Insights & Resources

Businesses offer discounts from time to time for a variety of reasons including, but not limited to, getting and keeping customers, meeting short-term demand, increasing sales volume, managing inventory, or staying competitive in crowded markets. Given the highly regulated nature of the health care industry, the use of discounts raises concerns related to patient steering, distorted medical decision-making, unfair competition, and potential violations of the federal anti-kickback statute (AKS), among others.

The U.S. Department of Health and Human Services, Office of Inspector General (OIG) recently issued a favorable advisory opinion (26-03) in which it approved a Manufacturer’s proposal to give discounts on its conventional intraocular lenses and other surgical supplies (collectively, Lenses and Supplies) used in cataract surgeries to ambulatory surgery centers (ASCs) if the ophthalmological practices (Practices) that used the ASCs paid a one-time set up fee and a monthly subscription fee at full price for Manufacturer’s web-based software platform (Software). Practices and ASCs are eligible to receive the discount, which is not based on the volume or value of items ASCs purchase, if there is any overlapping ownership between the two entities.[1] Manufacturer’s Software is a digital planning tool specific to cataract surgeries that stores patient information from electronic health records, diagnostic test results, clinical observations, patient-reported visual complaints, surgical formulas utilized in planning a particular patient’s surgery, and the equipment and surgical techniques to be used in one convenient location.

OIG determined that Manufacturer’s proposal implicated the AKS and that the Discount Safe Harbor did not apply. Nevertheless, OIG found that the risk of fraud and abuse under the AKS was sufficiently low enough to issue a favorable opinion because:

• The risk of increased costs or overutilization is low. Cataract surgeries have set Facility and Professional Services Fees. Neither the Software nor the discounted Lenses and Supplies are separately billable. As such, federal health care programs pay the same amount for the surgeries regardless of the products and services used.
• The risk of distorted clinical decision-making is low. Software is an additional expense, not an incentive. Additionally, Manufacturer certified that Software can be used with all electronic health records systems as well as with competitors’ diagnostic equipment, lenses, or supplies. Manufacturer also certified that its discounted Lenses can be used with any supplies and that its discounted Supplies can be used with any lenses. Lastly, Manufacturer certified that Software does not include any marketing or any clinical decision support that would direct a provider to particular products.
• The risk of steering or unfair competition is low. Many factors, including price, quality, and convenience affect competition. Additionally, Practices (here, the referral sources) must purchase Software at full price for ASCs (the referral recipients) to get discounts on items included in its Facility Fee for cataract surgeries. OIG noted that the risk of inappropriate steering would be higher if these roles were reversed.

Practices and providers, as well as ASCs, are looking for advantages in an increasingly competitive marketplace. Offering such discounts, however, requires caution and careful analysis to avoid inadvertently violating the AKS.

A copy of the favorable advisory opinion is available here.

Should you have any questions regarding the above or need help structuring AKS-compliant discounts, please contact the author, the Garfunkel Wild attorney with whom you regularly work, or contact us at [email protected].

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[1] The Practice and the ASC would be required to complete an Ownership Certification Form, certifying to Manufacturer that there is at least one common direct owner of both entities.