OIG Issues Favorable Advisory Opinion on Federally Qualified Health Center Smartphone Loan Program | Sheppard Mullin Richter & Hampton LLP

The Office of the Inspector General (“OIG”) recently issued Advisory Opinion 22-08 (“the Advisory Opinion”) concluding that the provision of limited-use smartphones by a Federally Qualified Health Center (“FQHC”) to existing, low-income patients (the “Agreement”) did not have the requisite intent to violate the federal Anti-Kickback Statute (“AKS”)[1] and was not likely to generate remuneration prohibited under the federal Civil Monetary Penalty Act Prohibiting Beneficiary Incentives of Health Care Programs (“Beneficiary Incentive CMP”)[2].

The arrangement

The FQHC primarily served low-income individuals[3] including Medicare and Medicaid beneficiaries and offers telehealth services to its patients through a telehealth app that can be downloaded onto a smartphone.

An FQHC received funding from the Federal Communications Commission (“FCC”) and a local charity to provide smartphones and certain data services to its patients.[4] The FCC funding was intended to facilitate the ability of healthcare providers to supply telecommunications services and related devices for the purpose of providing telehealth services to patients during the ongoing Public Health Emergency (“PHE”) COVID-19.

The FQHC borrows the smartphones on a first-come, first-served basis to existing patients who do not own a smartphone capable of running the telehealth application. Patients eligible for the program were required to have received at least one FQHC service in the previous 24 months and report income levels at or below the Department of Health and Human Services’ federal poverty guidelines of 200 percent. The settlement was limited to 3,000 smartphone devices and did not cover new patients.

In addition to providing leased devices, the FQHC made free voice and data services available to patients for up to 14 months, after which patients had to pay directly for these services. Smartphones were available for use only to make or receive phone calls, send or receive text messages, receive telehealth services through the FQHC app, and/or review patient medical records. Smartphones could not be used to download apps or surf the Internet, and any patient who was no longer receiving services from the FQHC had to return the smartphone.

OIG analysis

The federal anti-kickback statute

The AKS makes it a crime to knowingly and intentionally offer, pay, solicit, or receive anything of value (cash or in kind) to induce a person to be referred for any item or service reimbursable under a federal health care program.[5] A violation of the AKS can result in a maximum fine of $100,000, 10 years in prison, or both for each violation.[6]

The OIG found that, although the arrangement did not fall within the safe harbor provisions of the AKS, the arrangement’s safeguards posed no more than a minimal risk of fraud and abuse under the AKS for the following reasons:

  • Neither the FCC nor the local charity that provided funding to the FQHC had a financial interest in patients who chose the FQHC for services;
  • The FQHC reported that it complied with all funding requirements imposed by the FCC and the local charity; and
  • There was no support to suggest that smartphones would be used by FQHCs to inappropriately increase the use of federally reimbursable services, despite the FQHC’s intention to continue allowing patients to use smartphones after PHE expired.

Beneficiary Incentive CMP

The Beneficiary Incentive CMP imposes civil monetary penalties on any person who transfers or offers a free item or service to a Medicare or state health program beneficiary that the person knows or should know is likely to influence the beneficiary’s choice of provider , practitioner or provider, to order or receive any service that is paid for by Medicare or a government health care program. However, providing an item or service that “promotes access to care and poses a low risk of harm to patients and federal health care programs” is an exception (“Promotes Access to Care Exception”).[7]

Promoting access to care

In evaluating whether FQHCs’ provision of free smartphones and data promotes access to care under the Agreement, the OIG concluded that the Agreement improves the ability of Medicare and Medicaid beneficiaries to access telehealth services during PHE for the following reasons:

  • Given that the majority of FQHC patients report incomes at or below 200% of the federal poverty guidelines, the provision of smartphones for limited use can reducing socio-economic barriers to access to telehealth services;
  • Remote patient monitoring and mobile health applications have given healthcare providers the ability to deliver quality healthcare directly to patients, regardless of location; and
  • The agreement was limited to patients who did not yet have a device capable of running the app needed to access FQHC telehealth services.

Risk of damage

The OIG concluded that the Agreement posed a low risk of harm by assessing the likelihood that the fee would interfere with clinical decision making, increase costs to federal health care programs or beneficiaries through overuse or inappropriate use, and increase patient safety or quality concerns for care. In reaching this conclusion, the OIG highlights the following features of the Agreement:

  • The Agreement is unlikely to interfere with clinical decision-making because there is no information to support that patient use of smartphones has adversely affected clinical decision-making by health professionals providing services to FQHC patients;
  • The risk of excessive or inappropriate use is low because:
    • The agreement was limited to existing patients who already had smartphones;
    • Patients received at least one service from the FQHC in the previous year;
    • Smartphones had limited functionality; and
    • Patients were required to pay directly for voice and data services after the services were initially provided; and
  • The agreement does not raise concerns about patient safety or quality of care based on the fact that the use of telehealth services during PHE promotes patient safety by reducing physical contact with providers, staff, and other patients and that the FQHC does not provide telehealth services, when it poses a risk to patient safety or quality of care.

Finally, it is important to note that the OIG found that in the event that a program does not meet the promotion of access to care exception, it will not impose administrative penalties under the CMP for incentivizing the beneficiary after PHE expires based on the above characteristics of the Agreement.

Practical conclusions

The advisory opinion provides useful insight for healthcare providers considering measures designed to improve access to telehealth services during PHE and beyond. Healthcare entities interested in implementing such programs should note that advisory opinions are limited to their facts and are binding only on requesting parties. Experienced regulatory counsel should be consulted for guidance on specific measures prior to implementation.


[1] Section 11128A(a)(7) of the Social Security Act (“SSA”).

[2] Section 1128(a)(5) of the SSA.

[3] It was noted that 94% of FQHC patients have incomes at or below 200% of the federal

poverty guidelines.

[4] The FCC provided 85% and the local charity provided 15% of the funding received from

FQHC to purchase the smartphones.

[5] 42 USC § 1320a-7b(b).

[6] ID.

[7] Section 1128A(i)(6)(F) of the SSA.

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