Gifts, Donations, and Discounts: What Medicare Needs You to Know

The world of private practice physical therapy is certainly competitive, so it makes sense that owners and directors consider every angle when it comes to promoting their businesses. (On that note, be sure to check out our free modern PT marketing guide to learn fresh—and legally compliant—promotional strategies.) Unfortunately, some of those angles can get you and your practice in hot water with Medicare. Today, I’ll discuss handling gifts, donations, and discounts in a way that doesn’t rile up the big M.

But before I launch into that, here’s a legal primer:

Stark Law vs. Federal Anti-Kickback Statute

Both the Stark Law and the Federal Anti-Kickback Statute (AKS) exist to stop financial incentives from influencing medical decision-making. However, the laws are different in scope, structure, and approach.

Stark Law

It’d be far more entertaining—and much less concerning and confusing—if Stark Law had to do with Game of Thrones (governance of the North set forth by House Stark). In reality, though, according to the APTA, Stark Law is a civil statute that:

1. “prohibits physician referrals of certain health services for Medicare and Medicaid patients if the physician (or an immediate family member) has a financial relationship with the entity that provides the designated service. A financial relationship includes ownership, investment interest, and compensation arrangements.”
2. “has a list of 12 ‘designated health services,’ including physical therapy.”

In other words, physicians can’t refer patients to certain designated health services (e.g., physical therapy) if they’ll receive a financial benefit—unless one of the “enumerated exceptions” applies. Furthermore, providers of designated health services cannot generate claims for—or bill to—any entity if the services in question came from a prohibited referral. (Makes POPTS sound a bit sticky, eh? They actually exist because of a legal loophole—one that the APTA is working to change.)

What are the “enumerated exceptions?”

You can think of these exceptions as safe harbors to protect both you and the other provider. The two that are most relevant to the PT space are the rental lease and the bonafide employer exceptions. In a recent discussion with WebPT, Veda Collmer, JD, OTR/L, General Counsel at Phoenix Spine and Joint, gave this rental lease example: “Let’s say a physician has ownership interest in a PT practice that operates within the physician space—the physician and PT must have a rental agreement that meets all of the requirements on page 12 and 13 [of this HCCA presentation]. If they don’t have such an agreement, then any referrals from the physician to the PT would be in violation of Stark.”

As for the bonafide employer exception, Collmer provided this example: “Another exception is if the physician is a bonafide employee of the practice, meaning they meet the IRS criteria of an employee (e.g., W-2 with employment taxes withheld, physician has control of the employee’s duties, employee primarily works for the physician) and other criteria are met,” said Collmer. “If the physician is a bonafide employee, then referrals to and from the physician will not implicate Stark.”

Federal Anti-Kickback Statute

Now, the federal anti-kickback statute is a criminal law that, according to the APTA, “prohibits anyone from ‘knowingly and willfully’ receiving a form of payment in return for referring a patient to another provider for services or items covered by Medicare or Medicaid.” Furthermore, it “forbids payment in return for purchasing, leasing, or ordering any good, facility, service, or item that would be paid for by Medicare or Medicaid.” In short, it’s illegal to give or accept anything of value (including gifts, trips, expensive meals, concert tickets, or hotel stays), regardless of the dollar amount, if your intent is to provide or receive referrals for patients or services covered by government healthcare programs (e.g., Medicare and Medicaid).

Gifts to Physician Offices

Gift-Giving and the Anti-Kickback Statute

When it comes to gifting, the murky part of the anti-kickback statute lies in the intent. According to this bulletin from the Office of Inspector General, when enacting the AKS, “Congress expressed its intent that inexpensive gifts of nominal value be permitted,” although these small gifts should not be given with the intent of obtaining a referral.

For example, if a PT clinic owner takes a physician out for lunch with the intent of encouraging that physician to provide more referrals, then it’s clear the PT is providing remuneration—in this case, lunch—for more business. This is a no-go according to the AKS.

Alternatively, if a PT clinic owner takes a physician out to lunch and discusses a new therapy technique she provides at her practice, then the intent of the meeting is not generating business, but providing education. Therefore, the luncheon should be acceptable. However, it’s best to not go all out on an occasion like this. Expensive trips or lavish meals may implicate this statute, because in many cases, vendor costs are either directly or indirectly reimbursed by a government healthcare program—such as Medicare.

Gift-Giving and the Stark Law

The Stark Law also has something to say about gifts: According to legal services provider Mintz, “The exception for nonmonetary compensation allows health care entities to give physicians modest gifts and benefits provided that they are not in the form of cash and do not exceed an annual limit.” (For 2021, the aggregate limit is $423.) However, in alignment with the anti-kickback law, the value of the gift cannot be determined in a way that takes into account the volume or value of potential referrals from the referring provider.

So, what to do? You can take the hardline route and prohibit giving or receiving anything of value to or from a referring healthcare professional. Or, you can work with a trusted legal professional to create and document a clear, firm policy that outlines specific situations, guidelines, and risks—with a particular focus on intent. Modest spending (pro tip: establish limits) with the intent to inform and educate (i.e., legitimate business purposes) = legal. Lavish spending with the intent to influence, give, or receive = illegal.

Patient Discounts

The anti-kickback statute allows discounts under one of the law’s safe harbors, which denotes that exemptions exist for healthcare providers who submit claims to Medicare and Medicaid if:

• those providers properly disclose and accurately report the discounts, and
• the discounts represent reductions in the prices of goods and services based on arm’s length transactions.

Holy mouthful. In a nutshell, you can discount the price of a specific product or service for a Medicare or Medicaid beneficiary, and that discount must occur or be set at the time of sale. However, according to ASHA, “applying such a discount cannot lower the amount collected to less than” the Medicare allowed amount for the same service (as represented by the CPT service code). The ASHA resource goes on to explain, “Discount-for-cash offers or policies cannot be for an amount less than what Medicare allows because Medicare prohibits providers from charging the program more than is charged to others.”

So, while discount arrangements may also come in the form of waivers or deductions in insurance costs, I would advise against imposing discounts on the Medicare fee schedule to entice a patient to obtain therapy from you over another Medicare provider. Charge what Medicare’s fee schedule denotes.

One more note: Patient discounts are not the same as copay waivers. For more on that topic—and why you shouldn’t do it—check out this blog post.

Gifts to Patients

In certain circumstances, you can offer gifts—like promotional products or services—to potential or current patients who are covered under federal healthcare programs. What are those circumstances? According to the OIG:

1. The gifts must be inexpensive (i.e., a retail value of no more than $10 individually or $50 total annually per patient).
2. The gifts cannot be cash or eligible for cash equivalents.
3. You cannot give the gift with the intent of securing your services to a patient.

Now, what about incentives? As we all know in this age of gamification, incentives are an effective marketing practice. According to this article from Physicians New Digest, patient or prospective patient incentives are permissible if that “incentive is to promote the delivery of preventive care services” and if the delivery of such preventive care services is not related to the provision of other services. Similar to the caveats listed in the above paragraph:

1. Incentives cannot be cash or eligible for cash equivalents.
2. The value of the incentive cannot be greater than that of the preventive care services.

That said, we always recommend that you reference your state laws to determine if there are any additional provisions regarding patient gifts.

The “Preventative Screenings” Exception

Now, if you frequently offer free injury or health screenings as a way to recommend additional services to new patients, you may be concerned that this violates the Anti-Kickback Statute. Well, I have good news for you: according to this article from the Medical Group Management Association (MGMA), there is an exception “for ownership/investment interest and compensation arrangements and physician referrals for certain preventive screening tests, immunizations and vaccines covered by Medicare.” Furthermore, “The exception allows for the referral for such tests and items when a physician has a financial relationship with an entity that furnishes the services, when the services are furnished as part of a screening test, or if the item is subject to frequency limits.”

As MGMA explains, in order to qualify for this exception, a screening test must be:

• subject to CMS-mandated frequency limits;
• otherwise in compliance with the Anti-Kickback Statute;
• in compliance with federal and state claims submission regulations and laws;
• covered by Medicare; and 
• on the list of CPT/HCPCS codes eligible for this exception.

Now that you know the rules, it’s time to follow them. As I recommended above, define and document all rules in a written company policy, and ensure legal professionals thoroughly review everything. And lastly, a blanket CYA for myself: While I’m quite experienced in researching, deciphering, and writing about Medicare rules and regulations, I am not a lawyer—nor do I have any Medicare certifications. So, please, if you have specific questions about these rules, regulations, and laws, feel free to ask them in the comment section below, but be advised that I may recommend (scratch that, I am recommending) that you speak to an experienced healthcare law attorney or certified compliance expert.