Moving the HME Industry Forward


Beneficiary Inducement Statute – Nominal Value Exception Increases

December 12, 2016

AMARILLO, TX – Under section 1128A(a)(5) of the Social Security Act (the Act), enacted as part of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), and commonly known as the “beneficiary inducement” statute, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of Medicare or Medicaid payable items or services may be liable for civil monetary penalties (CMPs) of up to $10,000 for each wrongful act.  

The beneficiary inducement statute defines “remuneration” to include, without limitation, waivers of copayments and deductible amounts (or any part thereof) and transfers of items or services for free or for other than fair market value.  See section 1128A(i)(6) of the Act.  The statute and implementing regulations contain a limited number of exceptions.  See section 1128A(i)(6) of the Act; 42 CFR 1003.110.

In the Conference Committee report accompanying the enactment of section 1128A(a)(5), Congress expressed its intent that inexpensive gifts of nominal value be permitted. See Joint Explanatory Statement of the Committee of Conference, section 231 of HIPAA, Public Law 104-191. The Office of Inspector General (OIG) expressed its interpretation of “inexpensive” or “nominal value” to mean a retail value of no more than $10 per item or $50 in the aggregate per patient on an annual basis, and noted that it would periodically review these limits and adjust them according to inflation, if appropriate.  See, e.g., 65 FR 24400, 24411 (Apr. 26, 2000), available at:, and “Special Advisory Bulletin: Offering Gifts and Other Inducements to Beneficiaries,”

August 2002, available at: (Special Advisory Bulletin).

The OIG recently determined that the figures from 2000 should be adjusted.  Therefore, as of December 7, 2016, the OIG is interpreting “nominal value” as having a retail value of no more than $15 per item or $75 in the aggregate per patient on an annual basis.  As with the OIG’s previous interpretations, the items may not be cash or cash equivalents.

In terms of providing “something of value” to Medicare patients, the following are examples of what the DME supplier can and cannot do:

• The supplier can give a $15 Dallas Cowboys coffee mug to a prospective patient.
• The supplier cannot give an $89 Dallas Cowboys football jersey to a prospective patient.
• The supplier cannot give a $15 gift card to the prospective patient.
• The supplier can give a $15 Christmas present to an existing patient.  Even though the patient is an existing patient, he/she is also a prospective patient for future products provided by the DME supplier.
• During the course of 12 months, the DME supplier can give seven gifts to a patient (each of which has a retail value of $10) and an eighth gift to the patient (which has a retail value of $5).
• The DME supplier can offer to reduce a patient’s copayment by up to $15 without requiring the patient to show an inability to pay.
• The DME supplier can waive a patient’s copayment, even if the copayment exceeds $15, if the patient can establish (to the reasonable satisfaction of the supplier) an inability to pay the copayment.
• Let’s say that a DME supplier opens up a new location.  The supplier can have a week-long open house in which guests/customers place their names in a fish bowl.  At the end of the week, the supplier draws a name.  The winner receives an iPad.  This is acceptable.  Assume that the retail value of the iPad is $800.  Assume that 800 people put their names in the fish bowl.  The supplier is not offering an iPad.  Rather, the supplier is offering a 1‑in‑800 chance to win an iPad.  This 1‑in‑800 chance to win an $800 iPad is worth $1.

Notice of Upcoming Industry Deadline – For those DME suppliers that are currently participating suppliers, the deadline for them to switch to being non-participating suppliers is December 31.  A participating supplier agrees to accept assignment on all claims for Medicare products and agrees to be paid the Medicare-allowed amount as full payment, less any unmet deductible and copayment.

On the other hand, a non-participating supplier may accept assignment on a claim-by-claim basis. By not accepting assignment, the non-participating supplier can (i) collect directly from the patient, (ii) charge more than the Medicare allowable, and (iii) within certain guidelines, charge less than the Medicare allowable.  [Note that a competitive bid contract supplier, even if it is non-participating, must, nevertheless, accept assignment on products covered by the supplier’s competitive bid contract.] When the non-participating supplier provides an item non-assigned, then the supplier is required to file the claim with Medicare on behalf of the patient, and any Medicare reimbursement is sent directly to the patient.  The supplier should examine its business model to determine if it is in its best interest to switch from being a participating supplier to a non-participating supplier.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or