TABLE B

OVERLAPPING ANTI-KICKBACK SAFE HARBORS AND STARK GENERAL EXCEPTIONS

Description of Safe Harbor/ General Exception	Anti-Kickback Safe Harbor Sources: 42 U.S.C. § 1320a-7b(b) and 42 C.F.R. § 1001.952	Stark General Exception Sources: 42 U.S.C. § 1395nn and 42 C.F.R. § 411.350 et seq.
1. Investment Interests in Small Entities [e.g., joint venture and limited and general partnership interests] 42 C.F.R. § 1001.952(a)(2)	Returns on investments in small entities, provided: i.               no more than 40% of all investment interests in the entity are held by referring investors (note that “referring investors” can include not only physician investors, but also investors who furnish items or services to the entity (e.g., DME suppliers)); ii.              terms on which investment interests are offered to referring investors are no different from the terms on which investment interests are offered to passive investors; iii.             terms on which investment interests are offered to referring investors are not related to expected referrals; iv.             no requirement to make referrals as a condition for remaining as an investor; v.               entity and referring investors cannot favor passive investors over non-investors in promoting and/or furnishing the entity’s items or services; vi.             no more than 40% of the entity’s gross revenues relating to health care come from business referred by investors (note that revenues the entity derives from items or services furnished by investors to the entity (e.g., management services) are not counted toward the 40% limitation); vii.            entity and its investors (and persons acting on their behalf) cannot finance (or guarantee financing of) any purchase of the entity’s securities by a person who could make or influence referrals; and viii.           returns are directly proportional to capital investment (including the fair market value of any pre-operational services rendered) of investors. Note that joint ventures located in rural or urban areas designated “Medically Underserved Areas” (“MUAs”) and serving primarily “Medically Underserved Populations” (“MUPs”) are permitted to have a higher percentage of referring investor ownership—50% instead of 40%--and can derive an unlimited amount of revenues from referring investors.	No general exception. Returns physicians receive on their investments in joint ventures and partnerships may implicate Stark because the physicians have a financial relationship with such entities and they may make referrals for DHS to such entities. Potentially helpful Stark regulatory exceptions include the Fair Market Value Compensation Exception (Item 9 in Table C) and the Indirect Compensation Arrangements Exception (Item 13 in Table C).
2. Referral Services 42 C.F.R. § 1001.952(f)	All of the following four standards: i.            referral service is non-exclusive if provider is qualified; ii.           any fees from participants are assessed equally, are based only on operating costs of service and are not tied to referrals or other business generated by either the referral service or the participant for the other; iii.          no requirements on manner in which the participant provides services; iv.          referral service must maintain written records evidencing disclosures to persons seeking referrals as specified in regulations.	No general exception, but Stark only prohibits referrals by physicians, not referrals by non-physician referral services..
3. Warranties (i.e., the exchange of anything of value under a warranty provided by a manufacturer or supplier of an item to the buyer) 42 C.F.R. § 1001.952(g)	All of the following four standards: i.            buyer must report price reduction from warranty on cost report. ii.           buyer must provide invoices evidencing warranties upon request. iii.          manufacturer must report warranty on invoice and advise buyer of obligations under (i) and (ii); iv.          manufacturer may not pay remuneration beyond cost of warranted item.	No general exception. Warranties may implicate Stark because the definition of "designated health services" includes durable medical equipment and supplies.
4. Discounts on items or services 42 C.F.R. § 1001.952(h)	All of the following five standards: i.            discounts must be earned based on purchases of the same good or service (as the discount is applicable to) within a single fiscal year of buyer (however, discounts offered on one good or service to induce the purchase of a different good or service (e.g., discounts on multiple items included in a hospital DRG) is also permitted provided the goods and services are reimbursed by the same federal program using the same methodology, and the reduced charge is fully disclosed to the federal program); ii.           buyer must claim the discount in fiscal year earned or the following year; iii.          buyer must report the discount in cost report; iv.          buyer must provide invoices evidencing discounts to federal programs upon request; and v.           seller or offeror must report the discount on invoice and must inform buyer of buyer’s obligations under (iii) and (iv) in a manner reasonably calculated to give notice to buyer (but seller or offeror can satisfy this safe harbor even if buyer does not fulfill its obligations so long as seller or offeror is not complicit in buyer’s noncompliance). Note that “buyers” protected under this safe harbor include charge-based buyers who enjoy discounts in the form of rebates so long as the terms of the rebate are fixed and disclosed at the time of the first sale of the good or service to which the rebate applies. Charge-based buyers are not requiredto report discounts in cost reports. However, documentation of discountsmust be made available to federalprograms upon request.	No general exception. Discounts may implicate Stark because they may constitute a financial relationship between the physician and the entity giving the discount.
5. Group Purchasing Organizations (GPO) 42 C.F.R. § 1001.952(j)	Both of the following standards: i.            written agreement with GPO fees fixed or capped at 3%; and ii.           GPO must disclose in writing at least annually the amount received from each vendor.	No general exception. Payments to GPOs may implicate Stark because they may constitute a financial relationship between the physician and the entity paying the GPO.
6. Waiver by Hospitals of Medicare Part A Coinsurance or Deductible Amounts 42 C.F.R. § 1001.952(k) [A rule proposed 9/25/02 would allow waivers (by physicians and suppliers) of Medicare Part B cost-sharing amounts.]	All of the following three standards: i.            hospital must not claim waiver as bad debt on cost report; ii.           hospital must offer to waive without regard to reason for admission, length of stay or DRG; and iii.          waiver must not be part of price reduction agreement with third-party payer, unless part of a Medicare supplemental policy.	No general exception. Waivers of coinsurance or deductibles may implicate Stark because they may constitute a financial relationship between the physician and the entity granting the waivers.
7. Subsidies for Obstetrical Malpractice Insurance in Underserved Areas 42 C.F.R. § 1001.952(o)	Payment of obstetrical malpractice insurance premiums for practitioners engaging in obstetrical practice by hospitals (and other entities) in primary care HPSAs, provided the following conditions are met: i.            payment is in accordance with a written agreement between the hospital and practitioner; ii.           at least 75% of the subsidized practitioner’s patients are medically underserved patients; iii.          there is no requirement that the practitioner make referrals to hospital as condition for receiving the benefits; iv.          practitioner is not restricted from establishing staff privileges at any other entity; v.           the amount of the payment does not vary based on the volume or value of referrals; vi.          the practitioner treats patients who receive benefits under federal health programs in nondiscriminatory manner; and vii.         the insurance is a bona fide malpractice insurance policy or program and the premium, if any, is calculated based on a bona fide assessment of the liability risk covered under the insurance.	No general exception. The subsidies may implicate Stark because they may constitute a financial relationship between the physician and the entity providing the subsidy.
8. Specialty Referral Arrangements between Providers 42 C.F.R. § 1001.952(s)	Protects arrangements whereby one provider (which may be an individual or an entity) refers a specific patient to another provider, for specialty services, with the understanding that the specialty services provider will refer the patient back to the original provider at a certain time or under certain circumstances, as long as the following four standards are met: i.            the mutually agreed upon time or circumstance for referring the patient back to the originating provider is clinically appropriate; ii.           the service for which the referral is made is not within the medical expertise of the referring provider, but is within the special expertise of the provider receiving the referral; iii.          the providers do not receive payment from each other for the referral and do not split a global fee from a federal health program; and iv.          the only payments either provider receives are from the patient or third-party payors for services the provider performs.	Stark not implicated if the requirements of Anti-Kickback safe harbor are satisfied because neither provider would have a financial relationship with the entity to which he is referring a patient for DHS.
9. Cooperative Hospital Services Organizations (“CHSOs”) 42 C.F.R. § 1001.952(q)	Protects payments from “patron hospitals”—i.e., tax-exempt hospitals that join with other tax-exempt hospitals in CHSOs to provide specifically enumerated services (e.g., billing) solely for the benefit of the CHSO member hospitals—to CHSOs to support the CHSO’s operational costs, and payments from CHSOs to patron hospitals that are required by Internal Revenue Service rules.	Stark not implicated.
10. Ambulance Restocking 42 C.F.R. § 1001.952(v)	Arrangements whereby hospitals restock ambulance providers with drugs and/or supplies used during transport of a patient to the hospital, provided all of the following four conditions (plus additional conditions applicable to three specific categories of restocking arrangements—i.e., general restocking, fair market value restocking, and government-mandated restocking) are met: i.            appropriate billing of federal health programs (i.e., no double billing); ii.           either the hospital or ambulance provider must generate patient care report that identifies the drugs and supplies used and subsequently restocked, and the non-generating party must receive and keep a copy of the report; iii.          the restocking arrangement must not be conditioned on or otherwise take into account the volume or value of referrals or other business generated between the parties for which payment may be made by a federal health program; and iv.          hospital and ambulance provider must comply with all laws regulating ambulance services.	Stark not implicated.

© 1997-2004 Scott C. Withrow. All rights reserved.

NOTE: This site includes a summary of certain compliance issues facing health care providers today. This site does not, and is not intended to, give legal advice. Reference should be made to full text of the statutes and regulations for complete analysis. Consultation with competent counsel is strongly recommended.