issue generally objected to 
the potential requirement that patient need be documented. Commenters 
suggested that detailed documentation is burdensome, may require 
extensive time and effort, and might deter providers from offering 
assistance.
    Response: While we are not requiring any specific documentation of 
financial need, we do expect that entities offering these items would 
do so in accordance with a set policy that is uniformly applied. 
Moreover, if an entity were under investigation and asserted this 
exception as a defense, it would have to be able to demonstrate 
compliance with the requirement to make a good faith determination of 
financial need. A written policy describing the standards and 
procedures used for establishing financial need, together with evidence 
that this written policy was followed, would be useful in making such a 
demonstration.
    Comment: Several commenters suggested that entities be permitted to 
continue using their current processes for determining need. One 
commenter stated that some Medicaid programs require pharmacies to 
accept as true patient statements of inability to pay coinsurance 
amounts. Another recommended that FQHCs' assessments based on the 
sliding fee discount schedule should suffice. Some commenters suggested 
that hospitals have longstanding policies for determining need, and 
they should not be required to use a different process. One commenter 
supported an individualized determination, on a case-by-case basis, but 
recommended that the providers have flexibility to consider relevant 
variables.
    Response: We agree with most of these comments. While the financial 
need determinations must be done on an individual basis, we are not 
mandating any particular basis for determining need. We do expect 
entities to have a set policy, based on income or other factors, and to 
uniformly apply that policy. However, providers and suppliers have the 
flexibility to determine the appropriate policy for their own patient 
populations. We do not agree that a patient statement of financial need 
should suffice in every instance. A statement of inability to pay 
coinsurance may suffice for a Medicaid patient, because Medicaid 
patients have been screened for financial eligibility by the state. A 
provider may have other reasons to be comfortable in accepting a 
patient's own statement of financial need, such as being located in a 
low-income area and generally serving a financially needy patient 
population, or knowing that a particular family has very high medical 
expenses. However, a provider or supplier should not rely solely on a 
representation by the patient that he or she is in financial need, 
unless the provider or supplier has some independent basis for belief 
that such a representation is reliable.
    Comment: One commenter recommended that OIG determine a uniform 
measure of need (e.g., a specific percentage of the Federal Poverty 
Level, as proven by individual tax forms or wage statements). Another 
recommended not requiring any documentation of need, unless a patient 
would receive over $500 in assistance annually.
    Response: We decline to adopt a uniform measure of need, and we 
also decline to adopt a minimum threshold of assistance before a 
determination of need is required. This exception is intended to 
protect items and services that, under certain conditions, are given to 
financially needy patients. Thus, providers and suppliers must adopt a 
standard that can be reasonably considered to reflect financial need 
and cannot simply ignore the last condition of the exception. We also 
explained above that we do not intend to require specific documentation 
of the actual determination of need for each patient, but that 
providers or suppliers using this exception as a defense would need to 
be able to prove they complied with their own standards. For example, 
if a physician's policy was that any patient on Medicaid is qualified 
for assistance, the simple fact that the patient's file shows Medicaid 
as the payor is sufficient documentation. However, the income or wealth 
of patients with Medicare as a payor varies greatly. Thus, a provider 
or supplier offering items or services to a Medicare patient would need 
some method to determine whether the patient qualifies as financially 
needy under the standards set by the provider or supplier.
5. First Fill of a Generic
    We proposed to incorporate into our regulations the fourth new 
provision added at section 1128A(i)(6)(I) of the Act, which excepts 
from the definition of ``remuneration'' the waiver by a PDP sponsor of 
a Part D plan or MA organization offering MA-PD plans of any copayment 
that would be otherwise owed by their enrollees for the first fill of a 
covered Part D drug that is a generic drug. We proposed to rely on the 
definition of ``generic drug'' in the Part D regulations at 42 CFR 
423.4. Further, because CMS already permits these waivers as part of 
Part D and MA plan benefit designs, we proposed that sponsors desiring 
to offer these waivers to their enrollees would be required to disclose 
this incentive program in their benefit plan package submissions to 
CMS. We proposed that this exception would be effective for coverage 
years beginning after publication of the final rule. However, because 
this final rule is being published after the deadline for submission to 
CMS of benefit plan packages for coverage year 2017), this exception is 
applicable to coverage years beginning on or after January 1, 2018. We 
have revised the regulation text accordingly.
    Those who commented on this proposal generally supported it. We 
address some specific comments and recommendations below.
    Comment: One commenter asked that we revise the text of the 
regulation to ensure that it applies to all sponsors of Part D 
coverage.
    Response: We did not intend to exclude any sponsors of Part D 
coverage from this exception. To ensure that the exception applies to 
all Part D sponsors, we have replaced the reference to ``a sponsor of a 
Prescription Drug Plan under part D of Title XVIII or a MA organization 
offering a MA-PD Plan under part C of such title'' with ``a Part D Plan 
sponsor,'' as that term is defined in 42 CFR 423.4.'' For consistency 
with this change, we also replaced the reference to ``Prescription Drug 
Plan or MA-PD Plan, repectively'' with ``Part D plan (as that term is 
defined in 42 CFR 423.4).''

[[Page 88406]]

    Comment: One commenter asserted that the definition we proposed for 
``generic drug'' (at 42 CFR 423.4) would not include ``authorized 
generics,'' which are defined at 21 CFR 314.3. The commenter 
recommended we expand the definition to include authorized generics.
    Response: As we explained in the preamble of the Proposed Rule, the 
purpose of this exception is to minimize drug costs by encouraging the 
use of lower cost generic drugs. As a form of lower cost generic drug, 
use of authorized generics would further this goal. Therefore, as long 
as these waivers are included in the Part D Plan sponsor's benefit plan 
package submission to CMS, waivers of the first fill of authorized 
generics may be included in the exception as well. We have revised the 
language in the final rule to reflect this change.
    Comment: One commenter asked OIG to remind PDP and MA-PD plans that 
pharmacy reimbursement must remain sufficient to provide Medicare 
beneficiaries adequate access to care. The commenter stated that plans 
should not simply waive copayment amounts, which the commenter asserts 
would be at no cost to the plan but great cumulative cost to the 
pharmacies. The commenter also suggests that these waivers could create 
a financial incentive for pharmacies not to dispense generic drugs.
    Response: Part D Plan sponsors submit their plan designs to CMS and 
negotiate terms with their network providers. Pharmacies can choose 
whether to be in the network and accept those terms. OIG does not have 
a role in setting pharmacy reimbursement via the Part D Plan sponsors. 
This statutory exception, which we are incorporating into regulations, 
confirms only that Part D Plan sponsors offering such waivers would not 
violate the beneficiary inducements CMP.
    Comment: One commenter supported our proposal to require advance 
disclosure of any copayment waivers in Medicare plan benefit packages, 
as well as transparency of such programs to pharmacies, in order to 
allow pharmacies notice to decide if and how the pharmacies may agree 
to participate in Part D Plan sponsor's provider network and waiver 
program.
    Response: We agree with the commenter that disclosure and 
transparency are important. We are finalizing the requirement that the 
waivers be included in the benefit design package submitted to CMS in 
the regulation.

D. Comments Outside the Scope of Rulemaking

    We received several comments that are outside the scope of this 
rulemaking. For example, some commenters requested that we initiate new 
safe harbors, provide guidance on issues outside of the proposed safe 
harbors, and protect specific programs or initiatives outside of the 
proposed safe harbors. While we may consider these requests in future 
rulemaking, we also remind stakeholders that the advisory opinion 
process remains available for determinations on individual 
arrangements.

III. Provisions of the Final Regulation

    This final rule incorporates most of the regulations we proposed in 
the Proposed Rule, but with some changes to the regulatory text.
    We are finalizing, with certain revisions, both new safe harbors 
that we proposed in 42 CFR 1001.952(k): one to protect waivers or 
reductions in cost-sharing by pharmacies for financially needy 
beneficiaries, and one to protect waivers in cost-sharing for State- or 
municipality-owned emergency ambulance services. We also made a change 
was to the introductory language of subparagraph (k), expanding this 
safe harbor to all Federal health care programs. To implement the 
change where applicable, we are republishing subparagraph (k) in its 
entirety. We are finalizing the safe harbor to protect free or 
discounted local transportation, with some changes from the Proposed 
Rule. Two of the most frequent topics of comment were our 
interpretation of ``established patient'' and the distance limitation. 
In response to comments, we broadened our interpretation of 
``established patient'' to encompass any patient who has made an 
appointment with the provider or supplier. We also revised our 
interpretation of ``local'' to include different distances for rural 
and nonrural areas, and we added a section applicable to shuttle 
services. We are finalizing the other safe harbors ((1) a technical 
correction to the referral services safe harbor; (2) arrangements 
between federally qualified health centers and MA organizations; and 
(3) discounts under the Medicare Coverage Gap Discount Program) as we 
proposed them in the Proposed Rule with minor, if any, changes.
    We are finalizing all of the beneficiary inducements CMP 
exceptions, with certain changes. In the Proposed Rule, we did not 
propose regulatory text for the exception for remuneration that 
promotes access to care but poses a low risk of harm to patients and 
Federal health care programs. However, we proposed to interpret 
``promotes access to care'' to mean that the remuneration improves a 
particular beneficiary's ability to obtain medically necessary health 
care items and services. We proposed to interpret the requirement that 
remuneration pose a low risk of harm to Federal health care program 
beneficiaries and programs to mean that the remuneration must: (1) Be 
unlikely to interfere with, or skew, clinical decision making; (2) be 
unlikely to increase costs to Federal health care programs or 
beneficiaries through overutilization or inappropriate utilization; and 
(3) not raise patient safety or quality-of-care concerns. We are 
finalizing regulatory text that mirrors these proposals. The only 
changes we are making to any of the other four exceptions proposed in 
the Proposed Rule are the following changes to the exception relating 
to waivers of the copayment for the first fill of a generic drug: to 
incorporate a definition recommended by commenters of ``Part D Plan 
sponsor;'' to include ``authorized generic drugs'' in the exception; 
and to specify when the exception becomes effective. Otherwise, the 
text of each exception in the final rule is the same that we proposed 
in the Proposed Rule.
    We are not finalizing the gainsharing CMP regulation that we 
proposed. We had proposed to codify the gainsharing CMP set forth in 
section 1128A(b) of the Act, which, as of October 2014, provided 
penalties for hospital payments to physicians to ``reduce or limit 
services'' (not only medically necessary services) to Medicare or 
Medicaid beneficiaries. We solicited comments on a narrower 
interpretation of the term ``reduce or limit services'' than we have 
previously held. However, section 512(a) of MACRA amended the language 
in quotes to insert the words ``medically necessary'' before 
``services.'' Because of the amendment to the statute, we are unable to 
finalize the rule, as proposed. However, this statutory provision is 
self-implementing, and no regulatory action is required to make the 
change enacted in MACRA effective.

IV. Regulatory Impact Statement

    We have examined the impact of this proposed rule, as required by 
Executive Order 12866, the Regulatory Flexibility Act (RFA) of 1980, 
the Unfunded Mandates Reform Act of 1995, and Executive Order 13132.

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and,

[[Page 88407]]

if regulations are necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects; distributive impacts; and equity). A 
regulatory impact analysis must be prepared for major rules with 
economically significant effects, i.e., $100 million or more in any 
given year. This is not a major rule as defined at 5 U.S.C. 804(2); it 
is not economically significant because it does not reach that economic 
threshold.
    This proposed rule would implement or codify new and existing CMP 
exceptions and implement new or revised anti-kickback statute safe 
harbors. The vast majority of providers and Federal health care 
programs would be minimally impacted from an economic perspective, if 
at all, by these proposed revisions.
    The changes to the safe harbors and CMP exceptions would allow 
providers to enter into certain beneficial arrangements. In doing so, 
this regulation would impose no requirements on any party. Providers 
would be allowed to voluntarily seek to comply with these provisions so 
that they would have assurance that participating in certain 
arrangements would not subject them to liability under the anti-
kickback statute and the beneficiary inducement CMP. These safe harbors 
and exceptions facilitate providers' ability to provide important 
health care and related services to communities in need. We believe 
that the aggregate economic impact of the changes to these regulations 
would be minimal and would have no effect on the economy or on Federal 
or State expenditures.
    Accordingly, we believe that the likely aggregate economic effect 
of these regulations would be significantly less than $100 million.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) and the Small Business 
Regulatory Enforcement and Fairness Act of 1996, which amended the RFA, 
require agencies to analyze options for regulatory relief of small 
businesses. For purposes of the RFA, small entities include small 
businesses, nonprofit organizations, and government agencies. Most 
providers are considered small entities by having revenues of $7 
million to $35.5 million or less in any one year. For purposes of the 
RFA, most physicians and suppliers are considered small entities.
    The changes to the CMP exceptions and the the anti-kickback statute 
safe harbors would not significantly affect small providers as these 
changes would not impose any requirement on any party.
    In summary, we have concluded that this final rule should not have 
a significant impact on the operations of a substantial number of small 
providers and that a regulatory flexibility analysis is not required 
for this rulemaking.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule under Titles XVIII or XIX or 
section B of Title XI of the Act may have a significant impact on the 
operations of a substantial number of small rural hospitals. For the 
reasons stated above, we do not believe that any provisions or changes 
finalized here would have a significant impact on the operations of 
rural hospitals. Thus, an analysis under section 1102(b) is not 
required for this rulemaking.

Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4, also requires that agencies assess anticipated costs and 
benefits before issuing any rule that may result in expenditures in any 
one year by State, local, or tribal governments, in the aggregate, or 
by the private sector, of $100 million, adjusted for inflation. We 
believe that no significant costs would be associated with these 
revisions that would impose any mandates on State, local, or tribal 
governments or the private sector that would result in an expenditure 
of $141 million (after adjustment for inflation) in any given year.

Executive Order 13132

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a rule that imposes substantial 
direct requirements or costs on State and local governments, preempts 
State law, or otherwise has Federalism implications. In reviewing this 
rule under the threshold criteria of Executive Order 13132, we have 
determined that this rule would not significantly affect the rights, 
roles, and responsibilities of State or local governments.

V. Paperwork Reduction Act

    The provisions of this final rule will not impose any new 
information collection and recordkeeping requirements. Consequently, it 
need not be reviewed by the Office of Management and Budget under the 
authority of the Paperwork Reduction Act of 1995.

List of Subjects

42 CFR Part 1001

    Administrative practice and procedure, Fraud, Grant programs--
health, Health facilities, Health professions, Maternal and child 
health, Medicaid, Medicare, Social Security.

42 CFR Part 1003

    Fraud, Grant programs--health, Health facilities, Health 
professions, Medicaid, Reporting and recordkeeping.

    Accordingly, 42 CFR parts 1001 and 1003 are amended as set forth 
below:

PART 1001--PROGRAM INTEGRITY--MEDICARE AND STATE HEALTH CARE 
PROGRAMS

0
1. The authority citation for part 1001 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(j), 
1395u(k), 1395w-104(e)(6), 1395y(d), 1395y(e), 1395cc(b)(2)(D), (E) 
and (F), and 1395hh; and sec. 2455, Pub. L. 103-355, 108 Stat. 3327 
(31 U.S.C. 6101 note).


0
2. Section 1001.952 is amended by revising paragraphs (f)(2) and (k), 
and adding paragraphs (z), (aa), and (bb) to read as follows:


Sec.  1001.952  Exceptions.

* * * * *
    (f) * * *
    (2) Any payment the participant makes to the referral service is 
assessed equally against and collected equally from all participants 
and is based only on the cost of operating the referral service, and 
not on the volume or value of any referrals to or business otherwise 
generated by either party for the other party for which payment may be 
made in whole or in part under Medicare, Medicaid, or other Federal 
health care programs.
* * * * *
    (k) Waiver of beneficiary copayment, coinsurance and deductible 
amounts. As used in section 1128B of the Act, ``remuneration'' does not 
include any reduction or waiver of a Federal health care program 
beneficiary's obligation to pay copayment, coinsurance or deductible 
(for purposes of this subparagraph (k) ``cost-sharing'') amounts as 
long as all the standards are met within one of the following 
categories of health care providers or suppliers.
    (1) If the cost-sharing amounts are owed to a hospital for 
inpatient hospital services for which a Federal health care program 
pays under the prospective payment system, the hospital must comply 
with all of the following three standards:

[[Page 88408]]

    (i) The hospital must not later claim the amount reduced or waived 
as a bad debt for payment purposes under a Federal health care program 
or otherwise shift the burden of the reduction or waiver onto a Federal 
health care program, other payers, or individuals.
    (ii) The hospital must offer to reduce or waive the cost-sharing 
amounts without regard to the reason for admission, the length of stay 
of the beneficiary, or the diagnostic related group for which the claim 
for reimbursement is filed.
    (iii) The hospital's offer to reduce or waive the cost-sharing 
amounts must not be made as part of a price reduction agreement between 
a hospital and a third-party payer (including a health plan as defined 
in paragraph (l)(2) of this section), unless the agreement is part of a 
contract for the furnishing of items or services to a beneficiary of a 
Medicare supplemental policy issued under the terms of section 
1882(t)(1) of the Act.
    (2) If the cost-sharing amounts are owed by an individual who 
qualifies for subsidized services under a provision of the Public 
Health Services Act or under Titles V or XIX of the Act to a federally 
qualified health care center or other health care facility under any 
Public Health Services Act grant program or under Title V of the Act, 
the health care center or facility may reduce or waive the cost-sharing 
amounts for items or services for which payment may be made in whole or 
in part by a Federal health care program.
    (3) If the cost-sharing amounts are owed to a pharmacy (including, 
but not limited to, pharmacies of the Indian Health Service, Indian 
tribes, tribal organizations, and urban Indian organizations) for cost-
sharing imposed under a Federal health care program, the pharmacy may 
reduce or waive the cost-sharing amounts if:
    (i) The waiver or reduction is not offered as part of an 
advertisement or solicitation; and
    (ii) Except for waivers or reductions offered to subsidy-eligible 
individuals (as defined in section 1860D-14(a)(3)) to which only 
requirement in paragraph (k)(3)(i) of this section applies:
    (A) The pharmacy does not routinely waive or reduce cost-sharing 
amounts; and
    (B) The pharmacy waives the cost-sharing amounts only after 
determining in good faith that the individual is in financial need or 
after failing to collect the cost-sharing amounts after making 
reasonable collection efforts.
    (4) If the cost-sharing amounts are owed to an ambulance provider 
or supplier for emergency ambulance services for which a Federal health 
care program pays under a fee-for-service payment system and all the 
following conditions are met:
    (i) The ambulance provider or supplier is owned and operated by a 
State, a political subdivision of a State, or a tribal health care 
program, as that term is defined in section 4 of the Indian Health Care 
Improvement Act;
    (ii) The ambulance provider or supplier engaged in an emergency 
response, as defined in 42 CFR 414.605;
    (iii) The ambulance provider or supplier offers the reduction or 
waiver on a uniform basis to all of its residents or (if applicable) 
tribal members, or to all individuals transported; and
    (iv) The ambulance provider or supplier must not later claim the 
amount reduced or waived as a bad debt for payment purposes under a 
Federal health care program or otherwise shift the burden of the 
reduction or waiver onto a Federal health care program, other payers, 
or individuals.
* * * * *
    (z) Federally Qualified Health Centers and Medicare Advantage 
Organizations. As used in section 1128B of the Act, ``remuneration'' 
does not include any remuneration between a federally qualified health 
center (or an entity controlled by such a health center) and a Medicare 
Advantage organization pursuant to a written agreement described in 
section 1853(a)(4) of the Act.
    (aa) Medicare Coverage Gap Discount Program. As used in section 
1128B of the Act, ``remuneration'' does not include a discount in the 
price of a drug when the discount is furnished to a beneficiary under 
the Medicare Coverage Gap Discount Program established in section 
1860D-14A of the Act, as long as all the following requirements are 
met:
    (1) The discounted drug meets the definition of ``applicable drug'' 
set forth in section 1860D-14A(g) of the Act;
    (2) The beneficiary receiving the discount meets the definition of 
``applicable beneficiary'' set forth in section 1860D-14A(g) of the 
Act; and
    (3) The manufacturer of the drug participates in, and is in 
compliance with the requirements of, the Medicare Coverage Gap Discount 
Program.
    (bb) Local Transportation. As used in section 1128B of the Act, 
``remuneration'' does not include free or discounted local 
transportation made available by an eligible entity (as defined in this 
paragraph (bb)):
    (1) To Federal health care program beneficiaries if all the 
following conditions are met:
    (i) The availability of the free or discounted local transportation 
services--
    (A) Is set forth in a policy, which the eligible entity applies 
uniformly and consistently; and
    (B) Is not determined in a manner related to the past or 
anticipated volume or value of Federal health care program business;
    (ii) The free or discounted local transportation services are not 
air, luxury, or ambulance-level transportation;
    (iii) The eligible entity does not publicly market or advertise the 
free or discounted local transportation services, no marketing of 
health care items and services occurs during the course of the 
transportation or at any time by drivers who provide the 
transportation, and drivers or others arranging for the transportation 
are not paid on a per-beneficiary-transported basis;
    (iv) The eligible entity makes the free or discounted 
transportation available only:
    (A) To an individual who is:
    (1) An established patient (as defined in this paragraph (bb)) of 
the eligible entity that is providing the free or discounted 
transportation, if the eligible entity is a provider or supplier of 
health care services; and
    (2) An established patient of the provider or supplier to or from 
which the individual is being transported;
    (B) Within 25 miles of the health care provider or supplier to or 
from which the patient would be transported, or within 50 miles if the 
patient resides in a rural area, as defined in this paragraph (bb); and
    (C) For the purpose of obtaining medically necessary items and 
services.
    (v) The eligible entity that makes the transportation available 
bears the costs of the free or discounted local transportation services 
and does not shift the burden of these costs onto any Federal health 
care program, other payers, or individuals; and
    (2) In the form of a ``shuttle service'' (as defined in this 
paragraph (bb)) if all of the following conditions are met:
    (i) The shuttle service is not air, luxury, or ambulance-level 
transportation;
    (ii) The shuttle service is not marketed or advertised (other than 
posting necessary route and schedule details), no marketing of health 
care items and services occurs during the course of the transportation 
or at any time by drivers who provide the transportation, and drivers 
or others arranging for the transportation are not paid on a per-
beneficiary-transported basis;

[[Page 88409]]

    (iii) The eligible entity makes the shuttle service available only 
within the eligible entity's local area, meaning there are no more than 
25 miles from any stop on the route to any stop at a location where 
health care items or services are provided, except that if a stop on 
the route is in a rural area, the distance may be up to 50 miles 
between that that stop and all providers or suppliers on the route; and
    (iv) The eligible entity that makes the shuttle service available 
bears the costs of the free or discounted shuttle services and does not 
shift the burden of these costs onto any Federal health care program, 
other payers, or individuals.
    Note to paragraph (bb): For purposes of this paragraph (bb), an 
``eligible entity'' is any individual or entity, except for individuals 
or entities (or family members or others acting on their behalf) that 
primarily supply health care items; ``established patient'' is a person 
who has selected and initiated contact to schedule an appointment with 
a provider or supplier to schedule an appointment, or who previously 
has attended an appointment with the provider or supplier; ``shuttle 
service'' is a vehicle that runs on a set route, on a set schedule; 
``rural area'' is an area that is not an urban area, as defined in this 
rule;and ``urban area'' as: (a) A Metropolitan Statistical Area (MSA) 
or New England County Metropolitan Area (NECMA), as defined by the 
Executive Office of Management and Budget; or (b) the following New 
England counties, which are deemed to be parts of urban areas under 
section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-
21, 42 U.S.C. 1395ww (note)): Litchfield County, Connecticut; York 
County, Maine; Sagadahoc County, Maine; Merrimack County, New 
Hampshire; and Newport County, Rhode Island.

PART 1003--CIVIL MONEY PENALTIES, ASSESSMENTS AND EXCLUSIONS

0
3. The authority citation for part 1003 continues to read as follows:

    Authority: 42 U.S.C. 262a, 1302, 1320-7, 1320a-7a, 1320b-10, 
1395u(j), 1395u(k), 1395cc(j), 1395w-141(i)(3), 1395dd(d)(1), 
1395mm, 1395nn(g), 1395ss(d), 1396b(m), 11131(c), and 11137(b)(2).

0
4. In Sec.  1003.110, the definition of ``remuneration'' is amended by 
revising the introductory text and paragraph (3) and adding paragraphs 
(5) through (9) to read as follows:


Sec.  1003.110  Definitions.

* * * * *
    Remuneration, for the purposes of Sec.  1003.1000(a) of this part, 
is consistent with the definition in section 1128A(i)(6) of the Act and 
includes the waiver of copayment, coinsurance and deductible amounts 
(or any part thereof) and transfers of items or services for free or 
for other than fair market value. The term ``remuneration'' does not 
include:
* * * * *
    (3) Differentials in coinsurance and deductible amounts as part of 
a benefit plan design (as long as the differentials have been disclosed 
in writing to all beneficiaries, third party payers and providers), to 
whom claims are presented;
* * * * *
    (5) A reduction in the copayment amount for covered OPD services 
under section 1833(t)(8)(B) of the Act;
    (6) 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 Medicare and Medicaid beneficiaries and the 
Medicare and Medicaid programs by--
    (i) Being unlikely to interfere with, or skew, clinical decision 
making;
    (ii) Being unlikely to increase costs to Federal health care 
programs or beneficiaries through overutilization or inappropriate 
utilization; and
    (iii) Not raising patient safety or quality-of-care concerns;
    (7) The offer or transfer of items or services for free or less 
than fair market value by a person if--
    (i) The items or services consist of coupons, rebates, or other 
rewards from a retailer;
    (ii) The items or services are offered or transferred on equal 
terms available to the general public, regardless of health insurance 
status; and
    (iii) The offer or transfer of the items or services is not tied to 
the provision of other items or services reimbursed in whole or in part 
by the program under Title XVIII or a State health care program (as 
defined in section 1128(h) of the Act);
    (8) The offer or transfer of items or services for free or less 
than fair market value by a person, if--
    (i) The items or services are not offered as part of any 
advertisement or solicitation;
    (ii) The offer or transfer of the items or services is not tied to 
the provision of other items or services reimbursed in whole or in part 
by the program under Title XVIII or a State health care program (as 
defined in section 1128(h) of the Act);
    (iii) There is a reasonable connection between the items or 
services and the medical care of the individual; and
    (iv) The person provides the items or services after determining in 
good faith that the individual is in financial need;
    (9) Waivers by a Part D Plan sponsor (as that term is defined in 42 
CFR 423.4) of any copayment for the first fill of a covered Part D drug 
(as defined in section 1860D-2(e)) that is a generic drug (as defined 
in 42 CFR 423.4) or an authorized generic drug (as defined in 21 CFR 
314.3) for individuals enrolled in the Part D plan (as that term is 
defined in 42 CFR 423.4), as long as such waivers are included in the 
benefit design package submitted to CMS. This exception is applicable 
to coverage years beginning on or after January 1, 2018.
* * * * *

    Dated: August 3, 2016.
Daniel R. Levinson,
Inspector General.
    Approved: August 4, 2016.
Sylvia M. Burwell,
Secretary.

    Note:  This document was received by the Office of the Federal 
Register on November 18, 2016.

[FR Doc. 2016-28297 Filed 12-6-16; 8:45 am]
 BILLING CODE 4152-01-P