This opinion addresses a proposed arrangement (“Proposed Arrangement”) by the manufacturer of cochlear implants (“Requestor”), where the Requestor would provide certain patients who receive one of their implants with a free compatible hearing aid for the other ear.

OIG determines that the Proposed Arrangement, if undertaken (i) would generate prohibited remuneration under the federal Anti-Kickback Statement (if the required intent were present) and (ii) would generate prohibited remuneration under the Beneficiary Inducements Civil Monetary Penalties (CMP) prohibitions.

The cited factual background includes the following:

  1. The Requestor identified that some patients who receive their manufactured cochlear device (“Device”) may be candidates for bimodal hearing – hearing aid in one ear and their Device in the other ear.
  2. The Device is reimbursable by federal health care programs, including Medicare, but hearing aids are not covered by Medicare.
  3. Requestor confirmed that although the pairing of the Device with a hearing aid in the other ear can improve hearing outcomes for bimodal hearing candidates, the Device works properly with or without the use of a hearing aid in the other ear.
  4. To be eligible under the Proposed Arrangement, bimodal patients would need to:
    (i) meet Medicare coverage requirements for a cochlear implant, including that the Device would be used according to FDA-approved labeling for the Device;
    (ii) have moderate-to-severe hearing loss in the ear that would not have the Device, as determined by a Provider.
  5. The Device would be purchased by the hospital or Ambulatory Surgical Center (“ASC”), as applicable, from the Requestor, at the request of the patient’s Provider and the hearing aid would be provided by the Requestor with the Device for free.
  6. The Device would be implanted by the Provider at the hospital or ASC and the hearing aid would be later programmed and fit by an audiologist.
  7. The free hearing aid would be conditioned on the purchase of the Requestor’s Device and the Requestor expects both patients and Providers to be aware that the hearing aids are provided for free.
  8. The hearing aids would be manufactured by a third-party hearing aid manufacturer and Requestor would require hospitals and ASCs to certify that they:
    (i) would not bill patients or federal health care programs for the hearing aids; and
    (ii) would advise patients and audiologists in writing that they may not claim insurance reimbursement for the hearing aid, and audiologists may charge patients only their usual and customary fee for fitting the hearing aids.
  9. Requestor proposed either to:
    (i) not impose any financial need criteria for the provision of the hearing aid; or
    (ii) establish financial-need criteria to provide the hearing aid only to those whose household incomes are at or below 300% of the federal poverty level.

OIG’s Analysis section specifically provides the following:

  1. The federal Anti-Kickback Statute would be implicated because the Requestor would offer and provide remuneration in the form of a free hearing aid to eligible patients that may induce them to arrange for the purchase of the Requestor’s Device by hospitals or ASCs, with the Device being reimbursable by federal health care programs.
  2. The safe harbor for patient engagement and support arrangements would not apply, as the value of the hearing aid exceeds the current monetary cap (current cap $570 compared to cost of at least $1,180).
  3. The risk of fraud and abuse under the Proposed Arrangement is not sufficiently low enough under the federal Anti-Kickback Statute for OIG to issue a favorable opinion. This is due to OIG’s historic concerns under federal health care programs over offers of free items or services; potential for inappropriate steering of patients to the Device over competitor’s cochlear implant products or over other clinically appropriate items or services; and the potential for unfair competition.
  4. Beneficiary Inducement CMP is implicated because the Requestor’s offer could influence Medicare or Medicaid managed care plan beneficiaries to select Requestor or DME supplier for the Device that is paid in whole or in part by Medicare or a state health care program. Additionally, beneficiaries could be influenced by the Proposed Arrangement to select the Device. Requestor serves as the DME supplier and provider of repair and replacement services.
  5. The hearing aid is not necessary for the Device to work properly, the Proposed Arrangement would not improve beneficiaries’ ability to obtain items and services payable by Medicare and Medicaid, so the Promotes Access to Care Exception would not be applicable.
  6. The Financial Need-Based Exception would not be met because the free hearing aid would be conditioned on the purchase of the Device and the Exception applies only to items or services offered for free or at less than fair market value and not tied to the provision of other Medicare or Medicaid reimbursable items or services.
  7. No exception to the Beneficiary Inducements CMP is deemed to apply.

The full text of Advisory Opinion 23-08 includes a statement of the facts considered by the Office of Inspector General.

OIG Advisory Opinions are very fact specific and, by their terms, limited to the facts presented by the specific Requestors, and are subject to specific limitations set out in the Advisory Opinions.

Should you need anything else on this topic or if you have a matter that you wish to pursue with the Department of Health and Human Services’ Office of Inspector General for an Advisory Opinion, please feel free to reach out to Matthew Babcock at to discuss an engagement.

This alert is not a substitute for advice of counsel on specific legal issues.

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