Law Exceptions and Safe Harbors 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 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 arrangement 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. 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). 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 (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. 422.208, the entity (and/or any downstream contractor) complies with the requirements concerning physician incentive plans set forth at Sec. 422.208 and Sec. 422.210 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.