2024 U.S. Health Care Fraud, Waste & Abuse Trends (Part I): Advisory Opinions on Patient Inducements

Join Ropes & Gray’s attorneys for a three-part podcast series exploring recent regulatory, compliance, and enforcement developments in the fraud, waste, and abuse space and the potential implications for health care and life science companies in 2024. In this first installment, health care partners Devin Cohen and Michael Lampert discuss key considerations for understanding recent advisory opinions published by the U.S. Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”), as well as their scope and implications. With particular focus on advisory opinions concerning beneficiary inducements to patients, this episode examines Anti-Kickback Statute and Civil Monetary Penalties Law concerns with such arrangements, as well as factors OIG has deemed to alleviate such concerns in the advisory opinions it issued in the past year.

Transcript:

Devin Cohen: Hello, and welcome to today’s podcast. This is part one of a three-part series reviewing recent developments in fraud, waste, and abuse. My name’s Devin Cohen—I’m a partner in Ropes & Gray’s health care practice group. My practice includes a broad range of regulatory and transactional matters, with a focus strongly in insurance requirements and payor-provider alignment. With me today is Michael Lampert. Michael is a partner in our health care practice group whose work centers around providing strategic, regulatory, and transactional advice to clients in all sectors of the health care industry, and Michael co-heads our Chambers Band 1-Ranked False Claims Act practice.

This podcast is the first installment in a series of three podcasts reviewing recent developments in fraud and abuse in health care. The first podcast is going to discuss advisory opinion considerations, provide an overview of the lay of the land, and discuss patient-inducement opinions that have arisen over the past year. The following podcast is going to dig into clinical laboratory arrangements and specimen collection arrangements and their implications under the Kickback Statute and Civil Monetary Penalties Law, and advisory opinions issued by the U.S. Department of Health and Human Services Office of Inspector General (“HHS-OIG”) in 2023. Finally, our third podcast is going to focus specifically on enforcement actions in this space over the last year. Now, let’s jump in.

Michael Lampert: Fantastic. I’ll give a background, initially, on advisory opinions. Really four points, just for context. First point: What an “advisory opinion” is is it’s an opportunity to get HHS-OIG’s view on a particular arrangement. One can write in, and one can get an answer out: a “yea” or a “nay.” And that’s really point two: That it is, in a way, though not “yea” or “nay,” it’s really “green light” or “not green light.” HHS-OIG can give a favorable opinion, which is to say that HHS-OIG concludes that the arrangement is sufficiently low-risk that it is not subject to enforcement—that’s a green light, that’s essentially an immunity cloak. Or a party can get a “not a green light,” in which HHS-OIG says, “We can’t give that immunity cloak,” so to speak, “and so, this arrangement is subject to risk.” Now, “not green light” doesn’t necessarily mean “red light,” but it does mean “not green.” The way to get an opinion is to write in and to provide a lot of detail describing the arrangement that one either proposes entering or that one has already entered. And then, to engage normally in a bit of a back-and-forth dialogue over a course of several months with HHS-OIG, giving the agency enough information to be able to weigh in definitively on a particular arrangement to see if that arrangement warrants a green light.

Now, the process can be used to ask about one’s own arrangement, whether existing or proposed, or it can be used, frankly, to ask about a competitor’s arrangement. In order to seek the advisory opinion, it’s necessary for the Requestor to say either “I am doing this,” or, if given a green light, “I will do this.” But it can be used competitively, which is to say, for example, if an organization sees a competitor doing something that is beyond that own organization’s risk barometer, and if that organization feels that it’s getting its lunch eaten by the competitor that is doing this thing that the organization thinks is outside the right risk parameters, it’s possible to write in and to ask HHS-OIG for its view. If the answer is, “No,” or if the answer is “Not green light,” and HHS-OIG writes that, that becomes public, and that then becomes a tool that can be used competitively. And so, with that, I’ll turn to Devin for a couple of numbers.

Devin Cohen: Thanks, Michael. Recently, there’s actually been a downward trend in the number of advisory opinions we’ve been seeing—with over 20 in 2022 and 2021, but really only 15 in ‘23. So, we’re keeping a close eye on the trends on figures, but that’s particularly given OIG’s expanded use of a new Frequently Asked Questions tool. Those FAQs are used to provide informal, non-binding feedback to the public on a range of issues, including questions about what type of arrangements could implicate the Kickback Statute and Civil Monetary Penalties Law, broader compliance questions, and how to comply with OIG’s Health Care Fraud Self-Disclosure Protocol. Now, while those aren’t binding, these advisory opinions indicate where regulators are likely to scrutinize precisely, as Michael was saying, and in future years, we do want to keep an eye out as these FAQs are updated and given as a further tool in determining whether conduct is permissible in the eyes of OIG.

Michael Lampert: With that, we’ll dive into a couple of examples from 2023. A lot of those examples bucket into the category of “patient inducements.” Now, patient inducements—kickbacks to a patient—are certainly relevant in a world of patient engagement and of consumer-based medicine. There are two laws, both enforced by HHS-OIG, under which they fall or under which they can fall, and that’s why organizations worry about them. The first is the Kickback law, which applies to inducements offered to anybody that might cause that “anybody” to make a health care-related decision. And the second is the Civil Monetary Penalties Law, which applies to inducements specifically made to a patient or a Medicare beneficiary in order to get that beneficiary to select a provider, practitioner, or supplier over another one. So, those are patient inducements.

The regulatory worry about those is, in part, coming from the fact that there’s a view that, if the consumer is the recipient of a service—a Medicare beneficiary is a recipient of a service—that individual may exercise decision-making authority that is divorced from financial decision-making because the insurer—Medicare—covers the cost. So, there is an opportunity for some divergent interests, and there is a regulatory worry that inserting finances into the patient decision-maker could be a challenge—could separate those interests. The second, of course, is a worry about excess spending: the idea, the concept, that if patients are given something of value that might cause them to choose to get health care that they otherwise wouldn’t get, and that Medicare would end up paying for. So, as I said, it’s a pretty high bar to get a favorable opinion, to get a “green light.” And with that high bar in mind, I think we can move forward and think about some of the opinions that were issued. Devin, I’ll turn to you.

Devin Cohen: With that, let’s dive into the recent opinions. The first opinion, which was Advisory Opinion 23-01, had a drug manufacturer who asked whether it could permissibly provide financial assistance for travel expenses to financially needy pediatric patients (and a maximum of two caregivers) in order to receive treatment with that manufacturer’s product. The OIG concluded that, while the arrangement did implicate the Anti-Kickback Statute, as discussed by Michael, the risk of fraud and abuse presented was sufficiently low. This was because, according to the advisory opinion:

• First, the arrangement facilitates safe access to treatment for a patient population that otherwise generally lacks financial resources to be able to obtain it.
• Next, this was a one-time treatment—a potentially curative drug—and it was the only treatment option available for this specific condition.
• Next, a small percentage of the population affected by the condition that the drug treats and fact that the drug is not mass-produced, in the eyes of OIG, helps reduce the risk of overutilization, or inappropriate or mis-driven utilization.
• Further, the program utilizes a set of metrics for determining eligibility based specifically on financial need.
• And, finally, the OIG felt that the curative nature of this drug could really help offset the cost to federal health care programs immediately and in the near future.

Now, first of note, this arrangement really seems to clearly fall within exclusions to the definition of “remuneration” under the Kickback Statute, or otherwise within a safe harbor. However, because the safe harbors only apply to arrangements under the Kickback Statue, and not necessarily beneficiary inducements under the Civil Monetary Penalties Law, the Requestor here was essentially seeking clarity from the OIG and DOJ to see if they would take issue with the arrangement specifically from a Civil Monetary Penalties perspective. Thus, this decision was not a surprising “yes”—OIG (and Congress) don’t want to let fraud and abuse enforcement get in the way of promoting access to the care. But this advisory opinion did demonstrate the importance, particularly for life sciences companies and others in the industry, about taking into account the requirements and exclusions of both the Kickback Statute and the Civil Monetary Penalties Law when seeking to provide this kind of financial assistance to patients.

Michael Lampert: Terrific—thanks, Devin. I’ll pick up from there to really talk about exactly the next one that HHS-OIG issued in sequence in its Advisory Opinion 23-02. It also is favorable, it was a green light, and it involved really the promotion of patients’ access to care. Specifically, free drugs by a drug company available to patients, but for just a limited period—it was a free 14-day supply of an enzyme replacement therapy made available to patients who had already been prescribed that treatment, and who had a delay in insurance coverage, and so they needed a bridge. This was a bridging proposal—it wasn’t offered or asked as more. So, like what Devin had discussed, the arrangement sought to make it easier for patients with limited means to get to care. It was an arrangement that, as one reads it and thinks through it, it’s not disruptive to insurance design and it’s not disruptive to federal health care program costs. What I mean by that is it wasn’t seeking to relieve patients of their obligation to pay a co-pay, co-insurance deductible, as is required by insurance, and it wasn’t looking to move a needle beyond the particular product already prescribed. So, as I said, the idea was patients would get a 14-day supply of a drug if they’d been (i) diagnosed with the condition for which the drug had been approved, (ii) not previously treated with that drug, (iii) if they had coverage, (iv) and if they just had a delay in coverage—though, specifically, that would mean they couldn’t get the drug for another couple of days.

It’s pretty easy to see the path that HHS-OIG frankly had to get to “yes” on this. This was the only treatment that was available, it was a rare disease, so it wasn’t really moving the needle for a lot of people. It wasn’t reallocating market share. It was making available something that otherwise would be available but for bureaucratic snafus that were making a delay for patients to be able to get to their drugs. So, it really facilitated access to care. It wasn’t driving changes in behavior. It’s the kind of thing that, reflecting on it, could be covered by the exception to the Civil Monetary Penalties Law for remuneration that improves access to care and presents a low risk of harm. The reason that didn’t apply is because that is an exception to the Civil Monetary Penalties Law—it’s not a safe harbor to the federal Anti-Kickback Statute. And in a Civil Monetary Penalties Law world, what we are thinking about, what’s proscribed, are pieces of remuneration: bits of value that are made available to a patient to cause that patient to select a particular provider, supplier, or practitioner—not a drug. It just simply doesn’t apply there. But it was very much, I think, the same type of arrangement that that exception to the Civil Monetary Penalties Law is intended to protect, and so, cross-walking it for protection to the Federal Anti-Kickback Statute didn’t seem to be a big leap.

Devin Cohen: That’s exactly right, Michael. In looking at this from a kickback perspective, I think one of the important things was that the OIG was focusing on how a number of different criteria and safeguards that could be used in combination to help minimize risk. For instance, there being strict criteria for access to free product for patient engagement purposes, or no financial benefit for prescribers, or reduced cost to the federal health care program. And the more that these proposed structures, or other structures people might be considering in the market, are able to incorporate more and more of those prongs, the closer we’d be able to get to comfort in a facts-and-circumstances analysis under the Kickback Statute.

Michael Lampert: Let’s pick up with a “not-a-green-light” one: Advisory Opinion 23-08. The Requestor was a manufacturer of cochlear implants. These are implants that can help patients who’ve lost hearing to hear again. It is a deeper implant—it’s beyond a hearing aid, at least technologically. And the idea was that the manufacturer would go to patients who selected it for a cochlear implant and say, “We will give you this cochlear implant, and we will also give you a free hearing aid for the other ear. You get the advanced cochlear implant in one ear, pay for that. Other ear: We will give you a hearing aid, if you need it, and that hearing aid will come for free.” So, OIG didn’t like this one—this is a “no-green-light” one. OIG thought the arrangement, number one, could do a lot of steering for patients: have them choose one brand of manufacturer over another. It could also disadvantage—there was some talk about—smaller-business competitors unable to offer a similar benefit.

Devin Cohen: I think that’s right, Michael. I think there were also three strongly detrimental characteristics across this arrangement the OIG specifically focused on that are notable. First, patients had an opportunity to be able to seek the similar hearing aid from others on the market, and this was viewed as a manner to drive those patients potentially towards the specific manufacturer. Second, the hearing aid at issue, it was not required for the cochlear implant to work properly, so, when construed most critically, could be seen as a driving factor to federal health care program costs. Finally, the hearing aid does not make the manufacturer’s device a more clinically appropriate option for most patients, and as Michael said, as a result, could result in undue patient steering. So, this is one of the reasons that, unlike in Advisory Opinion -01 and -02 from last year (free products or services provided patients access to care), here, we’re getting at something different—it was more viewed as a “bad-bundled discount.”

Michael Lampert: I think it’s a really good point, Devin, the “bad-bundled discount.” I’ll pause for a little bit on reimbursement here, because I think it’s helpful to understand that. Hearing aids aren’t covered by Medicare historically. Medicare does not cover them—patients have to pay for them themselves. And they’re not cheap. Hearing aids, as the Advisory Opinion said, were around $1,200 to $2,200, so a fair bit of money. Cochlear implants are covered. Medicare does pay for, under appropriate circumstances, when medically necessary, a cochlear implant. And so, the bundled discount concept, this company was saying, “If you choose to receive what Medicare pays for, we will give you, for free, what you pay for.” Taking the cochlear implant and the hearing aid together, the value of the discount is made available exclusively to the patient out of the amount the patient otherwise would be paying. Medicare doesn’t get any bit of the value of the discount and some view—I think probably coming from the government—was, “If Medicare’s not paying the value of the discount, but it could be driving decision-making that ends up costing Medicare money, that doesn’t feel quite right.” That is a holding totally consistent with guidance that HHS-OIG has offered before on the way that it thinks about discounts.

Devin Cohen: Thank you so much for tuning into this first part of our review of fraud, waste, and abuse trends in health care podcast series. On the next iteration, we’re going to dive into specimen collection, and we’ll also talk with Andrew O’Connor on enforcement considerations and additional advisory opinion feedback he may have. For those of you listening, if you’d like more information on these topics, please don’t hesitate to contact us. You can also subscribe and listen to other Ropes & Gray podcasts wherever you regularly listen to your podcasts, including Apple and Spotify. Thanks again for listening.