Legal Intelligencer article by Lamb McErlane Health Law attorneys Vasilios J. (Bill) Kalogredis and Artyom (Art) Sharbatyan.

In March, in Advisory Opinion No 23-03, The Office of Inspector General (OIG) has responded to a request for an advisory opinion on a proposed arrangement by a Parent and Laboratory (Requestors) to provide prepaid cards of up to $75 to certain individuals, including Federal healthcare program beneficiaries, to encourage them to return a sample collection kit associated with the Requestors’ colorectal cancer screening test (Proposed Arrangement). The opinion analyzed whether the Proposed Arrangement violated the Federal Anti-Kickback statute (AKS) and the Beneficiary Inducements Civil Monetary Penalties (CMP). Upon review, and based on the information provided by Requestors, the OIG has concluded that although the Proposed Arrangement could generate prohibited remuneration under the AKS, they would not impose administrative sanctions on Requestors. Furthermore, the Proposed Arrangement would not constitute grounds for administrative sanctions under the CMP. The OIG relied solely on the information provided by the requestors and did not conduct an independent investigation of the facts presented.

Facts

The Parent is a company that manufactures a non-invasive colorectal cancer screening test (Test) that is the first and only such test that has been approved by the FDA as of the time of the Advisory Opinion being published. The Test is performed by the Parent’s wholly owned subsidiary, the Laboratory, and is the only laboratory that performs the Test. Medicare covers the Test under specified circumstances. In October 2014, the CMS issued a Medicare National Coverage Determination and supporting Decision Memorandum stating that Medicare Part B will cover the Test once every three years for Medicare beneficiaries aged 50 or older who meet certain criteria. In November 2022, CMS revised its coverage determination for colorectal cancer screening, reducing the age from 50 to 45. The Test may be ordered for a patient only by healthcare providers acting within the scope of his/her prescribing authority (Prescriber). After the Prescriber submits an order for the Test to the Laboratory, the Laboratory ships the Test sample collection kit directly to the patient’s home. Patient subsequently collects his/her own stool sample, and ships the Test collection kit with the stool sample (Kit) to the Laboratory in a prepaid, preaddressed package. The Laboratory then analyzes the stool sample and compares the composite score of the various assay results to a control to determine a positive or negative result. A positive result may indicate the presence of colorectal cancer or advanced adenoma and should be followed by a diagnostic colonoscopy.

Requestors generally contact a patient upon receiving the Prescriber’s order for the Test to verify the patient’s address, encourage the patient to contact the Laboratory with any questions about the Test, and request that the patient promptly return the Kit. However, Requestor’s data show that more than 30% of patients fail to return the Kit back to the Laboratory for analysis. Therefore, Requestors intend to implement the Proposed Arrangement to encourage patients to return the Kit, thereby promoting patient compliance with the Prescriber’s order for the Test.

Under the Proposed Arrangement, if the Laboratory has not received the Kit following at least two patient contacts, Requestors would send the patient a reminder letter (Letter) no sooner than 2 weeks, and no later than 180 days, after the patient receives the Test sample collection kit. The Letter would include a telephone number the patient may call with any questions. Unlike the first two patient contacts, the Letter would also state that, if the patient returns the Kit within the period of time specified in the Letter, Requestors would send the patient a prepaid card, such as a Visa or Mastercard gift card, with a value of up to $75 (Gift Card). The Gift Card would not be redeemable for or convertible into cash and would be non-reloadable. Additionally, Requestors certified they would implement certain safeguards related to the Proposed Arrangement. In particular, Requestors certified that:

• The Gift Card would be mailed only to those patients who return the Kit by the deadline specified in the Letter.
• They would advise patients in the Letter that the Gift Card may not be used for items or services provided by Requestors.
• Each patient would be limited to receiving one Gift Card per 36-month period, a time period that aligns with Medicare’s coverage for the Test, which is once every 36 months.
• Requestors would implement processes to ensure that the recipient of the Gift Card had not already received a Gift Card in the prior 36-month period.

Requestors also certified that, as of January 2023, under Medicare’s Clinical Laboratory Fee Schedule, the Laboratory is reimbursed approximately $500 for each Test it performs.

Analysis

The described arrangement could trigger imposition of liability against the providers under AKS and CMP. The AKS makes it illegal to knowingly and willingly offer, pay, solicit, or receive any form of payment in exchange for the referral of an individual for services reimbursable under a Federal healthcare program and the violation of the statute may constitute a punishable felony. The CMP, on the other hand, makes it illegal to provide any financial benefit to a beneficiary in return for their selection of a particular provider, practitioner, or supplier for a Federally reimbursable healthcare item or service and it provides for the imposition of civil monetary penalties.

However, the CMS discussed that a non-invasive stool-based colorectal cancer screening test is advantageous as a first step compared to a screening colonoscopy. CMS recognized that there are significant differences between screening stool-based tests and screening colonoscopy tests in terms of invasiveness and burdens to the patient and healthcare system. The CMS also stated that a large proportion (46%) of screening tests found no polyps, so optimizing use of non-invasive stool screening test as a first step would benefit the patient and also the Medicare program.

Furthermore, the opinion explained that the Proposed Arrangement could qualify for an exception to the CMP. The Preventive Care Exception excludes remuneration given to individuals to promote the delivery of preventive care services where the delivery of such services is not tied to the provision of other services reimbursed by Federal healthcare programs. The regulations define “preventive care” to include any service that is a specific clinical service “described in the current US Preventive Services Task Force’s (USPSTF) Guide to Clinical Preventive Services[1]” and is reimbursable by Medicare or an applicable State health care program. In this case, the Gift Card would promote the delivery of the Laboratory services in connection with a preventive care service and was, therefore, eligible for the exception. Therefore, the proposed arrangement was not a violation of the CMP.

The opinion stated that the Gift Card could influence the patient to select the Laboratory’s services and, as such, could also trigger a violation of the AKS. “From an anti-kickback perspective, the chief concern is whether an arrangement to induce patients to obtain preventive care services is intended to induce other business payable by a Federal health care program.”[2] However, the Laboratory’s proposal presents a minimal risk of fraud and abuse under the AKS considering several factors. First, the Proposed Arrangement is unlikely to lead to improperly increased costs to Federal health care programs or overutilization of federally reimbursable services as Requestors would not offer any incentives to Prescribers in connection with the Proposed Arrangement, and a Prescriber would not be able to anticipate whether Requestors would offer or provide a Gift Card to any patient for whom the Prescriber orders the Test.  So, the Proposed Arrangement is unlikely to influence a Prescriber to order the Test in lieu of not ordering a test or ordering another screening test or procedure. The test is reimbursable at a fixed rate, therefore, there is no increased cost to Federal health care programs, since the cost of any Gift Cards are not directly or indirectly passed onto the programs. Secondly, the Proposed Arrangement would promote patient compliance with a screening test in a situation where a patient might not otherwise comply with a Prescriber’s order for the Test. Lastly, the Proposed Arrangement contains certain other safeguards that reduce the risk of fraud and abuse, such as no patient is offered or provided a Gift Card if they have received one within the past 36 months, apart from a Letter there is no patient-focused promotion of the Proposed Arrangement, and there is no direct marketing to Prescribers. OIG underscored, that if any of the foregoing facts were different, a different conclusion would have likely been reached as well.

In conclusion, based on the relevant facts provided in the request for an advisory opinion and supplemental submissions, the OIG determined that even though the Proposed Arrangement if undertaken would instigate a violation of the Beneficiary Inducements CMP and Federal Anti-Kickback statute the OIG would not impose administrative sanctions on Requestors.

Limitations

• The advisory opinion is limited in scope to the Proposed Arrangement and does not apply to any other arrangements disclosed or referenced in the request.
• The advisory opinion is only for the benefit of the Requestors and cannot be relied upon by any other person.
• The advisory opinion applies only to the specific statutory provisions addressed in the analysis and does not address any other laws that may be applicable to the Proposed Arrangement.
• The advisory opinion is subject to additional limitations set forth in 42 C.F.R. Part 1008.

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Vasilios J. (Bill) Kalogredis, Esq. has been exclusively advising physicians, dentists, and other health care professionals and their businesses as to contractual, regulatory and transactional matters for over 45 years. He is Chairman of Lamb McErlane PC’s Health Law Department. bkalogredis@lambmcerlane.com. 610-701-4402.

*Artyom (Art) Sharbatyan, Esq. contributed to this article. Art has extensive real life practical experience in the healthcare field with particular concentration in dental practice groups. He represents healthcare providers in their business and legal needs at Lamb McErlane, PC’s Health Law Department. asharbatyan@lambmcerlane.com; 610-701-4416.

Read the article online on Law.com.

[1] For purposes of this exception, the OIG interpreted the regulation’s reference to include the final published recommendations in the USPSTF website at: https://www.uspreventiveservicestaskforce.org/uspstf/topic_search_results?topic_status=P

[2] OIG Advisory Opinion No. 23-03: https://oig.hhs.gov/documents/advisory-opinions/1109/AO-23-03.pdf