The Office of Inspector General (OIG) recently issued Advisory Opinion 17-02, allowing waivers or reductions of cost-sharing amounts owed by financially needy Medicare beneficiaries in connection with certain clinical research studies conducted at a non-profit medical center.  In the advisory opinion, the OIG reiterated its longstanding concern about routine waivers of Medicare beneficiary cost-sharing amounts in the absence of financial hardship, and noted this can lead to liability under the anti-kickback statute (AKS).  The research studies were conducted utilizing protocols under the Medicare Coverage with Evidence Development (CED) framework and involved a wound care system used to treat chronic, non-healing wounds.

Under the arrangement, when obtaining informed consent from a Medicare beneficiary to participate in a research study the medical center would notify the beneficiary that he or she may owe cost-sharing amounts in connection with the study. If the beneficiary then notified the medical center’s staff-member that the beneficiary lacks the resources to cover the applicable cost-sharing, the medical center would make an individualized determination as to whether the beneficiary qualifies for waiver of cost-sharing amounts in accordance with the medical center’s financial need policy. The medical center certified that no entity or individual involved with the research studies would offer the cost-sharing reduction as part of any advertisement or solicitation.

The OIG decided that the proposed arrangement satisfied an exception to the definition of “remuneration” under the Beneficiary Inducement Civil Monetary Penalty (CMP) law. The OIG concluded that the arrangement would not constitute grounds for imposing CMPs, and that it would not impose administrative sanctions under the AKS, based in part on the following safeguards being in place:

  • The cost-sharing reduction or waiver would not be advertised or be part of a solicitation.
  • Study subjects would be notified about the potential for a reduction/waiver of cost sharing only after they indicated they may lack financial resources.
  • The reductions or waivers would not be made routinely, and instead would be determined on a case-by-case basis.
  • The reductions or waivers would be contingent on a study subject’s inability to pay, based on a good faith determination by the medical center.
  • Inability to pay would be determined using objective criteria based on family income as a percentage of the Federal Poverty Level using an application process that would be consistent with the medical center’s financial need policies.

Although the OIG notes in its description of the approved arrangement that the medical center “certified that it would not claim any amounts stemming from cost-sharing reductions or waivers… as bad debt on its Medicare cost report,” the OIG did not actually cite that aspect of the arrangement as one of the safeguards supporting its favorable conclusion.

Additionally, although the OIG declined to specify any particular method for determining financial need because this “varies with circumstances,” the opinion did include a lengthy footnote describing the medical center’s financial need policy and concluding this would comprise a “reasonable inquiry.”  As described by the OIG, the policy:

  • Required individuals to complete an application and provide the following documentation:

(i) payroll check stubs from the most recent three months,

(ii) the most recent tax return (if payroll check stubs were unavailable),

(iii) unemployment records,

(iv) documentation of government benefits, and

(v) any other financial documentation reasonably requested by the medical center.

  • Required the individuals to certify that all information provided on the financial need application is true.
  • Used monthly family income and savings in determining financial assistance eligibility.
  • Determined family income using the Census Bureau definition of “income” which includes only certain income components.
  • Varied the reduction or waiver of cost-sharing, on a sliding scale, by family income based on certain percentages of the Federal Poverty Level.

As with its other advisory opinions, the OIG cautioned that this opinion applied only to the specific arrangement and requestors.