Favorable Opinion Issued in Free Smartphone Distribution by Federally Qualified Health Clinic

May 9, 2022

Although it is unclear if the arrangement would be endorsed after the end of the COVID-19 pandemic, the Office of Inspector General (OIG) has issued a favorable opinion to a Federally Qualified Health Clinic (FQHC) planning to loan free smartphones to patients to facilitate telehealth services with providers at the FQHC.  The Advisory Opinion was issued on April 27, 2022 (AO 22-08).

The smartphones were restricted in use to only permit the telehealth encounters, sending and receiving texts and calls, and accessing their medical records.  There were a limited number of phones distributed (3,000) on a first-come first-use basis to existing patients of the FQHC who met certain criteria.  The FQHC served primarily low-income patients, many who could not otherwise afford their own smartphone to enable telehealth services.

The smartphones were issued on loan with the obligation for the patient to return the phones if they did not meet certain ongoing care requirements or otherwise lost eligibility under the program.  Resources necessary to purchase the smartphones came from a COVID telehealth program of the Federal Communications Commission.

The purpose of this service was to enhance access to care during the pandemic to the FQHC’s existing patients.  Access included texting and phone calls to reduce the isolation these low-income individuals had during the pandemic.

In order to qualify for the service, patients had to have an existing patient relationship with the FQHC and must have received at least one service from the FQHC during the two-year period prior to the issuance of the phone.  New patients were not eligible to receive smartphones.  Phones could be retained as long as one service was received from the FQHC during any two-year period.  This was a one-time program with the 3,000 FQHC purchased smartphones.

The OIG concluded this program created a low risk of harm to the Medicare and Medicaid programs.  According to the OIG, the program is not likely to result in overutilization of care and would not raise quality of care or safety issues.  It is not likely to interfere with the clinical decision-making of the FQHC providers.  Therefore, even though the OIG acknowledged such a program could implicate the Anti-Kickback Statute, it agreed to withhold sanction in this case.

Though the OIG noted the loaned smartphones could violate the Anti-Kickback Statute and the Beneficiary Inducements Civil Monetary Penalties Law (Beneficiary Inducement Law), it nevertheless approved the program in view of the COVID-19 pandemic.  The pandemic appears to have been a strong factor supporting the OIG’s opinion.  However, some of the OIG’s reasoning could have application beyond the existence of the pandemic.  For example, the OIG pointed out the program could meet the terms of an exception under the Beneficiary Inducement Law because it improved beneficiary access to care.  Though the pandemic made application of this exception clear, it could also potentially have application beyond the pandemic.

The OIG also rested its decision on the removal of socioeconomic barriers to access of care the qualifying patients would otherwise face.  This was particularly the case during the pandemic, but the same patient base would likely face these same barriers without the pandemic.  The OIG acknowledges these principals could apply even after the pandemic.  However, because Advisory Opinions only bind the OIG with respect to the specific parties making the request, others who wish to establish similar programs should carefully consider the details of this and other opinions issued by the OIG on smartphone loan program to enable telehealth such as Advisory Opinion No. 19-02.  In this opinion, the OIG permitted a pharmaceutical manufacturer to go forward with a smartphone loan program to patients who were in financial need.  The smartphones in that situation were locked and could only be used by patients who were prescribed an antipsychotic drug that required digital monitoring.  The limited use of the distributed smartphones was of significance in the 2019 decision and was a strong factor in the recent decision involving the FQHC.

Again, the OIG advisory opinions are not legal precedent and are only binding as to the specific party requesting the decision.  However, the opinions can provide useful insight into how the OIG views these programs and helps identify factors the OIG may believe reduce related risk of abuse to federal health care programs.  This is a relatively new application of applicable federal laws and other clinics who are contemplating distribution or loan of smartphones to patients.  They would be wise to look closely at existing opinions and consider whether an advisory opinion should be requested with respect to the contemplated program.

Back to all News & Insights


The content in the following blog posts is based upon the state of the law at the time of its original publication. As legal developments change quickly, the content in these blog posts may not remain accurate as laws change over time. None of the information contained in these publications is intended as legal advice or opinion relative to specific matters, facts, situations, or issues. You should not act upon the information in these blog posts without discussing your specific situation with legal counsel.

© 2024 Ruder Ware, L.L.S.C. Accurate reproduction with acknowledgment granted. All rights reserved.