Digital Health Compliance Considerations — Revenue Models and Patient Incentives

Digital Health Compliance Considerations — Revenue Models and Patient Incentives

The digital health market continues to grow exponentially in the United States. As startups and established companies market digital tools and technology to improve health outcomes and reduce costs, a key issue is whether the revenue model and any incentives used to drive patient behavior comply with federal healthcare laws that prohibit kickbacks to providers and patients. A recent government opinion issued to a digital behavioral health company approves a revenue and patient incentive model under key federal healthcare fraud and abuse laws and serves as a possible starting point for development of a sustainable revenue model that can be scaled as the business grows.

Advisory Opinion

Earlier this month, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published a favorable opinion, Advisory Opinion 22-04, in response to a request to review a program through which a digital health company (the Company) provides a comprehensive support program to eligible individuals recovering from substance use disorders that includes cash incentives in exchange for a fair market flat monthly fee (per eligible individual) or a fee contingent on agreed-on targets for abstinence paid by contracting health plans, addiction treatment providers, employee assistance programs, research institutions, and other treatment providers overseeing the care of the eligible individual (each a Customer).

The Program

The Company uses smartphone and smart debit card technology to implement digital contingency management incentives (CM Incentives), up to $200 per month and $599 per year, to motivate and sustain behavioral health efforts (e.g., verified substance tests, medication adherence, treatment attendance, participating in self-guided cognitive behavioral therapy) in people who suffer from substance use disorders. The debit card looks like a typical debit card but cannot be used at certain locations (e.g., bars, liquor stores, casinos), and the Company can monitor the patient’s use of the debit card and alert coaches and providers if the patient attempts to use it at a blocked location.

An individual may seek the Company’s services via referral from a Customer or self-referral. The Company receives fees from Customers: (i) a flat monthly fee per enrolled, active individual or (ii) a pay-for-performance model, in which the Company is paid upon an individual’s achieving certain agreed-on targets for abstinence. The Company’s enrollment team (which includes certified recovery coaches and specialists trained and supervised by a licensed clinical psychologist, a board-certified addiction psychiatrist, and a counselor licensed to treat addiction and mental health disorders) conducts a “structured interview” using the American Society of Addiction Medicine Continuum Triage tool to determine whether (and if so, how much) services are appropriate for each enrolled individual. The Company’s technology establishes the schedule of expected target health behavioral events for each enrolled individual, validates whether each expected event has occurred, and disburses the protocol-specified CM Incentives to the enrolled individual when appropriate.

The program itself does not include any in-person elements, but CM Incentives may be tied to certain services furnished in-person by another provider, which could include a Customer, that bills federal healthcare programs.

OIG’s Analysis

According to OIG, the program involves two streams of remuneration that could incentivize a member to receive a federally billable service and that must be evaluated — one to the Customer and one to the patient. In concluding that the program poses minimal risk under the federal Anti-Kickback Statute and the beneficiary inducement prohibition under the Civil Monetary Penalty Statute, two laws aimed at curtailing fraud and abuse under Medicare, Medicaid, and other federal healthcare programs, OIG focused on four key factors.

• Evidence-Based Program. The program is consistent with evidence-based research funded by the National Institutes of Health and principles for the effective treatment of substance use disorders published by the National Institute on Drug Abuse. Additionally, the program has been funded by government-sponsored grants and used as a research platform by university-affiliated research groups, and contingency management has been determined by such groups as “a highly effective, cost-efficient treatment for individuals with substance use disorders” and not “an inducement to seek, or a reward for having sought, a particular federally reimbursable treatment.”
• Low Risk of Overutilization. The program poses low risk of overutilization because the CM Incentives given to enrolled individuals have a relatively low value, and some are not associated with federally payable services (e.g., self-administered drug testing). Further, the Requester is not enrolled as a provider or supplier in, and does not bill, any federal healthcare program.
• Not an Inducement to General Referrals. The risk is low that Customers would use the program to generate business or reward referrals as Customer fees are not based on the volume or value of any federally reimbursable services and the Company is not enrolled as a provider or supplier in any federal healthcare program.
• Appropriate Safeguards in Place. The safeguards developed by the Company, which include the Company (an entity that does not bill federal healthcare programs) determining the types of services each enrolled individual needs and the appropriate CM Incentives for those services, minimize potential risk that the program would be misused.

The opinion signals OIG’s willingness to acknowledge that the benefits associated with improved patient treatment outcomes can outweigh potential healthcare fraud and abuse risk if appropriate safeguards are implemented. Notably, while OIG advisory opinions like the one at issue here are limited to the specific arrangement at issue in the opinion, they serve as important guidance to the industry. Consumer protection and state laws governing kickbacks, among others, may also be relevant to consider when establishing revenue and patient incentive models, depending on the facts and circumstances.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.