Over the years, HHS-OIG has become somewhat more forgiving with respect to discount arrangements under the AKS, and this trend has continued with the issuance of Advisory Opinion 26-03 on March 4, 2026. In that opinion, HHS-OIG concluded that an arrangement involving discounts offered to one party that were conditioned on a purchase by a second party did not qualify for protection under the AKS regulatory safe harbor for discounts (Discount Safe Harbor) but also did not present a material risk of Federal health care program (FHCP) abuse and hence did not warrant sanctions under the AKS.
While the advisory opinion represents a welcome addition to HHS-OIG guidance regarding bundled discounts, the agency emphasized that the risk posed by the arrangement at issue was mitigated by its “unique features” and, as such, it is unclear whether the opinion has broad applicability. Moreover, the opinion includes several sweeping statements, along with some vague reasoning, that may make it difficult for members of the health care industry to clearly distinguish between permissible discounts and illegal remuneration.
Proposed Arrangement
Advisory Opinion 26-03 concerns a somewhat unorthodox discount arrangement proposed by a medical technology manufacturer and distributor (Requestor).
Requestor sells various products related to cataract surgery, including (i) a web-based software platform used for cataract surgery planning and tracking clinical outcomes (the Software), (ii) single-use supplies used in connection with the phacoemulsification technique for removing cataracts (Phaco Packs), and (iii) intraocular lenses (IOLs), a medical device implanted during cataract surgery to replace the natural lens of the eye. When used in cataract surgery, both Phaco Packs and IOLs generally are reimbursed, at least in part, by FHCPs. For example, Medicare generally makes a composite payment to an ASC for a cataract extraction procedure (the Facility Fee), which Facility Fee specifically includes reimbursement for the supplies used by the ASC in performing the procedure (including, for example, Phaco Packs) and a conventional IOL.1
Under the proposed arrangement, Requestor would offer an eligible ASC discounted pricing for Requestor’s Phaco Packs and conventional IOLs. For the ASC to be eligible for these price reductions—which could take the form of upfront volume-based discounts or post-sale, volume-based rebates—Requestor would require (i) a physician practice with ophthalmic surgeons who perform cataract surgery at the ASC (Practice) to purchase and enter into a subscription agreement for Requestor’s Software and (ii) the ASC and the Practice to have at least one common direct owner (presumably an ophthalmic surgeon). In other words, Requestor proposed to condition the discount offered to one party (the ASC) on a purchase by another party (the Practice).
Requestor certified that the Practice would not receive any discount on the Software subscription based on the volume or value of items purchased by the ASC. Requestor also certified that it would (i) provide the ASC with an invoice that reflects the discount received on purchases of Phaco Packs and conventional IOLs and (ii) contractually require the ASC to “properly disclose and appropriately reflect” this discount in FHCP claims for the items where applicable.
HHS-OIG ANALYSIS
HHS-OIG has long taken the position that discounts and rebates are remuneration (i.e., something of value). Moreover, given that (i) price reductions inherently are tied to purchases and (ii) the products for which the discounts were being offered (Phaco Packs and conventional IOLs) are reimbursed by Medicare as part of the Facility Fee paid to ASCs for cataract surgery, it would be difficult to argue that the discounts and rebates offered under the proposed arrangement were not intended, at least in part, to induce FHCP purchases. Perhaps for those reasons, HHS-OIG did not specifically address whether the proposed arrangement implicated the AKS and instead immediately turned to whether the proposed arrangement could be protected under the Discount Safe Harbor.
The agency concluded it could not, for two reasons.
- First, HHS-OIG asserted that while the Discount Safe Harbor can protect certain bundled discounts, the same entity must be purchasing all of the products in the bundle. Where, as here, one party must purchase Product X in order for another party to obtain a discount on Product Y, the Discount Safe Harbor does not apply.
- Second, the agency took the position that the price reductions offered under the proposed arrangement did not qualify as a “discount” within the meaning of the Discount Safe Harbor because they were conditioned on the ASC “performing a service.” The Discount Safe Harbor’s definition of a “discount” specifically excludes “[s]ervices provided in accordance with a personal or management services contract.” According to HHS-OIG, this exclusion applied to the proposed arrangement because the discounts to be offered to ASCs for Requestor’s Phaco Packs and conventional IOLs were conditioned “not just on the purchase of the product at issue” but also on an “additional action.” Specifically, “to be eligible for the discounts, an ASC must (directly or indirectly) secure participation of a Practice with at least one common owner to purchase the Software.” According to the agency, conditioning a discount on the performance of a service is “expressly outside the safe harbor.”
Although HHS-OIG concluded that the proposed arrangement would not qualify for protection under the Discount Safe Harbor, the agency ultimately issued a favorable opinion. After noting that it generally does “not find price reductions conditioned on performing a service to be low risk,” the agency stated that the proposed arrangement had some ”unique features” that mitigated the risk of FHCP abuse. Those unique features were the following:
- No Items Separately Reimbursed by FHCPs. According to HHS-OIG, the proposed arrangement should not result in overutilization or any concomitant increase in FHCP costs because none of the items included in the bundle are “separately billable items.” HHS-OIG noted that the Software is not specifically covered by either the Facility Fee paid by Medicare to the ASC or the professional services fee paid by Medicare to the ophthalmologic surgeon. Moreover, while Phaco Packs and conventional IOLs are reimbursed by Medicare, they are included in a composite payment (i.e., the Facility Fee). Due to that reimbursement structure, HHS-OIG reasoned that FHCPs would “pay the same amount” regardless of whether an ASC used Requestor’s products or a competitor’s.
- No Impediments to Buying Competitor Products. HHS-OIG also emphasized that (i) Requestor’s discounted Phaco Packs “are not specific to any particular IOL,” (ii) Requestor’s discounted IOLs “do not require use of any particular Phaco Pack,” and (iii) “the Software will be functional regardless of” the ASC’s or Practice’s brand of Phaco Pack, IOL, EHR, or diagnostic equipment. Because all the products included in the proposed arrangement would be compatible with products not sold by Requestor, HHS-OIG reasoned that the proposed arrangement “posed a low risk of interference with clinical decision-making.” While HHS-OIG acknowledged that the surgeon with common ownership in the Practice and the ASC “could get an indirect benefit from a discount on a particular IOL or Phaco Pack (if the discounted items cost less than competitors’ products),” the agency reasoned that this potential benefit was unlikely to skew clinical decision-making as “the cost of these items is only one factor a surgeon might consider when choosing a product.” For similar reasons, HHS-OIG concluded that the proposed arrangement was unlikely to present an “inappropriately high” risk of steering to Requestor’s products or unfair competition because, as “rational economic actors,” the ASC and the Practice presumably would both “consider a variety of factors in their selection of Phaco Packs, Conventional IOLs, and practice-related software platforms.”
- Party Facilitating the Receipt of Discounts Does Not Receive Referrals from Party Receiving the Discounts. Finally, HHS-OIG addressed the fact that, by making a full price purchase of the Software to facilitate the ASC receiving a discount, the Practice arguably also would be providing remuneration to the ASC under the proposed arrangement. HHS-OIG concluded that the risk of “inappropriate steering” from the Practice to the ASC was low because the Practice (i.e., the party facilitating the discounts) would not ordinarily receive referrals from the ASC (i.e., the discount recipient). HHS-OIG emphasized that, if “the opposite were true (i.e., if an ASC were paying full price for an item or service that resulted in a Practice—a referral source to the ASC—receiving discounts or other remuneration),” then the risk of inappropriate steering would have been “much higher” and the agency “may have come to a different conclusion.”
IMPLICATIONS
In a 1999 rulemaking, HHS-OIG revised the Discount Safe Harbor to specifically permit certain bundled discounts. The agency’s analysis in Advisory Opinion 26-03 appears to add to that guidance by making it clear that more exotic, multi-party discount arrangements can be low risk as well. That, of course, is favorable news for the health care industry.
On the other hand, the agency’s analysis is unclear in several places and includes several broad statements that appear to go beyond the applicable statutory and regulatory text. Unfortunately, that may make it more difficult for members of the health care industry to distinguish between permissible discounts and potentially problematic remuneration.
Multi-Party Discounts
As noted above, the agency asserted that the proposed arrangement in Advisory Opinion 26-03 fell outside of the Discount Safe Harbor because that safe harbor “does not protect arrangements . . . that putatively ‘bundle’ discounts by requiring one party (here, a Practice) to make a full price purchase in order for a different party (here, the ASC) to qualify for a discount on other products.”
Based on the plain language of the regulations, however, the Discount Safe Harbor does not appear to preclude bundled discounts involving multiple parties. The Discount Safe Harbor states that a discount does not include “supplying one good or service without charge or at a reduced charge to induce the purchase of a different good or service” (i.e., a bundled discount) unless (i) the goods and services are reimbursed by the same FHCP “using the same methodology” and (ii) the reduced charge is fully disclosed to the FHCP and “accurately reflected where appropriate, and as appropriate, to the reimbursement methodology.” Presumably, those reimbursement and disclosure conditions could be met even if the goods or services at issue are purchased by different parties.
With respect to the proposed arrangement, HHS-OIG’s reasoning may have been that these conditions were not met since (i) the bundle arguably includes the Software (purchased by a Practice) and Phaco Packs and conventional IOLs (purchased by an ASC), and (ii) FHCPs reimburse physician practices and ASCs under separate reimbursement methodologies. That said, given that the Software is not reimbursed by FHCPs at all, it is unclear why the Discount Safe Harbor’s reimbursement and disclosure conditions for bundled discounts would not be met, as (i) the only reimbursable items (i.e., the Phaco Packs and conventional IOLs) are reimbursed by FHCPs using the same methodology (i.e., as part of the Facility Fee paid by Medicare to the ASC) and (ii) the discounts offered for those items would be disclosed in invoices issued by Requestor to the ASC. Moreover, even if the Discount Safe Harbor’s bundled discount requirements were not met for this particular arrangement (because ASCs and physician practices are reimbursed under separate FHCP reimbursement methodologies), there may be other multi-party bundled discounts where this is not an issue (e.g., a bundled discount offered to two separate ASCs). In short, the agency’s blanket statement that the Discount Safe Harbor does not protect multi-party discount arrangements appears overbroad.
Personal Services
The agency’s analysis regarding the Discount Safe Harbor’s services exclusion is similarly problematic. As noted above, the definition of a “discount” under the Discount Safe Harbor excludes “[s]ervices provided in accordance with a personal or management services contract.” The agency took the position that the proposed arrangement did not involve a “discount” within the meaning of the Discount Safe Harbor because it “requires performing a service to obtain the discount;” that is, “to be eligible for the discounts, an ASC must (directly or indirectly) secure participation of a Practice with at least one common owner to purchase the Software.”
- Although it’s true that a “discount” cannot take the form of “[s]ervices provided in accordance with a personal or management services contract,” the price reductions offered by Requestor for Phaco Packs and conventional IOLs are neither services nor furnished as part of a “personal or management services contract.”
- Further, while HHS-OIG asserts that “to be eligible for the discounts, an ASC must (directly or indirectly) secure participation of a Practice with at least one common owner to purchase the Software,” that “action” by the ASC does not appear to be an explicit requirement of the arrangement. Presumably a Practice could decide to purchase the Software from Requestor without any involvement of the ASC and the ASC would still be eligible to receive the discounts on Requestor’s Phaco Packs and conventional IOLs. Further, even if an ASC did have some involvement in convincing a Practice to purchase the Software, the ASC would not be doing so as an agent of the Requestor. Put differently, even if the ASC were performing an “action,” that action would not appear to be “services provided in accordance with a personal or management services contract.”
- Finally, the agency’s sweeping assertion that the Discount Safe Harbor will not protect a price reduction if the buyer is required to take some action beyond purchasing the discounted product is surely an overstatement. For example, vendors commonly provide discounted pricing to members of group purchasing organizations (GPOs). To qualify for those discounts, the buyer arguably has to take an “action” by joining or remaining a member of the GPO at issue. Given that both Congress and HHS-OIG have recognized the legitimacy of GPO arrangements (e.g., through the creation of separate statutory and regulatory safe harbors for certain payments from vendors to GPOs), it would strain credulity to think that all discounts offered to GPO members fall outside of the Discount Safe Harbor because an “action” (GPO membership) is a condition for earning the discount. Similarly, product purchase agreements commonly impose a host of obligations on buyers beyond simply paying the seller for the products at issue, including, by way of example, duties to: (i) inspect delivered goods within a specified period and notify the seller of any defects, nonconformities, or shortages; (ii) store, handle, and use the products in accordance with the seller’s specifications; (iii) provide periodic product demand forecasts; (iv) comply with applicable laws and regulations; and (v) keep certain information confidential (e.g., pricing terms, product specifications, trade secrets, and other business information disclosed during the course of the relationship). It would be ironic indeed if an agreement providing for a discount on a product could not be protected under the Discount Safe Harbor precisely because the agreement required the buyer to comply with that safe harbor. Assuming HHS-OIG considers only certain “actions” to be problematic conditions for earning a discount, the agency will need to be more precise regarding what actions cross the line.
Discount Exception
Finally, even assuming the proposed arrangement didn’t qualify for protection under the Discount Safe Harbor for one or both of the above reasons, HHS-OIG did not explain why the proposed arrangement could not qualify for protection under the AKS’s statutory discount exception (Discount Exception). While HHS-OIG tends to take the position that the Discount Safe Harbor encompasses all arrangements covered by the Discount Exception, (i) the Discount Exception contains far fewer requirements than the Discount Safe Harbor and (ii) some courts have confirmed that the Discount Exception provides a separate and wholly independent grounds for AKS protection.
By its terms, the Discount Exception protects any “reduction in price obtained by a provider of services or other entity,” as long as the “reduction in price is properly disclosed and appropriately reflected in the costs claimed or charges made by the provider or entity under a Federal health care program.” Given that Requestor certified that it would (i) provide the ASC with an invoice that reflects the discount received on purchases of Phaco Packs and conventional IOLs and (ii) contractually require the ASC to “properly disclose and appropriately reflect the discount” in FHCP claims for the items where applicable, those conditions would appear to be met.
CONCLUSION
Advisory Opinion 26-03 represents some good news for the health care industry, as it continues a string of sensible, favorable opinions involving discount arrangements that, at bottom, serve to lower prices for buyers and, ultimately, patients and payers as well (including, of course, the Medicare and Medicaid programs). That said, in declining to provide a fulsome, text-based explanation for concluding that the Discount Safe Harbor could not protect the proposed arrangement, and basing its decision on agency discretion, rather than compliance with the Discount Exception or Discount Safe Harbor, HHS-OIG continues to expose benign discount arrangements to potential liability under the FCA by parties (i.e., whistleblowers) who simply do not care whether the arrangement at issue will result in overutilization, increased program costs, improper patient steering, or unfair competition. While sellers and buyers still have numerous defenses, of course—including an alternate interpretation of the Discount Safe Harbor and the much more straightforward, and forgiving, Discount Exception—that exposure can only impede legitimate discount arrangements that would lower prices and promote market competition. Ultimately, the health care industry would be better served by HHS-OIG providing thorough, clear, objective, broadly applicable, and legally enforceable rules, rather than ad-hoc guidance that may create further confusion and concern regarding the contours of the AKS.
- Patients undergoing cataract surgery may choose to have either a conventional IOL or a premium IOL implanted. Conventional IOLs are monofocal lens implants that provide clear vision at a single distance. Premium IOLs are lens implants that are used to correct refractive errors (e.g., astigmatism, presbyopia). ↩︎
