14028. DISCOUNTS, REBATES AND OTHER REDUCTIONS IN PRICE

A. Action To Take When You Discover Questionable Discount or Rebate Programs.--When you learn of a questionable discount or rebate program, refer the matter to OIFO.

B. Anti-Kickback Statute Implications.--The Medicare and Medicaid anti-kickback statute provides the following:

Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid or a State health care program, or in return for purchasing, leasing, or ordering or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under Medicare, Medicaid, or a State health program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both. 42 U.S.C. 1320a-7b(b), Section 1128B(b) of the Act."

Discounts, rebates, or other reductions in price may violate the anti-kickback statute because such arrangements induce the purchase of items or services payable by Medicare or Medicaid. However, some such arrangements are clearly permissible if they fall within a safe harbor. One safe harbor protects certain discounting practices. For purposes of this safe harbor, a "discount" is the reduction in the amount a seller charges a buyer for a good or service. In addition, to be protected under the discount safe harbor, the discount must apply to the original item or service which is purchased or furnished. That is, a discount cannot be applied to the purchase of a different good or service than the one on which the discount was earned. A buyer is the individual or entity responsible for submitting a claim for the item or service which is payable by the Medicare or Medicaid programs. A seller is the individual or entity that offers the discount.

A "rebate" is defined as a reduction in price which is not given at the time of sale. Because this reduction in price is not given at the time of sale, a rebate is not protected by the discount safe harbor.

C. Charge-Based Payment: Necessary Factors for Protected Discounts.--For a discount program to be protected, certain factors must exist. These factors assure that the benefit of the discount or other reduction in price are reported and passed on to the Medicare or Medicaid programs. The discount must be made at the time of sale of the good or service. In other words, rebates are not permitted for items or services if payable on the basis of charges. The discount must be offered for the same item or service that is being purchased or furnished. The discount must be clearly and accurately reported on the claim form.

Credit or coupon discounts directly redeemable from the seller may be protected if they comply with all the applicable standards in the discount safe harbor.

The following types of discounts are not protected:

o Rebates offered to beneficiaries;
o Cash payment;
o Furnishing an item or service free of charge or at a reduced charge in exchange for any agreement to buy a different item or service;
o Reduction in price applicable to one payer but not to Medicare or a State health care program; and
o Routine reduction or waiver of any coinsurance or deductible amount owed by a program beneficiary.

NOTE: There is a separate safe harbor for routine waiver of copayments for inpatient hospital services.