The Office of Inspector General (“OIG”) for the Department of Health and Human Services recently issued an Advisory Opinion that provides insight into how the agency evaluates arrangements that deal with the integration of technology, medicine, and patient monitoring under the federal Anti-Kickback Statute (“AKS”). In Advisory Opinion No. 19-02, OIG evaluated whether a pharmaceutical manufacturer could temporarily loan a limited-functionality smartphone to financially needy patients enrolled in federal health care programs. OIG concluded that the proposed arrangement could violate federal health care fraud laws but OIG would not impose civil monetary penalties or administrative sanctions in light of the purpose of the arrangement and certain safeguards in place. This Advisory Opinion related to the promotion of remote patient monitoring and is useful to telehealth providers and other pharmaceutical manufacturers to evaluate how OIG might analyze similar arrangements.

The FDA recently approved a digital medicine version of the antipsychotic drug that, once ingested, gives off a signal detectable by a wearable sensor (a “Patch”) on a patient’s abdomen. The wearable tracks patient adherence to the medication regimen and transmits this data through an App on the patient’s smartphone.

Under the arrangement, in order to access and use the App, the pharmaceutical company would loan a smartphone to patients who have a prescription for the digital medicine drug, do not already have a smartphone, and have an annual income below a specific percentage of the Federal poverty level. The offer would not be advertised to patients and prescribers would not receive any financial benefit for prescribing the digital medicine drug or for helping patients participate in the program. The smartphone would come preloaded with the App and only have the ability to make domestic telephone calls but no other capabilities. Patients would have the loaner smartphone for no more than two 12-week periods.

OIG determined that because patients would receive something of value from receipt of the smartphone, the patients would receive a form of remuneration. Therefore, the OIG examined the arrangement under the Civil Monetary Penalties Law (“CMPL”). OIG determined that the arrangement would implicate the Beneficiary Inducement of the CMPL because the provision of the loaner smartphone may influence a patient to continue to receive care from the particular prescriber. Similarly, the patient may believe he or she must continue to use the specialty pharmacy to obtain the digital medicine drug if the patient uses the loaner smartphone.

However, OIG ultimately determined that the arrangement would satisfy the criteria under the CMPL’s Promote Access to Care Exception and not subject the pharmaceutical company to administrative sanctions under the AKS statute for the following reasons:

  • The loaner smartphone would improve a patient’s ability to both properly use and access the full scope of the benefits of the digital medicine drug.
  • Provision of the loaner smartphone to low-income patients would also pose a low risk of harm to the government, as it would be unlikely to interfere with clinical decision-making.
  • The arrangement is not likely to increase costs to federal health care programs or beneficiaries through overutilization or inappropriate utilization.
  • Patients would be unlikely to request the digital medicine drug for the sake of obtaining the loaner smartphone given that the program would not be advertised to patients.
  • The arrangement does not pose patient safety or quality-of-care concerns.
  • Provision of the loaner smartphone would not influence a person to select the digital medicine drug.

OIG also commented on what type of arrangement it would not give the same discretionary approval. If the smartphone had additional functionality, such as access to an internet browser or a camera, or the ability to add other apps, OIG would very likely conclude that the arrangement would not meet the Promote Access to Care Exception. OIG explained that additional smartphone capabilities are problematic because they would relieve patients from the need to purchase their own smartphones or pay for a smartphone contract.

In light of the safeguards in place, OIG concluded that the pharmaceutical company would not be subject to administrative sanctions under the CMPL and AKS in connection with the loaner smartphone program. Although this opinion is useful for other providers and suppliers that have or intend to have similar patient monitoring arrangements in place, the advisory opinion only applies to the particular arrangement.

Drug and device manufacturers that operate patient assistant programs and providers that provide care to patients enrolled in federal health care programs through digital devices must carefully scrutinize their own arrangement to ensure it does not violate federal health care fraud laws. However, this opinion provides insight into OIG’s rationale with respect to such telehealth arrangements. It is clear that a carefully structured arrangement that improves patient safety and quality of care and has safeguards in place to guard against fraud and abuse may be deemed permissible under the CMPL and AKS.

Imagine there are two hospitals (or two physician groups). One is highly specialized and has developed a telemedicine program for treating stroke patients; the other is a community hospital or physician practice that would like to take part in this telemedicine program but does not want to pay for the technology needed to virtually connect with the program’s specialists. Can the telemedicine provider buy this technology for the receiving hospital or physician group, or rent it out at a deep discount, without violating the law?

This turns out to be a hard question. Under federal law, it is a criminal offense to knowingly and willfully pay another provider as an inducement or reward for referrals of items or services provided under federal health care programs, such as Medicare or Medicaid. This is known as the Anti-Kickback Statute, and the penalties for violating it can be severe (see here and here). There are exceptions to the Anti-Kickback Statute (referred to as safe harbors), but none of these are likely to apply in this context.

Determining whether an arrangement violates the Anti-Kickback Statute is largely a question of intent. In reviewing payment arrangements among providers, government enforcers are primarily interested in whether one of both of the parties intended for the payment to serve as an inducement or reward for referrals. These determinations are based on a review of the facts and circumstances surrounding the payment or payments.

In September, 2011 the Department of Health and Human Services Office of Inspector General (“OIG”) concluded in an Advisory Opinion that one such arrangement involving payments by a telemedicine provider to a participating provider would not violate the Anti-Kickback Statute. Although like all OIG advisory opinions, this opinion is fact specific and only speaks to the legality of the specific payment arrangement that it addresses, the opinion shows how the OIG may analyze similar type arrangements under the Anti-Kickback Statute.

The Advisory Opinion examined whether a health system with a strong reputation for neuroscience care could cover certain program expenses (including the technology expense) that a community hospital would have to incur in order to participate in the health system’s telemedicine program for stroke patients. In the Advisory Opinion, the OIG noted the following facts and circumstances as supportive of its determination that this specific arrangement would not be an illegal kickback:

  • The participating hospital would not be under any pressure to refer patients to the health system as a condition for participating in the telemedicine program, and would not be providing its physicians additional compensation for their involvement in the telemedicine program;
  • The health system anticipated that its stroke telemedicine program would result in a reduction in the number of transfers of simple stroke cases that it would receive;
  • Physicians at hospitals participating in the telemedicine program would not be restricted from referring stroke patients to facilities other than the health system;
  • The selection of participating hospitals would be driven by access-to-care considerations and not the participating hospital’s ability to generate referrals or other business for the health system;
  • The telemedicine program would be promoting best practices by assisting hospitals in providing treatment for stroke patients immediately upon their arrival in the emergency room;
  • Each party would be responsible for the costs associated with its own marketing activities; and
  • The arrangement would unlikely to result in increased costs to Medicare or Medicaid, in part because the consultations provided by the health system would not be billable to Medicare, and also because the telemedicine program would likely reduce transfers of stroke patients to the health system.

Although the Advisory Opinion is based on a particular set of facts and circumstances, it provides insight on how government enforcers are likely to view similar type arrangements and shows that legal pathways do exist for providing financial assistance to entities that would like to participate in a telemedicine program. Nonetheless, telemedicine program operators looking to offer such financial assistance should proceed cautiously and with an eye toward the Anti-Kickback Statute, for there is an element of risk here that unfortunately cannot be avoided.