Accessing Care and Improving Care Are Not the Same Thing, According to HHS-OIG

Since HHS-OIG finalized the Promotes Access to Care (PAC) Exception to the Beneficiary Inducement Law (BIL) in 2016, the agency has issued almost a dozen advisory opinions (AOs) interpreting the Exception’s contours.¹ A key question in most of these AOs is whether the offer of a free or discounted item or service (e.g., free lodging or transportation) to a particular Medicare or Medicaid beneficiary will  “improve” the beneficiary’s “ability to obtain” an item or service payable by Medicare or Medicaid (e.g., an inpatient hospital procedure). Most recently, in an AO published on October 25, 2023, HHS-OIG concluded that the offer of a free hearing aid to a patient who also is obtaining a cochlear implant (a device payable by Medicare and Medicaid) would not qualify for protection under the PAC Exception. The reason? While it might be better clinically for the patient to have both the (non-covered) hearing aid and the (covered) cochlear implant, receiving the free hearing aid would not make it any easier for the patient to obtain the cochlear implant.

Background

The BIL prohibits the provision of “remuneration” to a Medicare or Medicaid beneficiary if the arrangement is “likely to influence” the beneficiary to “order or receive” covered items or services “from a particular provider, practitioner, or supplier.”² Simply put, a hospital or a physician, for example, can’t offer gifts to a Medicare or Medicaid beneficiary in an effort to obtain their business.

Congress has created a number of statutory exceptions to the BIL’s general prohibition,³ and HHS-OIG has followed suit with a number of regulatory exceptions.⁴ Pertinent here:

• in 2010, Congress enacted the PAC Exception, which protects remuneration that might otherwise violate the BIL provided (among other things) the remuneration “promotes access to care”⁵; and

• in 2016, HHS-OIG finalized its regulatory version of the PAC Exception, interpreting this “promotes access to care” requirement to mean that the items or services must “improve a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid.”⁶

This requirement raises an obvious question: under what circumstances will the provision of one particular item or service “improve a beneficiary’s ability to obtain” a different item or service payable by Medicare or Medicaid? AO 23-08 sheds some light on how HHS-OIG interprets this requirement.

Proposed Arrangement

The Requestor in AO 23-08 is a manufacturer and distributor of a cochlear implant (Device) payable by Medicare and Medicaid. The Device “may be implanted in one or both ears depending on the patient’s presentation of symptoms and the medical judgment” of the patient’s Provider. If the Provider concludes that the Device is medically necessary for one ear only, the Patient may be a candidate for “bimodal hearing,” in which case the Patient would use the Device in one ear and a hearing aid in the other. The Requestor certified that while the “pairing of the Device with a hearing aid in the other ear can improve hearing outcomes for bimodal hearing candidates,” the Device itself “works properly with or without the use of a hearing aid in the other ear.”

Under the Proposed Arrangement, the Requestor would offer bimodal hearing candidates a free, compatible hearing aid (Hearing Aid) with the purchase of one Device. The Hearing Aid would be manufactured by a third party and would range in cost from $1,180 to $2,240. All parties to the arrangement would be prohibited from seeking reimbursement from a Federal health care program for the Hearing Aid (which, in any event, generally is not a covered benefit under Federal health care programs).

HHS-OIG Analysis

As a threshold matter, HHS-OIG concluded that the Proposed Arrangement would implicate the BIL in the first instance because it would involve “remuneration” (the free Hearing Aid) that is “likely to influence” beneficiaries to obtain the (covered) Device from the Requestor. The agency then concluded that the Proposed Arrangement would not qualify for protection under the PAC Exception because the free Hearing Aid would not “improve” the beneficiary’s “ability to obtain” the (covered) Device. Why? Because “the Hearing Aid is not required for the Device to work properly.”

HHS-OIG went on to conclude that the Proposed Arrangement was not low risk under the BIL (as well as the Anti-Kickback Statute) because (i) the offer of the free Hearing Aid could “steer” patients to select the Device over other clinically appropriate alternatives and (ii) the provision of the free Hearing Aid could result in “unfair competition,” in that Requestor would have a “significant advantage” over its competitors, who may not be “willing or able to provide such a valuable item.”

Key Takeaway

In AO 23-08, HHS-OIG plainly is reinforcing its position that the first requirement of the PAC Exception will be interpreted literally, not liberally. That is, the mere fact that a non-covered item (X) will, when combined with a covered item (Y), result in clinical benefits to the beneficiary does not establish that providing X “improves” the beneficiary’s “ability to obtain” Y in the first instance. This is to be distinguished, for example, from the provision of free or discounted travel or lodging to beneficiaries who, but for this assistance, might not be able to obtain a covered service at a particular treatment location,⁷ or the provision of free, limited-use smartphones to beneficiaries who, but for this assistance, might not be able to obtain a covered telehealth service.⁸   

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1. See AO 17-01 (Mar. 10, 2017) (favorable) (provision of free lodging and meals satisfies PAC Exception); AO 18-05 (Jun. 25, 2018) (favorable) (provision of support services does not satisfy PAC Exception but arrangement is low risk); AO 19-02 (Jan. 29, 2019) (favorable) (provision of loaner device satisfies PAC Exception); AO 19-03 (Mar. 6, 2019) (favorable) (provision of support services does not satisfy PAC Exception but arrangement is low risk); AO 20-02 (Jan. 21, 2020) (favorable) (provision of free lodging, travel, and meals, and coverage of certain other out-of-pocket expenses, satisfies PAC Exception); AO 20-06 (Dec. 23, 2020) (favorable) (provision of support services satisfies the PAC Exception); AO 20-08 (Dec. 30, 2020) (favorable) (provision of gift card does not satisfy PAC Exception but arrangement is low risk); AO 20-09 (Dec. 31, 2020) (favorable) (provision of free lodging and travel, and coverage of certain other out-of-pocket expenses, satisfies PAC Exception); AO 21-08 (Jul. 8, 2021) (favorable) (provision of free travel, lodging, and meals satisfies PAC Exception); AO 22-08 (Apr. 27, 2022) (favorable) (provision of limited use smartphones and chargers satisfies PAC Exception; and AO 23-08 (Oct. 25, 2003) (unfavorable) (provision of free hearing aids does not satisfy PAC Exception). ↩︎
2. 42 U.S.C. §1320a-7a(a)(5). More precisely, the BIL provides that “[a]ny person . . that . . . offers to or transfers remuneration to any individual eligible for benefits under subchapter XVIII of this chapter, or under a State health care program (as defined in section 1320a–7(h) of this title) that such person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, under subchapter XVIII, or a State health care program (as so defined)” shall be subject to sanctions under the BIL. ↩︎
3. 42 U.S.C. §1320a-7a(i)(6). ↩︎
4. 42 C.F.R. §1003.110 (definition of “remuneration”). ↩︎
5. 42 U.S.C. §1320a-7a(i)(6)(F). ↩︎
6. 42 C.F.R. §1003.110 (definition of “remuneration” at subsection (6)). ↩︎
7. See, e.g., AOs 17-01, 20-02, 20-09, and 21-08. ↩︎
8. See, e.g., AO 22-08. ↩︎