New Final Rule Clarifying Discount Safe Harbor

The Department of Heath and Human Services' ("HHS") Office of Inspector General ("OIG") published a final rule in the Federal Register on November 19, 1999, that establishes eight new regulatory exceptions or "safe harbors," and clarifies six of the existing safe harbors to the federal Anti-kickback Statute (the "Statute"). This Memorandum focuses on the 1999 final rule's clarification of the regulatory discount safe harbor. We will address the final rule in its entirety in a separate, subsequent Memorandum.

The 1999 discount safe harbor "clarification" creates a third category of party to a transaction. Previously, the discount safe harbor recognized only buyers and sellers. The 1999 final rule restructures the discount safe harbor to provide for three categories of parties to a discount transaction, namely: buyer; seller; and "offeror."

Essentially, the final rule:

• Clarifies each party's responsibility for disclosing discounts, and connects the extent of the disclosure to the form of reimbursement or payment by a federal health care program ("program");
  
• Makes the safe harbor protection for sellers more clearly dependent on the notification and disclosure actions taken by the seller, rather than the subsequent reporting activity of the submitter of the claim or cost report;
  
• Replaces the word "furnish" in the definition of seller with the term "supplies," in order to conform the rule's language with standard Medicare usage and meanings;
  
• Revises the definitions of "rebate" and "discount;" and
  
• Clarifies the limited circumstances when "bundling" (i.e., providing a discount on the purchase of one good or service for the purpose of inducing the purchase of another good or service) is permissible.

In clarifying the regulatory safe harbor for discounts in its new final rule, the OIG noted that "the regulatory safe harbor both incorporates and enlarges upon the statutory exception," and only particular discounts and price reduction schemes are protected from sanctions under the statutory exception.

Dickstein Shapiro Morin & Oshinsky, LLP