On January 16, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published Advisory Opinion 26-01, approving a proposal by the manufacturer of a clinical laboratory test used to screen for colorectal cancer (Requestor) to waive any applicable cost-sharing amounts for commercially insured patients.
Although the proposed arrangement would be limited to commercially insured patients, OIG has long taken the position that arrangements that carve out federal healthcare program business are not insulated from federal Anti-Kickback Statute (AKS) liability. In this case, however, no remuneration would flow through to either federal healthcare program beneficiaries or ordering providers, leading OIG to conclude that the proposed arrangement would not implicate the AKS or the Civil Monetary Penalty provision prohibiting inducements to beneficiaries (Beneficiary Inducements CMP).
The Proposed Arrangement
Requestor’s screening test for colorectal cancer (Test) is the first and only non-invasive, stool-based RNA colorectal cancer screening test approved by the U.S. Food & Drug Administration (FDA) for use by certain patients, and Requestor is the only laboratory that performs the Test.
The U.S. Preventive Services Task Force (USPSTF) designates colorectal screening as having a substantial net benefit for individuals between the ages of 50 to 75 and a moderate net benefit for those 45-49, and outlines various ways to obtain screenings, including visual screening and stool-based DNA tests. Commercial health insurers are required to cover colorectal screening tests covered by the USPSTF recommendations for the patient groups identified above without cost sharing. While the Test was approved by the FDA in 2024, the USPSTF has not updated its guidelines to incorporate new types of colorectal cancer screening tests since 2021 and does not have plans to do so for some time. Consequently, commercial payors may impose cost-sharing requirements for the Test despite its FDA approval to be used for colorectal screenings. Currently, no federal healthcare program covers the Test, with the exception of certain Medicaid and Medicaid Managed Care Organizations that either do not impose cost-sharing requirements or prohibit Requestor from collecting any cost-sharing amounts for the Test.
Under the proposed arrangement, Requestor would waive any applicable cost-sharing amounts for all commercially insured patients who receive the Test, which are estimated to be between $100 and $135. The cost-sharing waiver would not be tied to any other healthcare item or service, and Requestor certified that it would not offer or pay any remuneration to any ordering provider. Requestor would continue to offer the proposed arrangement until the USPSTF updates its colorectal cancer screening recommendations to include the Test.
OIG’s Analysis
OIG concluded that, because the proposed arrangement would be limited to commercially insured patients and the Test is not currently covered by any federal healthcare program, it would not implicate either the AKS or the Beneficiary Inducements CMP. OIG distinguished the proposed arrangement from potentially problematic “carve-out” arrangements in which a party provides remuneration only with respect to commercially insured patients, noting that the proposed arrangement would not induce a provider to order any federally reimbursable Tests, both because the Test is not federally reimbursable and because Requestor would not provide any remuneration to ordering healthcare professionals.
Takeaways
OIG has long supported regulatory flexibility with respect to services recommended by the USPTF, making the opinion’s outcome unsurprising. However, the path OIG took to reach its favorable conclusion is somewhat unexpected given its prior guidance. For years, OIG has cautioned that “carving out” federal healthcare business or beneficiaries from an otherwise potentially problematic arrangement may not insulate the arrangement from liability under the AKS and Beneficiary Inducement CMP. While OIG noted its longstanding concerns about “carve-out” arrangements in this opinion, it concluded the proposed arrangement did not raise any concerns associated with carve-out arrangements because Requestor would not offer or pay remuneration to any federal healthcare program beneficiary or ordering provider. OIG did not discuss whether providers might receive non-monetary remuneration—such as the convenience of working with a single laboratory, which OIG characterized as remunerative in Advisory Opinion 15-04— under the proposed arrangement that could change the providers’ ordering habits and result in orders of federally reimbursable Tests once Medicare begins covering the Test.
OIG also did not address whether the proposed arrangement would implicate the Eliminating Kickbacks in Recovery Act (EKRA). Like the AKS, EKRA prohibits laboratories from paying remuneration to induce referrals or in exchange for using the laboratory’s services. However, unlike the AKS, EKRA’s prohibitions extend to referrals and services paid for by private payors. While OIG is not authorized to issue advisory opinions on the application of EKRA, OIG likely would have rejected Requestor’s advisory opinion request if it believed the proposed arrangement would violate EKRA. We therefore assume the issuance of a favorable opinion means that OIG concluded the proposed arrangement would not violate EKRA. With that said, OIG historically has included a footnote in favorable opinions involving arrangements that could potentially implicate or violate other laws, stating that the favorable advisory opinion should not be construed as a determination that the arrangement complies with the law at issue. The absence of any such footnote here is noteworthy.
Like all advisory opinions, Advisory Opinion 26-01 is limited to Requestor and the particular facts and circumstances at issue. We therefore caution stakeholders not to rely too heavily on this opinion, as Requestor’s circumstances are unusual, if not unique, and represent a departure from OIG’s typical stance on carve-out arrangements.
If you have any questions about this advisory opinion, please contact the authors.