Increased Coverage, Reduced Cost-Sharing Amounts, or Reduced Premium Amounts Offered by Health Plans -- 43

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1 Includes changes from the 2009 Inpatient Prospective Payment Final Rules published in Federal Register August 18, 2008 and reference to changes made by the Patient Protection and Affordable Care Act of Index to Exceptions and Safe Harbors Academic Medical Centers Ambulance Restocking Ambulatory Surgery Centers -- 3 Charitable Donations by a Physician Community-Wide Health Information Systems Cooperative Hospital Service Organizations -- 7 Compliance Training Discounts: Buyers Who Submit Claims and Sellers Thereto -- 9 Discounts: Buyers who Submit Cost Reports and Sellers Thereto Electronic Health Records Items and Services Electronic Prescribing Items and Services Employment Relationships EPO and Other Dialysis-Related Drugs Furnished in or by an ESRD Facility Equipment Leases Eyeglasses and Contact Lenses Following Cataract Surgery Fair Market Value Compensation Federally Qualified Health Centers Group Practice Arrangements With a Hospital Group Purchasing Organizations 14 Implants in an ASC Increased Coverage, Reduced Cost-Sharing Amounts, or Reduced Premium Amounts Offered by Health Plans Indirect Compensation Arrangements In-Office Ancillary Services Intra-Family Rural Referrals Investment Interests Investments in Group Practices Isolated Transactions Joint Ventures in Underserved Areas Medical Staff Incidental Benefits Non-Monetary Compensation Up to $ Obstetrical Malpractice Insurance Subsidies Personal Services and Management Contracts -- 27

2 Physician Incentive Plans Physician Services Practitioner Recruitment Preventive Screening Tests, Immunizations, and Vaccines Price Reductions Offered by Contractors With Financial Risk to Managed Care Organizations Price Reductions Offered to Eligible Managed Care Organizations Price Reductions Offered to Health Plans Professional Courtesy Referral Agreements for Specialty Services Referral Services Retention Payments in Underserved Areas Risk Sharing Agreements Sale of Practice 28 Services Furnished by an Organization to Enrollees Space Leases Unrelated Remuneration Waiver of Beneficiary Coinsurance and Deductible Amounts Warranties -- 26

3 Ambulatory Surgery Centers: All [No comparable exception; ambulatory surgery centers Safe harbor for payments on an investment interest in ASC exempt under, not a designated health service] The entity is a certified ambulatory surgery center (ASC) under the Medicare program. The operating and recovery room space is dedicated exclusively to the ASC. Patients referred to the ASC by an investor are fully informed of the investor's investment interest in the ASC. The terms on which an investment interest is offered must not be related to previous or expected volume of referrals, services furnished, or the amount of business otherwise generated from the investor to the ASC. The ASC or any investor (or other individual or entity acting on behalf of the entity or any investor) must not loan funds to or guarantee a loan for an investor if the investor uses any part of such loan to obtain the investment interest. The amount of payment to an investor in return for the investment must be directly proportional to the amount of the capital investment (including the fair market value of any preoperational services rendered) of that investor. All ancillary services for federal or state health care program beneficiaries performed at the ASC must be directly and integrally related to primary procedures performed at the ASC, and none may be separately billed to a federal or state health care program. The ASC and any physician or surgeon or hospital investors

4 must treat patients receiving medical benefits or assistance under any federal or state health care program in a nondiscriminatory manner. Ambulatory Surgery Centers: Hospital/Physician ASCs [No comparable exception; ambulatory surgery centers exempt under, not a designated health service] Safe harbor for payments on an investment interest in a hospital/physician ambulatory surgery center All requirements listed under "Ambulatory Surgery Centers: All" are met. At least one investor is a hospital and all of the remaining investors are: a)(i) general surgeons or surgeons engaged in the same surgical specialty, who are in a position to refer patients directly to the ASC and perform surgery on such referred patients; ii) physicians engaged in the same medical practice specialty who are in a position to refer patients directly to the ASC and perform procedures on such referred patients; or iii) physicians who are in a position to refer patients directly to the ASC and perform procedures on such referred patients; b) group practices composed of such physicians; c) surgical group practices; and/or d) investors who are not employed by the ASC or by any investor, are not in a position to provide items or services to the ASC or any of its investors, and are not in a position to make or influence referrals directly or indirectly to the ASC or any of its investors. The ASC does not use space, including but not limited to, operating and recovery room space, or equipment, located in or owned by any hospital investor, unless such space or equipment is leased from the hospital in accordance with a lease that complies with the space or equipment rental safe harbor.

5 The ASC does not use services provided by a investor hospital unless such services are provided in accordance with a contract that complies with the personal services safe harbor. The hospital may not include on its cost report or any claim for payment from a federal or state health care program any costs associated with the ASC (unless such costs are required to be included by a health program). The hospital is not in a position to make or influence referrals directly or indirectly to any investor or the ASC. Ambulatory Surgery Centers: Multi-Specialty ASCs [No comparable exception; ambulatory surgery centers exempt under, not a designated health service] Safe harbor for payments on an investment interest in a multi-specialty ambulatory surgery center All requirements listed under "Ambulatory Surgery Centers: All" are met. The investors are a) physicians who are in a position to refer patients directly to the ASC and perform procedures on such referred patients; b) group practices composed exclusively of such physicians; and/or c) investors who are not employed by the ASC or by any investor, are not in a position to provide items or services to the ASC or any of its investors, and are not in a position to make or influence referrals directly or indirectly to the ASC or any of its investors. At least 1/3 of each physician investor's medical practice income from all sources for the previous fiscal year or previous 12 month period must be derived from the physician's performance of procedures that require an ASC or hospital surgical setting in accordance with Medicare reimbursement rules.

6 At least 1/3 of the procedures that require an ASC or hospital surgical setting in accordance with Medicare reimbursement rules performed by each physician investor for the previous fiscal year or previous 12 month period must be performed at the ASC. Ambulatory Surgery Centers: Single Specialty ASCs [No comparable exception; ambulatory surgery centers exempt under, not a designated health service] Safe harbor for payments on an investment interest in a single-specialty ambulatory surgery center All requirements listed under "Ambulatory Surgery Centers: All" are met. The investors are a) physicians engaged in the same medical practice specialty who are in a position to refer patients directly to the ASC and perform procedures on such referred patients; b) group practices composed exclusively of such physicians; and/or c) investors who are not employed by the ASC or by any investor, are not in a position to provide items or services to the ASC or any of its investors, and are not in a position to make or influence referrals directly or indirectly to the ASC or any of its investors. At least 1/3 of each physician investor's medical practice income from all sources for the previous fiscal year or previous 12 month period must be derived from the physician's performance of procedures that require an ASC or hospital surgical setting in accordance with Medicare reimbursement rules. Ambulatory Surgery Centers: Surgeon-Owned ASCs [No comparable exception; ambulatory surgery centers exempt under, not a designated health service] Safe harbor for payments on an investment interest in an surgeon-owned ambulatory surgery center

7 All requirements listed under "Ambulatory Surgery Centers: All" are met. The investors are a) general surgeons or surgeons engaged in the same surgical specialty, who are in a position to refer patients directly to the ASC and perform surgery on such referred patients; b) surgical group practices composed exclusively of such surgeons; and/or c) investors who are not employed by the ASC or by any investor, are not in a position to provide items or services to the ASC or any of its investors, and are not in a position to make or influence referrals directly or indirectly to the ASC or any of its investors. At least 1/3 of each surgeon investor's medical practice income from all sources for the previous fiscal year or previous 12 month period must be derived from the surgeon's performance of procedures that require an ASC or hospital surgical setting in accordance with Medicare reimbursement rules. Cooperative Hospital Service Organizations [No comparable exception] Safe harbor for payments between a cooperative hospital service organization (CHSO) and its patron hospital Both the CHSO and the patron hospital are described in 501(e) of the Internal Revenue Code and are tax-exempt under 501(c)(3.) The CHSO is wholly owned by two or more patron hospitals. If the patron hospital makes a payment to the CHSO, it must be for the purpose of paying for the bona fide operating expenses of the CHSO; or for the purpose of paying a distribution of net earnings required to be made under 501(e)(2) of the Internal Revenue Code.

8 Non-Monetary Compensation Up to $300 exception to the referral prohibition related to [No comparable safe harbor] compensation arrangements for nominal non-monetary compensation to physicians Items or services (not including cash or cash equivalents) that do not exceed an aggregate of $300 per year. The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician. The compensation may not be solicited by the physician or the physician's practice (including employees and staff members). The compensation arrangement does not violate the Federal anti-kickback statute or any Federal or State law or regulation governing billing or claims submission. The annual aggregate nonmonetary compensation limit is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index--Urban All Items for the 12-month period ending the preceding September 30. CMS displays after September 30 each year both the increase in the CPI-U for the 12-month period and the new nonmonetary compensation limit on the physician self-referral website. Where an entity has inadvertently provided nonmonetary compensation to a physician in excess of the limit, such compensation is deemed to be within the limit if-- (i) The value of the excess nonmonetary compensation is no more than 50 percent of the limit; and (ii) The physician returns to the entity the excess nonmonetary compensation (or an amount equal to the value of the excess nonmonetary compensation) by the end of the calendar year in which the excess nonmonetary compensation was received or within

9 180 consecutive calendar days following the date the excess nonmonetary compensation was received by the physician, whichever is earlier. This option may be used by an entity only once every 3 years with respect to the same referring physician. In addition to nonmonetary compensation up to the limit, an entity that has a formal medical staff may provide one local medical staff appreciation event per year for the entire medical staff. Any gifts or gratuities provided in connection with the medical staff appreciation event are subject to the limit. Discounts: Buyers Who Submit Claims and Sellers Thereto [No comparable exemption] Safe harbor for discounts received by a buyer, which submits a claim for payment for the good or service for which payment is made under any federal or state health care plan and sellers to such buyers The buyer is an individual or entity (which is not an HMO or competitive medical plan or a buyer which reports its costs on a cost report) in whose name a claim or request for payment is submitted for the discounted item or service and payment may be made, in whole or in part, under a federal or state health care program. The discount must be made at the time of the sale of the goods or service or the terms of the rebate must be fixed and disclosed in writing to the buyer at the time of the initial sale of goods or services. The buyer, (if submitting the claim) must provide, upon request, to the Secretary of HHS or a state agency, the information required to be provided to a buyer by a seller. Where the seller submits a claim or request for payment on behalf of the buyer and the item or service is separately

10 claimed, the seller must provide, upon request by Secretary of HHS or a state agency information request to be provided to a seller by an offeror. Where the buyer submits a claim, the seller must a) fully and accurately report such discount on the invoice, coupon or statement submitted to the buyer; b) inform the buyer of its obligations to report such discount and to provide information upon request; and c) refrain from doing anything that would impede the buyer from meeting its obligations. [Note that discount "offerors" have similar requirements to sellers; an offeror is an individual or entity who is not a seller but promotes the purchase of an item or service to a buyer]. Discounts: Buyers Who Submit Cost Reports and Sellers Thereto [No comparable exception] Safe harbor for discounts received by a buyer which submits a cost report and sellers to such buyers The buyer is an entity which reports its costs on a cost report required by the Department of HHS or a state health care program. The discount must be earned based on purchases of that same good or service bought within a single fiscal year of the buyer. The buyer must claim the benefit of the discount in the fiscal year in which the discount is earned or the following year. The buyer must fully and accurately report the discount in the applicable cost report. The buyer must provide, upon request, by the Secretary of HHS or a state agency, the information required to be provided to a buyer by a seller. The seller must a) fully and accurately report such discount on the invoice, coupon or statement submitted to the buyer; b) ; b) inform the buyer of its obligations to report such

11 discount and to provide information upon request; and c) refrain from doing anything that would impede the buyer from meeting its obligations. If the value of the discount is not known at the time of sale, the seller must a) fully and accurately report the existence of a discount program on the invoice, coupon or statement submitted to the buyer; and when the value of the discount becomes known, provide the buyer with documentation of the calculation of the discount identifying the specific goods or services purchased to which to discount will be applied. [Note that discount "offerors" have similar requirements to sellers; an offeror is an individual or entity who is not a seller but promotes the purchase of an item or service to a buyer]. Bona Fide Employment Relationships exception to the referral prohibition related to Safe harbor for employment relationships compensation arrangements for bona fide employment relationships with physicians (or an immediate family member of the physician) The employment is for identifiable services. The employment is a bona fide employment relationship with the employer. The amount of the remuneration under the employment is: a) consistent with the fair market value of the services; and b) is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician. Subparagraph b) herein does not prohibit payment of remuneration in the form of a productivity bonus based on services performed personally by the physician (or immediate family member of the physician). The remuneration is provided under an agreement that would be commercially reasonable even if no referrals were made to the employer.

12 Fair Market Value Compensation exception to the referral prohibition related to [No comparable safe harbor] compensation arrangements for fair market value compensation The arrangement is between an entity and a physician (or an immediate family member) or any group of physicians (regardless of whether the group meets the definition of a group practice) for the provision of items or services (other than the rental of office space) by the physician (or an immediate family member) or group of physicians to the entity, or by the entity to the physician (or an immediate family member) or a group of physicians. The arrangement is in writing, signed by the parties, and covers only identifiable items or services, all of which are specified in the agreement. The writing specifies the timeframe for the arrangement, which can be for any period of time and contain a termination clause, provided that the parties enter into only one arrangement for the same items or services during the course of a year. An arrangement made for less than 1 year may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change. The writing specifies the compensation that will be provided under the arrangement. The compensation must be set in advance, consistent with fair market value, and not determined in a manner that takes into account the volume or value of referrals or other business generated by the referring physician. Compensation for the rental of equipment may not be determined using a formula based on-- (i) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated

13 through the use of the equipment; or (ii) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred between the parties. The arrangement is commercially reasonable (taking into account the nature and scope of the transaction) and furthers the legitimate business purposes of the parties. The arrangment does not violate the anti-kickback statute or any federal or state law or regulation governing billing or claims submission. The services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a Federal or State law. Certain Group Practice Arrangements With a Hospital exception to the referral prohibition related to [No comparable safe harbor] compensation arrangements for certain arrangements between a hospital and a group practice under which designated health services are provided by the group but are billed by the hospital With respect to services provided to an inpatient, the arrangement is pursuant to the provision of inpatient services under 42 U.S.C. 1395x(b)(3) (diagnostic or therapeutic items or services as are ordinarily furnished to inpatients). The arrangement began before December 19, 1989, and has continued in effect without interruption since that date. With respect to the designated health services covered under the arrangement, at least 75 percent of these services furnished to patients of the hospital are furnished by the group under the arrangement.

14 The arrangement is pursuant to an agreement that is set out in writing and that specifies the services to be provided and the compensation for the services provided. The compensation paid over the term of the agreement is consistent with the fair market value. The compensation per unit of service is fixed in advance and is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties. The compensation is provided pursuant to an agreement which would be commercially reasonable even if no referrals were made to the entity. Group Purchasing Organizations [No comparable exemption] Safe harbor for payments made by a vendor of goods or services to a group purchasing organization (GPO) The GPO must have a written agreement with each individual or entity for which items or services are furnished. The agreement provides for either of the following: a) the agreement states that participating vendors from which the individual or entity will purchase goods or services will pay a fee to the GPO of 3 percent or less of the purchase price of the goods or services provided by that vendor. or b) in the event the fee paid to the GPO is not fixed at 3 percent or less of the purchase price of the goods or services, the agreement specifies the amount (or if not known, the maximum amount) the GPO will be paid by each vendor (where such amount may be a fixed sum or a fixed percentage of the value of purchases made from the vendor by the members of the group under the contract between the vendor and the GPO).

15 Where the entity which receives the goods or service from the vendor is a health care provider of services, the GPO must disclose in writing to the entity at least annually, and to the Secretary upon request, the amount received from each vendor with respect to purchases made by or on behalf of the entity. The term group purchasing organization means an entity authorized to act as a purchasing agent for a group of individuals or entities who are furnishing services for which payment may be made in whole or in part under Medicare or a State health care program, and who are neither whollyowned by the GPO nor subsidiaries of a parent corporation that wholly owns the GPO (either directly or through another wholly-owned entity). Physician Incentive Plan exception to the referral prohibition related to [No comparable safe harbor] compensation arrangements for incentive plans between an entity and a physician The arrangement meets the requirements for of the personal services safe harbor but the compensation may be determined in a manner (through a withhold, capitation, bonus, or otherwise) that takes into account directly or indirectly the volume or value of any referrals or other business generated between the parties. No specific payment is made directly or indirectly under the plan to a physician or a physician group as an inducement to reduce or limit medically necessary services furnished with respect to a specific individual enrolled with the entity. Upon request of the Secretary of HHS, the entity provides the Secretary with access to information regarding the plan

16 (including any downstream subcontractor plans), in order to permit the Secretary to determine whether the plan is in compliance with this section. In the case of a plan that places a physician or a physician group at substantial financial risk as defined in Sec , the entity (and/or any downstream contractor) complies with the requirements concerning physician incentive plans set forth at Sec and Sec of this chapter. Investments in group practices [No comparable exception] Safe harbor for any payment that is a return on an investment interest made to a solo or group practitioner investing in his own practice or group practice The equity interests in the practice or group must be held by licensed health care professionals who practice in the practice of the group. The equity interests must be in the practice or group practice itself and not a subdivision of the practice or group. In the case of a group practice, the practice must be a group practice and be a unified business with centralized decisionmaking, pooling of expenses and revenues, and a compensation/profit distribution system that is not based on satellite offices operating substantially as if they were separate enterprises or profit centers. Revenues from ancillary services, if any, must be derived from "in-office ancillary services as defined in section 1877(b)(2) of the Social Security Act. Joint Ventures in Underserved Areas

17 [No comparable exception] Safe harbor for payments that constitute return on an investment interest, such as dividend or interest income, made to an investor in an entity that possesses investment interests that are held by either active or passive investors No more than 50% of the value of the investment interests of each class of investments may be held in the previous fiscal year or previous 12 month period by investors who are in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity. The terms on which an investment interest is offered to a passive investor, if any, who is in a position to make or influence referrals to, furnish items or services to, or otherwise generate business for the entity must be no different from the terms offered to other passive investors. The terms on which an investment interest is offered to an investor who is in a position to make or influence referrals to or generate business for the entity must not be related to the previous or expected volume of referrals, or the amount of business generated from the investor to the entity. Passive investors are not be required to either make referrals to, or otherwise generate business for the entity as a condition for remaining as an investor. The entity or any investor must not market or furnish the entity's items or services to passive investors differently than to non-investors. At least 75% of the dollar volume of the entity's business in the previous fiscal year or previous 12 month period must be derived from the service of persons who reside in an underserved area or are members of medically underserved populations. The entity or any investor must not loan funds to or guarantee a loan for any investor who is in a position to make or influence referrals to or generate business for the entity if

18 the investor uses any part of the loan to obtain the investment interest. The amount of the payment to an investor in return for the investment must be directly proportional to the amount of the capital investment. Isolated Transactions exception to the referral prohibition related to [No comparable safe harbor] compensation arrangements for isolated financial transactions with a physician, such as a one-time sale of property or a practice The amount of the remuneration under the transaction is consistent with the fair market value of the services. The amount of remuneration under the transaction is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician or other business generated between the parties. The remuneration is provided under an agreement that would be commercially reasonable even if the physician made no referrals. There are no additional transactions between the parties for 6 months after the isolated transaction, except for transactions which are specifically excepted under the other provisions of the regulations and except for commercially reasonable post- closing adjustments that do not take into account (directly or indirectly) the volume or value of referrals or other business generated by the referring physician. Equipment Leases exception to the referral prohibition related to compensation arrangements for rental of equipment between Safe harbor for payments made by a lessee to a lessor for the use of equipment

19 an entity and a referring physician A rental or lease agreement is set out in writing and signed by the parties and specifies the equipment covered by the The lease agreement is set out in writing and signed by the parties. lease. The equipment rented or leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease or rental and is used exclusively by the The lease covers all of the equipment leased between the parties for the term of the lease and specifies the equipment covered by the lease. lessee when being used by the lessee and is not shared with or used by the lessor or any person or entity related to the lessor. The lease provides for a term of rental or lease of at least 1 year. If the agreement is terminated during the term with or without cause, the parties may not enter into a new agreement during the first year of the original term of the agreement. A holdover month-to-month rental for up to 6 If the lease is intended to provide the lessee with use of the equipment for periodic intervals of time, rather than on a fulltime basis for the term of the lease, the lease specifies exactly the schedule of such intervals, their precise length, and the exact rent for such interval. months immediately following an agreement of at least 1 year will satisfy this paragraph, provided the holdover rental is on the same terms and conditions as the immediately preceding agreement. The rental charges over the term of the agreement are set in The term of the lease is for not less than one year. advance, are consistent with fair market value, and are not determined (i) In a manner that takes into account the volume or value of any referrals or other business generated between the parties; or (ii) Using a formula based on (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed on or business generated by the use of the equipment; or (B) Perunit of service rental charges, to the extent that such charges reflect services provided to patients referred between the parties. The lease would be commercially reasonable even if no referrals were made between the parties. The aggregate rental charge is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated

20 between the parties for which payment may be made in whole or in part under Medicare or a State health care program. The aggregate equipment rental does not exceed that which is reasonably necessary to accomplish the commercially reasonable business purpose of the rental. The term fair market value means the value of the equipment when obtained from a manufacturer or professional distributor, but shall not be adjusted to reflect the additional value one party (either the prospective lessee or lessor) would attribute to the equipment as a result of its proximity or convenience to sources of referrals or business otherwise generated for which payment may be made in whole or in part under Medicare or a State health care program. Space Leases exception to the referral prohibition related to compensation arrangements for rental of office space Safe harbor for payments made by a lessee to a lessor for the use of space between an entity and a referring physician The agreement is set out in writing, is signed by the parties, and specifies the premises it covers. The term of the agreement is at least 1 year. To meet this requirement, if the agreement is terminated during the term with or without cause, the parties may not enter into a new The lease agreement is set out in writing and signed by the parties. The lease covers all of the premises leased between the parties for the term of the lease and specifies the premises covered by the lease. agreement during the first year of the original term of the agreement. A holdover month-to-month rental for up to 6 months immediately following an agreement of at least 1 year that met the conditions of this paragraph (a) will satisfy this paragraph (a), provided the holdover rental is on the same terms and conditions as the immediately preceding agreement. The space rented or leased does not exceed that which is If the lease is intended to provide the lessee with access to

21 reasonable and necessary for the legitimate business purposes of the lease or rental and is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the the premises for periodic intervals of time, rather than on a full-time basis for the term of the lease, the lease specifies exactly the schedule of such intervals, their precise length, and the exact rent for such intervals. lessor), except that the lessee may make payments for the use of space consisting of common areas if the payments do not exceed the lessee's pro rata share of expenses for the space based upon the ratio of the space used exclusively by the lessee to the total amount of space (other than common areas) occupied by all persons using the common areas. The rental charges over the term of the agreement are set in The term of the lease is for not less than one year. advance and are consistent with fair market value. The rental charges over the term of the agreement are not determined-- (i) In a manner that takes into account the volume or value of any referrals or other business generated between the parties; or (ii) Using a formula based on (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space; or (B) Per-unit of service rental The aggregate rental charge is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare or a State health care program. charges, to the extent that such charges reflect services provided to patients referred between the parties. The agreement would be commercially reasonable even if no referrals were made between the lessee and the lessor. The aggregate space rented does not exceed that which is reasonably necessary to accomplish the commercially reasonable business purpose of the rental. The term fair market value means the value of the rental property for general commercial purposes, but shall not be adjusted to reflect the additional value that one party (either the prospective lessee or lessor) would attribute to the property as a result of its proximity or convenience to sources of referrals or business otherwise generated for which payment may be made in whole or in part under Medicare or a State health care program. Practitioner Recruitment

22 exception to the referral prohibition related to compensation arrangements for physician recruitment Safe harbor for payments by an entity to induce a practitioner to relocate a practice into a Health Professional Shortage Area (HPSA) for his/her specialty area The remuneration, provided by a hospital to recruit a physician, is paid directly to the physician and is intended to induce the physician to relocate his or her medical practice to the geographic area served by the hospital in order to become a member of the hospital's medical staff. The arrangement is set out in writing and signed by both parties. The payments are to induce a practitioner who has been practicing within his or her current specialty for less than one year to locate, or to induce any other practitioner to relocate, his or her primary place of practice into a HPSA for his or her specialty area that is served by the entity. The arrangement is set forth in a written agreement signed by the parties that specifies the benefits provided by the entity, the terms under which the benefits are to be provided, and the obligations of each party. The arrangement is not conditioned on the physician's referral of patients to the hospital. If a practitioner is leaving an established practice, at least 75 percent of the revenues of the new practice must be generated from new patients not previously seen by the practitioner at his or her former practice. The hospital does not determine (directly or indirectly) the amount of the remuneration to the physician based on the volume or value of any actual or anticipated referrals by the physician or other business generated between the parties. The benefits are provided by the entity for a period not in excess of 3 years, and the terms of the agreement are not renegotiated during this 3-year period in any substantial aspect; provided, however, that if the HPSA to which the practitioner was recruited ceases to be a HPSA during the term of the written agreement, the payments made under the written agreement will continue to satisfy this paragraph for the duration of the written agreement (not to exceed 3 years). The physician is allowed to establish staff privileges at any other hospital(s) and to refer business to any other entities (except as referrals may be restricted under a separate employment or services contract). There is no requirement that the practitioner make referrals to, be in a position to make or influence referrals to, or otherwise generate business for the entity as a condition for receiving the benefits; provided, however, that for purposes of this paragraph, the entity may require as a condition for receiving benefits that the practitioner maintain staff privileges at the entity. In the case of remuneration provided by a hospital to a The practitioner is not restricted from establishing staff

23 physician either indirectly through payments made to another physician practice, or directly to a physician who joins a physician practice, the following additional conditions must be met: (a) the written agreement also signed by the party to whom the payments are directly made; (b) except for actual costs incurred by the physician practice in recruiting the new physician, the remuneration is passed directly through to or remains with the recruited physician; (c) in the case of an income guarantee of any type made by the hospital to a recruited physician who joins a physician practice, the costs allocated by the physician practice to the recruited physician do not exceed the actual additional incremental costs attributable to the recruited physician. With respect to a physician recruited to join a physician practice located in a rural area or HPSA, if the physician is recruited to replace a physician who, within the previous 12-month period, retired, relocated outside of the geographic area served by the hospital, or died, the costs allocated by the physician practice to the recruited physician do not exceed either-- (1) the actual additional incremental costs attributable to the recruited physician; or (2) the lower of a per capita allocation or 20 percent of the practice's aggregate costs; (d) records of the actual costs and the passed-through amounts are maintained for a period of at least 5 years and made available to the Secretary of HHS upon request; (e) the remuneration from the hospital under the arrangement is not determined in a manner that takes into account (directly or indirectly) the volume or value of any actual or anticipated referrals by the recruited physician or the physician practice (or any physician affiliated with the physician practice) receiving the direct payments from the hospital; (f) the physician practice may not impose on the recruited physician practice restrictions that unreasonably restrict the recruited physician's ability to practice medicine in the geographic area served by the hospital; and (g) the arrangement does not violate the antiprivileges at, referring any service to, or otherwise generating any business for any other entity of his or her choosing.

24 kickback statute or any Federal or State law or regulation governing billing or claims submission. Recruitment of a physician by a hospital located in a rural area to an area outside the geographic area served by the hospital is permitted under this exception if the Secretary of HHS determines in an advisory opinion that the area has a demonstrated need for the recruited physician and all other requirements for recruiting are met. These requirements apply to remuneration provided by a federally qualified health center or a rural health clinic in the same manner as it applies to remuneration provided by a hospital, provided that the arrangement does not violate the anti-kickback statute or any Federal or State law or regulation governing billing or claims submission. The amount or value of the benefits provided by the entity may not vary (or be adjusted or renegotiated) in any manner based on the volume or value of any expected referrals to or business otherwise generated for the entity by the practitioner for which payment may be made in whole or in part under Medicare, Medicaid or any other Federal health care programs. The practitioner agrees to treat patients receiving medical benefits or assistance under any Federal health care program in a nondiscriminatory manner. At least 75 percent of the revenues of the new practice must be generated from patients residing in a HPSA or a Medically Underserved Area (MUA) or who are part of a Medically Underserved Population (MUP). The payment or exchange of anything of value may not directly or indirectly benefit any person (other than the practitioner being recruited) or entity in a position to make or influence referrals to the entity providing the recruitment payments or benefits of items or services payable by a

25 Federal health care program. Waiver of Beneficiary Coinsurance and Deductible Amounts [No comparable exception] Safe harbor for reduction or waiver of a federal or state health program beneficiary's obligation to pay coinsurance or deductible amounts If the coinsurance or deductible amounts are owed to a hospital for inpatient hospital services for which Medicare pays under the prospective payment system, the hospital must comply with all of the following three standards: a) the hospital must not later claim the amount reduced or waived as a bad debt for payment purposes under Medicare or otherwise shift the burden of the reduction or waiver onto Medicare, a State health care program, other payers, or individuals; b) the hospital must offer to reduce or waive the coinsurance or deductible amounts without regard to the reason for admission, the length of stay of the beneficiary, or the diagnostic related group for which the claim for Medicare reimbursement is filed; c) the hospital's offer to reduce or waive the coinsurance or deductible amounts must not be made as part of a price reduction agreement between a hospital and a third-party payer (including a health plan), unless the agreement is part of a contract for the furnishing of items or services to a beneficiary of a Medicare supplemental policy. If the coinsurance or deductible amounts are owed by an individual who qualifies for subsidized services under a provision of the Public Health Services Act or under titles V or XIX of the Social Security Act to a federally qualified health care center or other health care facility under any Public Health Services Act grant program or under title V of the Act, the health care center or facility may reduce or waive the coinsurance or deductible amounts for items or services for

26 which payment may be made in whole or in part under part B of Medicare or a State health care program. Warranties [No comparable exception] Safe harbor for any payment or exchange of anything of value under a warranty provided by a manufacturer or supplier of an item to the buyer The buyer must fully and accurately report any price reduction of the item (including a free item), which was obtained as part of the warranty, in the applicable cost reporting mechanism or claim for payment filed with the Department or a State agency. The buyer must provide, upon request by the Secretary of HHS or a State agency, the information required to be provided by the manufacturer or supplier. The manufacturer or supplier must fully and accurately report the price reduction of the item (including a free item), which was obtained as part of the warranty, on the invoice or statement submitted to the buyer, and inform the buyer of its obligations; and/or where the amount of the price reduction is not known at the time of sale, the manufacturer or supplier must fully and accurately report the existence of a warranty on the invoice or statement, inform the buyer of its obligations, and, when the price reduction becomes known, provide the buyer with documentation of the calculation of the price reduction resulting from the warranty. The manufacturer or supplier must not pay any remuneration to any individual (other than a beneficiary) or entity for any medical, surgical, or hospital expense incurred by a beneficiary other than for the cost of the item itself. The term warranty means either an agreement made in accordance with the provisions of 15 U.S.C. 2301(6), or a

27 manufacturer's or supplier's agreement to replace another manufacturer's or supplier's defective item (which is covered by an agreement made in accordance with this statutory provision), on terms equal to the agreement that it replaces. Personal Services and Management Contracts exception to the referral prohibition related to compensation arrangements for personal services or Safe harbor for remuneration from an entity under an personal service arrangement or management contract management The arrangement is set out in writing, is signed by the parties, and specifies the services covered by the arrangement. The agency agreement covers all of the services the agent provides to the principal for the term of the agreement and specifies the services to be provided by the agent. The arrangement(s) covers all of the services to be furnished by the physician (or an immediate family member of the physician) to the entity. This requirement is met if all separate The agency agreement covers all of the services the agent provides to the principal for the term of the agreement and specifies the services to be provided by the agent. arrangements between the entity and the physician and the entity and any family members incorporate each other by reference or if they cross-reference a master list of contracts that is maintained and updated centrally and is available for review by the Secretary of HHS upon request. The master list must be maintained in a manner that preserves the historical record of contracts. A physician or family member can "furnish" services through employees whom they have hired for the purpose of performing the services; through a whollyowned entity; or through locum tenens physicians (as defined at Sec , except that the regular physician need not be a member of a group practice). The aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement(s). If the agency agreement is intended to provide for the services of the agent on a periodic, sporadic or part-time basis, rather than on a full-time basis for the term of the agreement, the agreement specifies exactly the schedule of such intervals, their precise length, and the exact charge for such intervals.

28 The term of each arrangement is for at least 1 year. To meet The term of the agreement is for not less than one year. this requirement, if an arrangement is terminated during the term with or without cause, the parties may not enter into the same or substantially the same arrangement during the first year of the original term of the arrangement. The compensation to be paid over the term of each arrangement is set in advance, does not exceed fair market value, and, except in the case of a physician incentive plan (as defined at Sec of this subpart), is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties. The aggregate compensation paid to the agent over the term of the agreement is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare or a State health care program. The services to be furnished under each arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any Federal or The services performed under the agreement do not involve the counselling or promotion of a business arrangement or other activity that violates any state or federal law. State law. A holdover personal service arrangement for up to 6 months following the expiration of an agreement of at least 1 year that met all of the above conditions satisfies the requirements, provided that the holdover personal service arrangement is on the same terms and conditions as the immediately preceding agreement. The aggregate services contracted for do not exceed those which are reasonably necessary to accomplish the commercially reasonable business purpose of the services. Sale of Practice [No comparable exception] Safe harbor for payments made to a practitioner by another practitioner where first practitioner is selling a practice to the second practitioner The period from the date of the first agreement pertaining to the sale to the completion of the sale is not more than one