Skin Substitute Rebate Compliance Requirements for Doctors under the Anti-Kickback Statute and Safe Harbor Regulations

Written by: J. Kevin West & Jamie L. Riley

PICA has become aware of situations in which vendors of skin substitute products offer rebates to doctors who purchase those products. Questions have arisen regarding what legal requirements, if any, are doctors required to comply with to ensure that any rebate payments received do not subject a doctor to the criminal or civil penalties in the Anti-Kickback Statute (AKS).

The AKS imposes criminal and civil penalties if a doctor knowingly receives any remuneration in return for purchasing or ordering any item for which payment may be made by a federal healthcare program, such as Medicare. In short, the AKS prohibits kickbacks between doctors and vendors. “Remuneration” under the AKS specifically includes rebates. However, the AKS contains an exception for certain “discounts” if the discount is properly disclosed and appropriately reflected in the costs claimed or charges made by the doctor to Medicare. This exception is commonly referred to as a “safe harbor” provision.

Under the federal safe harbor regulations, certain payments that may otherwise violate the AKS may not violate the AKS if they qualify as a “discount.” A rebate from a skin substitute vendor may qualify as a discount under the safe harbor if these criterion are met:

1. The terms of the discount are fixed and disclosed in writing to the doctor at the time of the initial purchase to which the discount applies.
2. The discount is not given at the time of sale.
3. The rebate is in the form of a rebate check (cash and cash equivalents do not qualify as discounts under the safe harbor regulations.)

A doctor receiving a rebate is subject to certain disclosure requirements. Under the safe harbor regulations, if the doctor or his/her practice makes a claim to Medicare using the same name in which they get the rebate for the skin substitute product, there is no preemptive disclosure requirement. Instead, the doctor must provide, only upon demand by governmental authority, an invoice from the seller that fully and accurately reports the discount.

To summarize, the key takeaways for a doctor receiving rebates from a vendor, such as vendor selling skin substitute products, are as follows:

1. A skin substitute rebate can fall into the safe harbor provisions of the AKS if it is:
   • In the form of a check; and
   • The terms of the rebate are fixed and disclosed in writing to a doctor at the time the skin substitute is purchased, but the rebate is not given at the time of the sale; and
   • The doctor provides, upon request by government agency, the invoice from the manufacturer or seller documenting the terms of the discount.
2. A doctor cannot “double recover” for the rebate and Medicare reimbursement. The charges to Medicare should be adjusted to reflect the rebate.
3. The rebate does not need to be preemptively disclosed if the doctor/practice is one in whose name the claim for payment is made to Medicare for the skin substitute product. Instead, disclosure of the rebate should be made upon request by the proper government agency.
4. Doctors should be aware that simply following the statute does not exempt potential investigation and liability.

Doctors should consult with legal counsel if they have questions regarding their compliance with the statutes and regulations governing rebate payments.

The information contained on the PICA Blog does not establish a standard of care, nor does it constitute legal advice. The information is for general informational purposes only. We encourage all blog visitors to consult with their personal attorneys for legal advice, as specific legal requirements may vary from state to state. Links or references to organizations, websites, or other information is for reference use only and do not constitute the rendering of legal, financial, or other professional advice or recommendations. All information contained on the blog is subject to change.