What new safe harbor rules mean for practices

Chances are you’ll be affected

On Nov. 19, the Office of the Inspector General (OIG) issued eight new safe harbors to the anti-kickback statute — along with clarification of six existing safe harbors and two new interim, final safe harbors.

"Virtually everyone in the health care industry will be affected to one degree or another by these new safe harbors," notes George Root, a health care lawyer in the San Diego law offices of Foley and Gardner.

If they are not already doing so, providers need to re-examine and revise payment arrangements that fall within the safe harbors, as well as their internal compliance manuals, policies, and standards, say reimbursement experts.

"Early indications are that the new safe harbors will provide their greatest benefit to managed care relationships, physician investments in ambulatory surgery centers, and a variety of arrangements in medically underserved areas — physician recruitment, joint ventures, and hos pital acquisitions of physician practices, for instance," says Root.

The clarification of certain existing safe harbors also should help when it comes to creating discount arrangements, leases, and personal services contracts, says Jeff Micklos, an attorney with the national law firm of Foley and Lardner.

Arrangements that come within a safe harbor are immune from prosecution under the Stark statute. Arrangements outside of any safe harbor do not automatically violate the law but may be subject to scrutiny and potential prosecution, note legal experts.

Here are the new safe harbor rules:

Investments in ambulatory surgical centers. This safe harbor protects investment interests in Medicare-certified ambulatory surgical centers (ASCs) that are surgeon-owned, single specialty (such as those owned by gastroenterologists), multispecialty, and hospital/physician. In each case, physician investors must disclose their investments to their patients.

This safe harbor is generally designed to protect ASCs that function as extensions of physician office practices, says Root. However, it does not protect investments by physicians who might refer to the ASC but do not personally perform ASC-covered procedures. As such, under the new rules, physician investors are generally protected only if they are in a position to refer to the ASC, he says. In contrast, to meet the safe harbor for hospital/physician ASCs, hospital investors must not be in a position to make or influence referrals to the ASC, he adds.

More clarification needed

"The exact meaning of this requirement is not clear yet," Root says. For example, the preamble to the safe harbor says ASCs may be located near or even on the hospital’s campus (if rent is fair market value and other conditions are met), thus begging the question of when the OIG thinks a hospital can "make or influence referrals."

"Unfortunately, the OIG offers little guidance on this issue, other than suggesting that hospitals may be able to influence the referrals of physicians employed by the hospital or by a medical practice owned by the hospital," he says.

Investments in group practices. This protects physician investments in their own medical group, provided the group meets the Stark definition of a group practice. "Unfortunately, the Stark definition of a group practice is intricate, complex, and not yet established in final regulations," says Micklos.

However, the safe harbor does not protect investments made by the group in other entities like laboratories and imaging centers. As such, "this new safe harbor potentially creates as many problems as it resolves," he notes. For instance, before Stark, it was widely accepted that for anti-kickback purposes there was no such thing as a "referral" among physicians within an integrated medical group because the patients belonged to the group.

While the OIG notes that it does not consider ownership in a group practice "suspect per se," it also says Stark "is implicated" by physician ownership interests in medical groups, and even ownership interests in single shareholder professional corporations.

Specialty referral arrangements between providers. This protects arrangements in which one provider (which may be any individual or entity) refers a specific patient to another provider for specialty services with the understanding that the specialist will refer the patient back to the original provider, assuming it is clinically appropriate, when the course of treatment is completed.

Among other things, the safe harbor requires that the services be within the expertise of the referred party and not the referring party; the parties receive no payments from each other for the referral; and the only payments either party receives are from the patient or third-party payers for services that party performs.

Joint ventures in underserved areas. Recog niz ing that "medically underserved" areas (MUAs) often have difficulty attracting the capital necessary to build and operate health care facilities, the OIG has relaxed the conditions for the existing small-entity investment safe harbor.

The new rules allow joint ventures in MUAs to have a higher percentage of physician ownership (up to 50% instead of the 40% limitation applicable to other geographic areas) and allow the ventures unlimited revenues from referring investors, instead of the 40% limitation applicable in other geographic areas. The new safe harbor applies to underserved urban and rural areas.

Practitioner recruitment in underserved areas. This safe harbor protects payments to recruit new and relocating physicians who establish their practice in rural or urban health professional shortage areas (HPSAs). While the safe harbor limits the time period for recruitment payments to three years, it does not regulate the nature of the payments, such as whether they may include income guaranties, moving expenses, etc.

However, the OIG specifically refused to protect payments by hospitals to existing group practices to recruit new physicians to the group or payments to retain physicians.

For example, a Jan. 9, 1998, OIG exception for physician recruitment permits payments by a hospital to an existing medical group to recruit physicians, even though those payments are specifically excluded from the new anti-kickback safe harbor.

Sale of physician practices to hospitals in underserved areas. This allows a hospital in an HPSA to buy and "hold" the practice of a retiring physician pending recruitment of a replacement. The safe harbor requires that the purchase be completed within three years and the hospital undertake good faith efforts to recruit a replacement physician.

Subsidies for obstetrical malpractice insurance in underserved areas. This permits hospitals (and other entities) in primary care HPSAs to pay some or all of the obstetrical malpractice insurance premiums for practitioners engaging in obstetrical practice, including certified nurse midwives as well as physicians. If a practitioner engages in obstetrics part time, the safe harbor protects only payments attributable to the obstetrical portion of the practitioner’s practice.

Cooperative hospital services organizations (CHSOs). This protects CHSOs that qualify for tax exemption under Section 501(e) of the Internal Revenue Code. CHSOs are formed by two or more tax-exempt hospitals to provide certain shared services (such as purchasing, billing, or clinical services) to the hospitals that form them. The safe harbor will protect certain payments between the CHSO and the hospitals that form the CHSO from scrutiny under the anti-kickback statute.