Anti-Kickback Act Safe Harbor Provisions Finalized


The federal anti-kickback statute, 42 USC '1320-a7(b), affects a vast array of business relationships in the health care industry. Broadly speaking, the anti-kickback statute prohibits payments or remunuration to any person in return for the referral of patients covered under a federal health care program. However, the statute contains several so-called "safe harbors" which have been revised and supplemented from time to time since the statute's enactment. The intent of the safe harbor provisions is to provide organizational guidance that, if complied with in full, will ensure compliance.

On November 19, 1999, the Office of the Inspector General (OIG) published a final rule establishing eight new safe harbors and clarifying six of the original 11 safe harbor provisions adopted back in 1991. With the addition of this final rule, the total number of anti-kickback safe harbors that immunize providers from criminal liability under the anti-kickback statute is up to 23. It is important to keep in mind that failure to qualify for a safe harbor does not automatically mean an arrangement that violates the statute. Instead, the arrangement is subject to examination on a case-by-case basis to determine whether the purpose was to improperly induce referrals.

Under this new final rule, the OIG has largely rewritten the ambulatory surgical center (ASC) safe harbor. In 1993, the OIG proposed to include within the list of safe harbor provisions, payments made to surgeon-investors in ASCs, provided that the facility was wholly owned by the referring surgeons and these surgeons perform the surgery themselves on patients they have referred to the ASC. The rationale under this safe harbor was that the ASC facility was just an extension of the referring surgeon's practice, and therefore there was little risk of fraud or abuse.

The new ASC safe harbor contains four categories:

1) surgeon-owned ASCs;
2) single specialty ASCs;
3) multi-specialty ASCs; and
4) hospital/physician-owned ASCs

All have the following five requirements in common: (1) the ASC must be certified under 42 CFR Pt. 416; (2) loans from the entity or other investors to physician investors are prohibited; (3) investment interests must be offered on terms not related to the volume or value of referrals; (4) all ancillary services must be directly and integrally related to primary procedures performed at the ASC and none may be separately billed to Medicare or other federal health care programs; (5) neither the ASC nor physicians practicing at the ASC can discriminate against federal health care program beneficiaries.

Both the surgeon-owned and single specialty ASC safe harbors, which differ only as to the types of physicians who may hold ownership interest in the ASC, impose as an additional requirement which examines each investor's income from the ASC. Under this rule, at least one-third (1/3) of each physician-investor's medical practice income for the previous year must be derived from the physician's performance of surgical procedures at an ASC or hospital surgical setting. According to the OIG, this will ensure that a physician's investment in an ASC actually represents an extension of the physician's office.

The multi-specialty ASC safe harbor is identical to the surgeon-owned and single specialty ASC safe harbors, but requires at least one-third (1/3) of the physician's surgical procedures are performed at the ASC in which he or she is investing. Like the practice income test applicable to surgeon-owned and single specialty ASCs, this requirement is intended to prohibit passive investment among physicians in different specialties. This situation, according to the OID, creates the greatest risk of prohibited payments or other remuneration for referrals.

The hospital/physician ASC is somewhat different from the above-described safe harbors. This safe harbor imposes the same five common requirements, but does not require examination of practice income arising from the facility. Instead, this safe harbor imposes three stringent requirements on the hospital investor which may well keep all hospital/physician ASCs outside the scope of the safe harbor.

Two other aspects of the final ASC safe harbor merit special examination. Perhaps the most important feature of the new ASC safe harbor is the OIG's decision to do away with a requirement of 100% physician ownership. Under the final safe harbor, individuals who are neither an existing nor potential source of referrals are permitted to invest in the facility.

Despite this allowance, in a number of settings, the revised ASC safe harbor will essentially eclipse the small entity safe harbor, unchanged by the OIG's final rule, which requires that no more than 40 percent of investment interests in the ASC are held by physician-investors and no more than 40 percent of the facility's gross revenue come from referrals from physician investors. Under the revised ASC safe harbor, up to 100% of ownership and 100% of gross revenue may come from physician investors. Also significant is the OIG's decision not to expand the scope of the safe harbor to include facilities that are not traditionally considered "surgical" facilities, such as lithotripsy facilities, end-stage renal disease facilities, comprehensive outpatient rehabilitation facilities, radiation oncology facilities, cardiac catheterization centers and optical dispensing facilities, despite wide-spread support for inclusion. In fact, the safe harbor specifically limits the reach of this safe harbor to Medicare certified ASCs only.

OIG did not articulate why these types of facilities are considered different from the ASCs which now receive safe harbor protection. The OIG suggest that inclusion of ASCs emanates from its historic policy encouraging freestanding ASCs as a "less costly alternative to hospitals for appropriate surgeries." As a result, such non-qualifying facilities must continue to structure themselves to comply with the small entity safe harbors in order to ensure that payments to referring physician-investors do not implicate the anti-kickback statute.