New exemptions broaden anti-kickback laws

New safe harbors focus on ASCs

Eight new final regulatory "safe harbors" to federal anti-kickback laws have been instituted by the Department of Health and Human Services’ Office of the Inspector General (OIG). The new safe harbors protect certain investment interests in four categories of freestanding Medicare-certified ambulatory surgical centers (ASCs):

• surgeon-owned ASCs;

• single-specialty ASCs (such as all gastroenterologists);

• multispecialty ASCs such as a mix of surgeons and gastroenterologists);

• hospital/physician-owned ASCs.

According to the OIG, a physician investor in an ambulatory surgical center is only protected if the ASC is considered an extension of the office practice. Hospital investors must not be in a position to make or influence referrals. However, the ASC safe harbor does not apply to other physician-owned clinical joint ventures, such as cardiac catheterization labs, end-stage renal dialysis facilities, or radiation oncology facilities.

The new provisions, unveiled Nov. 19, "reflect our desire to accommodate the legitimate concerns of the industry and to promote the effective and efficient delivery of health care services to federal health care program beneficiaries," says Inspector General June Gibbs Brown.

On the books since 1972, the federal anti-kickback law prohibits anyone from knowingly and willfully receiving or paying anything of value to influence the referral of federal health care program business. Violations of the law are punishable by up to five years in prison, criminal fines up to $25,000, administrative civil money penalties up to $50,000, plus exclusion from participation in federal health care programs.

OIG-authorized safe harbors are intended to protect providers engaging in relatively innocuous — and in some cases even beneficial — commercial arrangements otherwise prohibited by the anti-kickback law from unnecessary prosecution.

The OIG previously published 11 regulatory safe harbors in 1991 and two in 1992.

"Safe harbors immunize certain payment and business practices that are implicated by the anti-kickback statute from criminal and civil prosecution under the statute," notes OIG spokeswoman Alwyn Cassil. "To be protected by a safe harbor, an arrangement must fit squarely in the safe harbor," says Cassil. "Failure to comply with a safe harbor provision does not mean that an arrangement is per se illegal. Compliance with safe harbors is voluntary, and arrangements that do not comply with a safe harbor must be analyzed on a case-by-case basis for compliance with the anti-kickback statute."

Any providers wondering whether their arrangements qualify for safe harbor protection can request an advisory opinion. Instructions on how to request an advisory opinion are available on the Internet at index.htm.

Here are other elements of new safe harbor rules:

Joint ventures in underserved areas. Many health care ventures in underserved areas complain that existing limits on physician ownership and on the revenues that can be derived from referrals from physician investors make it hard for them to attract needed capital. Meanwhile, those projects often fail to fit into the existing safe harbor for small entity joint ventures.

In response, the OIG has relaxed several of the conditions of the existing joint venture safe harbor. For instance, the new safe harbor permits a:

— higher percentage of physician investors — up to 50%;

— unlimited revenues from referral source investors.

The new safe harbor also expands on the 1993 safe harbor by including joint ventures in underserved urban, as well as rural, areas. To qualify, a venture must be located in a medically underserved area, as defined by HHS regulations, and serve 75% medically underserved patients.

This safe harbor also protects recruitment payments made by entities to attract needed physicians and other health care professionals to designated rural and urban health professional shortage areas (HPSAs).

The safe harbor requires at least 75% of the recruited practitioner’s revenue to be from patients who reside in HPSAs or medically underserved areas or to involve patients who are members of medically underserved populations, such as the homeless or migrant workers. The safe harbor limits those payments to three years. However, it does not specifically prescribe what kind of payments are protected, such as income guarantees or moving expenses, instead leaving that be to be negotiated by the parties involved.

To help prevent the disguising of such payments as compensation for patient referrals, the safe harbor does not protect payments hospitals make to existing group practices to recruit physicians to join the group, nor does it protect payments to retain existing practitioners. Those arrangements remain subject to case-by-case review under the anti-kickback statute.

• Sales of physician practices to underserved areas. This protects hospitals in HPSAs that buy and "hold" the practice of a retiring physician until a new physician can be recruited to replace the retiring one. To qualify for safe harbor protection, the sale must be completed within three years, and the hospital must engage in good faith efforts to recruit a new practitioner.

Subsidies for obstetrical malpractice insurance in underserved areas. This protects a hospital or other entity that pays all or part of the malpractice insurance premiums for practitioners engaging in obstetrical practice in HPSAs. To qualify for protection, at least 75% of the subsidized practitioners’ patients must be medically underserved.

• Investments in group practices. Physicians may invest in their own group practice, if that practice meets the physician self-referral (Stark) law definition of a group practice. The safe harbor also protects investments in solo practices where the practice is conducted through the solo practitioner’s professional corporation or other separate legal entity. However, the safe harbor does not protect investments by group practices or members of group practices in ancillary services’ joint ventures, even if the joint ventures qualify for protection under other safe harbors.

• Specialty referral arrangements between providers. This protects arrangements in which a provider refers a patient to a specialist, who agrees to refer the patient back to the provider at a certain time or under certain circumstances. For example, a primary care physician and a specialist to whom the primary care physician has made a referral may agree that, when the referred patient reaches a particular stage of recovery, the primary care physician should resume treatment of the patient.

This safe harbor does not protect arrangements involving parties that split a global fee from a federal program. The safe harbor also requires that referrals be clinically appropriate rather than based on arbitrary dates or time frames.

• Cooperative hospital services organizations. This safe harbor protects cooperative hospital service organizations (CHSOs) that qualify under section 501(e) of the Internal Revenue Code. CHSOs are organizations formed by two or more tax-exempt hospitals, known as "patron hospitals," to provide specific services — such as purchasing, billing and clinical services — solely for the benefit of patron hospitals.

This safe harbor protects payments from a patron hospital to a CHSO to support the CHSO’s operational costs and payments from a CHSO to a patron hospital that are required by IRS rules.