Guide to Sweepstakes and Contests Laws for Healthcare Organizations

Editor’s Note: Prize promotions—such as sweepstakes, contests and giveaways—are popular and effective ways for healthcare organizations to attract, engage and retain customers; increase brand awareness; and, for nonprofits, raise funds. They also are governed, however, by a vast array of state and federal laws. Those unaware of the regulations may find themselves facing serious legal and public relations repercussions—including significant fines and even criminal prosecution in some states.

How can you safely navigate the potential minefield of laws and regulations governing prize promotions? How can you reap the business rewards without triggering the legal risks? And what added regulatory issues increase the complexity for healthcare organizations? Manatt shared the answers in a recent webinar. In part 1 of our article summarizing the webinar, published in the July “Health Update”, we defined key terms and shared some basic principles critical for organizations planning prize promotions. In part 2 of our summary, below, we focus on the laws specific to healthcare companies, as well as social media and user-generated content promotion. Click here to view the full webinar—and here to download a free copy of the webinar presentation.

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Prizes to Beneficiaries and Referral Sources: Fraud and Abuse Laws

There are two fraud and abuse laws we will focus on—the Civil Monetary Penalties Law (CMPL) and the Anti-Kickback Statute (AKS)—that can be implicated if an organization is offering prizes to Medicaid or Medicare program beneficiaries or to referral sources of patients reimbursed by the Medicare or Medicaid program. Both CMPL and AKS can result in criminal or civil penalties.

It is important to note that CMPL and AKS are just two of the fraud and abuse laws that sweepstakes can potentially violate. If prizes were to be awarded to physicians by facilities with which those physicians have financial relationships, for example, the federal Stark Law also could be implicated. In addition, many states have their own fraud and abuse laws that may be broader in their application than federal laws. For instance, some states have fraud and abuse laws that apply to all patients, not just federal healthcare program beneficiaries. It is critical that organizations planning sweepstakes or contests ensure they are in compliance with any applicable state-level fraud and abuse laws.

What Is the CMPL?

The CMPL is a federal statute that prohibits providers from offering or transferring remuneration to a Medicare or state healthcare program beneficiary that the provider knows or should know is likely to influence the beneficiary’s selection of a particular provider. (Remuneration is defined as any transfer of items or services for free or other than fair market value.) The government’s concern is that providing remuneration to patients can increase inappropriate utilization of services, improperly influence patient treatment decisions and skew the selection of patients by potentially targeting those who have certain social media accounts (such as younger, healthier patients). As a result, providers who cannot afford or choose not to provide prizes to potential beneficiaries can find themselves at a competitive disadvantage.

It is a common misconception that if an organization only targets a gift or a prize offering to its current clients, it can’t be violating the CMPL because the patient already has selected that organization as his or her provider. The Office of the Inspector General (OIG) doesn’t see it that way. The OIG believes that, since patients can choose to change providers, sweepstakes or prize offering can be seen as an inducement to get them to stay.

Violations of the CMPL can result in a civil fine of up to $15,024 per item or service. In addition, the OIG can initiate administrative proceedings to exclude the offending party from federal healthcare programs.

In short, the important takeaway is that the CMPL prohibits giving gifts, freebies or other discounts to Medicare or Medicaid beneficiaries.

CMPL Exceptions

How do providers award prizes or offer sweepstakes events to patients? Many providers take advantage of the CMPL’s nominal value exception. The OIG excepts from the general prohibition prizes with a retail value of no more than $15 per item or $75 in the aggregate per patient on an annual basis. The items offered, however, cannot be cash or cash equivalents, such as checks. Gift cards are permitted as long as they are not cards that can be converted to cash, such as Visa, MasterCard or American Express gift cards. The OIG believes that nominal value items pose a limited risk under the CMPL.

What if an organization believes that a $15 item wouldn’t entice enough people to participate and wants to offer a prize with a higher value? The OIG has addressed that possibility in the commentary to the regulation that says a prize can be more than $15 as long as when the prize value is divided by the total number of participants, each chance to win is worth $15 or less. For example, if a sweepstakes prize is worth $100 and there are 20 patients participating—each with an equal chance of winning—that would be permissible because the OIG considers each chance to win to be worth only $5.00. It is important to note that the prize must be made equally available to everyone in a given class and not provided selectively to only certain beneficiaries. For example, providers cannot award more prizes to Medicare beneficiaries than to other types of patients.

What Is the AKS?

The AKS is a criminal statute and is intended to protect patients and federal healthcare programs from fraud and abuse. The AKS makes it illegal to:

• Offer or pay remuneration to anyone to induce him or her to refer a patient or order a service paid by Medicare, Medicaid or another federal healthcare program; or

• Solicit or receive remuneration in return for referring a patient or ordering a service paid for by Medicare, Medicaid or another federal healthcare program.

The AKS is broadly drafted and establishes penalties for individuals on both sides of the prohibited transaction, including potentially criminal penalties. It applies to anyone who can refer to the business, including providers, patients, marketers and others.

Basically, the AKS is an intents-based statute. If any of the reasons for giving an item or gift is to induce referrals, there is an AKS violation—even if there are a host of other reasons that are legitimate. The purpose of the AKS is similar to the CMPL—to prevent overutilization of services, preserve patient-centric decision making and maintain a level competitive playing field.

There are safe harbours in the AKS to protect certain types of relationships—but sweepstakes do not fit within any of those safe harbours. Under the AKS, however, compliance with a safe harbour is not mandatory. When a safe harbour is not satisfied, the government’s inquiry will analyze the intention of the parties—and whether one purpose of the sweepstakes was to induce referrals.

Sweepstakes, where patients are participants, are protected under the CMPL. Generally, if a prize or sweepstakes falls within the CMPL, there is a low risk of violating the AKS. It is important to remember, however, that there are no CMPL protections for sweepstakes or prizes offered to providers.

Mitigating the Risk of Violating the AKS

When designing a raffle or sweepstakes aimed at providers, the following factors are mitigating factors that reduce the risk of violating the AKS:

• Items are of nominal value.
• Items are made available to all and not given out based on the volume or value of potential purchases.
• Items will not increase the number of services billed to federal health programs.
• Items are not tied to or received only after purchases.

What Role Does the Health Insurance Portability and Accountability Act (HIPAA) Play?

The HIPAA Privacy Rule protects patients’ protected health information (PHI) from any unauthorized use, access or disclosure. PHI includes any information related to an individual’s health status, treatment or payment for services that are created or received by a covered entity that may identify the individual. Generally, PHI can only be used or disclosed pursuant to an authorization. PHI used for marketing purposes is subject to HIPAA and almost always requires an authorization.

If a person submits his or her personal information to a provider as part of sweepstakes or a contest, is it considered to be PHI? The answer is … it depends. The following scenario illustrates the complexities that sweepstakes and contests present.

A Representative Scenario: Illustrating the Complexities

A new dental practice group asks all its patients to take a five-minute survey about their experiences and potential improvements. All patients who complete the survey get teeth cleaning kit. One person will be selected to win a dinner for two at a five-star restaurant. Should the survey data be treated as PHI that’s subject to HIPAA?

Since the dental practice is a covered entity—and participants are being asked to complete the survey based on the fact that they are patients of the practice—there is the presumption that the information they provide will be protected under HIPAA. Therefore, the information could not be used for marketing purposes without obtaining patient authorization.

Is this a prize promotion? All participants receive a teeth cleaning kit, so there are no issues with that part of the scenario. However, everyone who completes the survey also will be entered into a random drawing for a five-star dinner. That random element makes this a prize promotion. But there is another aspect to the scenario. Participants must complete the five-minute survey to be entered into the drawing. Could that be characterized as consideration? (Consideration is something of value or that has a commercial benefit to the sponsor or is a burden on the entrant, which is required to participate in the prize promotion.) Typically, a five-minute survey would not be defined as consideration.

In this scenario, however, participants also need to be patients of the practice. Could that in and of itself be categorized as consideration? If the fact that participants must be patients of the dental group to take part in the sweepstakes is not promoted, then there are no worries on the consideration front. If it is promoted, it could be problematic from a consideration perspective.

Finally, does the scenario violate the CMPL or AKS? The toothbrush is a nominal prize—and one frequently given by dentists, so it is unlikely to influence anyone’s choice of provider. Therefore, there is little risk of violating fraud and abuse laws. The five-star dinner, however, could be problematic depending on the number of participants. If the dinner is valued at $300 and only ten people participate, the value per person is $30—and therefore above the $15 maximum per person that the CMPL allows.

Social Media Promotions

Sweepstakes and contests become even more complex when they are conducted over social media. The Federal Trade Commission’s (FTC’s) Endorsement and Testimonial Guides require disclosure for sweepstakes or contests that are conducted on social media. Acceptable disclosures include #companynamesweepstakes and #contestentry. Abbreviations such as #sweeps or just the company name are not acceptable. For example, if an organization requires participants in sweepstakes to submit photos through Instagram, the photos must be accompanied by one of the acceptable hashtag disclosures. The reason is that the FTC requires any endorser to disclose a relationship. The FTC considers contest participants endorsers, because they are, in fact, promoting the company and the brand.

When conducting any kind of sweepstakes or contest on social media, it also is critical to know the rules of each specific social media platform. Every platform has its own rules related to promotions. It is also important to check the rules regularly, as there are often updates. (Click here to download the presentation from the webinar and view the current rules for Instagram, Facebook, Twitter and YouTube.)

User-Generated Content (UGC) Promotions

UGC is extremely popular. Organizations love to use UGC because it requires participants to become engaged in creating and sharing content through social media. UGC typically involves a contest as opposed to sweepstakes.

UGC poses potential liability threats for intellectual property (IP) infringement, right of publicity violations, deceptive advertising and libel. If the organization sponsoring the contest is not moderating what’s being posted, it could be held liable if the content violates IP infringement or other laws.

Right of publicity violations is also a major concern with UGC. If a participant posts a photo or video that includes someone other than him- or herself, it is potentially problematic because a participant cannot provide consent to use a third-party name or likeness for commercial purposes. When designing contests, be sure to avoid situations that could raise the right of publicity issues.

The best protection is to use both pre-moderation and post-moderation. By reviewing everything before it’s posted, organizations can avoid potential problems around IP ownership, usage rights and other concerns.