Groups reach consensus on anti-kickback safe harbors

A negotiated rule-making committee of industry representatives and officials from the Health and Human Services Office of the Inspector General have reached a consensus on proposed anti-kickback safe-harbor rules, which should be approved soon.

"The interim step to a final rule will be a short one as a result of this process," predicts an OIG spokesperson. As such, OIG does not want to open up the Prong II regulatory writing process to any more comments, despite a request to do so by industry groups.

Mandated by the Health Insurance Portability and Accountability Act, Prong II provides safe harbors from the anti-kickback statute for managed care risk-sharing arrangements in which the federal government pays on a fee-for-service basis. Prong I covers managed care organizations under a federal health program.

Trying to prevent overutilization

Prong II specifically affects arrangements in which employers cover health care expenses for retirees and collect fee-for-service payments from Medicare. The Inspector General and Department of Justice are concerned about preventing situations involving abuse of the Medicare program through overutilization. Industry representatives are concerned that restrictive safe harbors outlined under the document could have a "chilling effect" on innovation.

Under Prong II, a safe harbor will only be offered to plans that meet certain requirements. For instance, if a federal health care program is the primary payer, then no more than 10% of enrollees can be Medicare participants. If the federal government is not the primary payer, then at least 50% of enrollees must be non-Medicare beneficiaries.

Prong II defines appropriate reimbursement as the fair market value payment, established through negotiations, that will be earned by an individual or entity if they meet targeted utilization rates. The rates are set consistent with historical utilization rates of the same or comparable populations in similar managed care arrangements.

A minimum payment is the guaranteed amount that an individual or entity is entitled to receive under the contract. The target payment and minimum payment both include any bonus for performance at a level achieved by 75% of participating individuals or entities who are paid a performance bonus based on the same bonus structure under the arrangement.

To counteract arguments that the Prong II safe harbor provision is narrow, the OIG agreed to spell out in the regulation preamble that an arrangement is not necessarily illegal if it does not comply with the safe harbor. The regulation will state further that a number of managed care arrangements in the marketplace today do not fall within this safe harbor and yet are not illegal.