February was a busy month for the Office of the Inspector General (OIG) in the Department of Health and Human Services. As of the date of this publication, the OIG had issued four advisory opinions on diverse subjects and indicated some overall flexibility on its interpretation of the Anti-Kickback Statute. The full text of all four opinions can be found at http://oig.hhs.gov/fraud/advisoryopinions/opinions.html. The first advisory opinion (08-01) approves, with certain caveats, the distribution by a non-profit corporation of drugs donated by pharmaceutical manufacturers, to free clinics and federally qualified health centers (FQHCs). Specifically, the donated drugs must only be distributed to financially needy patients who have no form of prescription drug coverage. The free clinics cannot transfer the drugs to any third parties other than the needy patients and must dispense the drugs through their licensed pharmacy. The OIG points out that the free clinics do not treat Medicare or Medicaid patients and thus, in the absence of any hidden incentives for referrals in other contexts, are not covered by the Anti-Kickback Statute. In order to participate in the arrangement legally, the FQHCs must ensure that they do not overstock any of the donated medications and do not pass any of the costs for such medication on to any governmental payer. Moreover, the OIG points out that the FQHCs cannot compensate its physicians for prescribing the free medication and cannot allow the drug companies or the program charity to participate in any decisions regarding FQHC stock medications. Advisory Opinion 08-02 permits a marketing and research company to make charitable contributions on behalf of physicians who complete the company’s online surveys. Although the research company serves both medical equipment and drug providers, it does not participate in any federal healthcare programs directly. The request provides that the physician who directs the donation is not entitled to take a tax deduction with respect to the company’s donation and cannot be personally affiliated with the designated charity. Likewise, the amount of the donation is in no way dependent on the physician’s answers on the survey or his or her past prescriptions. In approving the arrangement, the OIG makes clear that it regards many instances of charitable contributions made at the direction of physicians to be problematic under the Anti-Kickback Statute. The OIG even provides a series of examples in which contributions are designed to induce referrals by a physician. Included within the list are the provision of free or discounted space or services to a charity at the direction of a referral source and contributions to organizations that employ relatives of referral sources. In this sense, this advisory opinion is probably more important for what it condemns rather than for the actual arrangement it approves. The third advisory opinion released in February (08-03) relates to the implementation of a prompt pay discount program for Medicare and Medicaid patients by a hospital system. In order to encourage patients to pay their co-payments and deductibles on a timely basis, the hospital system wants to implement a policy of providing percentage discounts for bills settled at or within thirty days of discharge. The proposed arrangement would cover both inpatient and outpatient care and would be extended across all payer lines, including Medicare and Medicaid. Although the OIG had previously promulgated a safe harbor for discount arrangement associated with inpatient care, it had been reluctant in the past to expand the safe harbor to outpatient care as well. In approving the discount arrangement, the OIG makes clear that the amounts written off because of the discount arrangement cannot be passed off as bad debt and that the discounts have to be applied uniformly regardless of diagnosis or payer source. Furthermore, the discount cannot be part of a price reduction arrangement with a third-party payer and, importantly, cannot be advertised to the general public. Patients can only learn about the possibility of the discount during the billing process. Advisory Opinion 08-04 allows a certain pharmaceutical company to offer free one-time trial prescriptions to hemophilia patients who are Medicare or Medicaid patients. Under the proposal, patients can receive up to $20,000 in medication and would be under no obligation to continue with the medication once their trial supply runs out. The OIG determines that the referring physicians are actually receiving nothing of value by encouraging their patients to participate in the program and prescribing the free medication. The OIG qualifies its approval by limiting the ability of physicians to take possession or otherwise sell any of the free medication. Although the patients are receiving value in the form of no co-payments on the free medication, they are unlikely to have an incentive to continue on the medication unnecessarily since the medication will require substantial co-payments after the end of the trial period. The OIG also reasons that the patients can choose other medications in consultation with their physicians. Each of these opinions has implications for many different arrangements. However, it is important not to draw too broad a conclusion from any of them. The OIG makes clear that that the specific circumstances, rather than the general context, make the proposals permissible. March 2008