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1991.07.26 :  Medicare/Medicaid Anti-Kickback "Safe Harbor" Regulation

Contact:  Judy Holtz 202/619-1142
July 26, 1991
     
     HHS Secretary Louis W. Sullivan, M.D., today announced
publication of the final Medicare and Medicaid anti-kickback
"safe harbor" regulation.
        Sullivan said, "This regulation will give health care
providers the guidance they have been looking for as to how to
operate in a lawful manner vis-a-vis the anti-kickback statute. 
We hope that health care providers will be encouraged to conform
their business arrangements to the safe harbors and thereby
engage in healthy competition that helps restrain health care
costs."
        The safe harbor regulation, mandated by Congress in 1987,
protects business arrangements from being the subject of civil or
criminal prosecution under the Medicare-Medicaid anti-kickback
statute.  The statute broadly prohibits intentionally paying
anything of value to influence the referral of Medicare and
Medicaid business.  The regulation creates 11 separate safe
harbors, for example, investment interests, rental of space and
rental of equipment.
        Because of the statute's breadth, many health care
providers have been seeking guidance on ways to engage in
legitimate business practices and avoid scrutiny under the anti-
kickback statute.
        Secretary Sullivan said, "We know that the overwhelming
number of health care providers want to operate legally, and will
restructure their arrangements in compliance with these rules."
        In developing this regulation, the department received
over 750 comments from the public.  In many cases, the comments
from health care providers were evenly divided between those
advocating loose rules and others favoring very narrow ones.
        One of the areas of most concern to the department in the
development of the regulation is the problem of physician self-
referrals.  This is the practice of physicians referring patients
to health care entities (known as "joint ventures" - usually
diagnostic services) in which they have invested.  The safe
harbor to be published July 29 applicable to joint ventures
contains stringent criteria that must be met by each joint
venture wishing to get the protection offered by this safe
harbor.  The standards of most interest are the two so-called 60-
40 rules.  These rules require joint ventures to obtain 60
percent of their investors from non-referring sources and 60
percent of their revenues from those without any financial
interest.
        The safe harbor rules will become effective July 29, the
Federal Register publication date.  (A fact sheet is attached.)

                               # # #

              ANTI-KICKBACK "SAFE HARBOR" REGULATION
                            FACT SHEET



ø    THE MEDICARE AND MEDICAID ANTI-KICKBACK STATUTE WAS
     ORIGINALLY ENACTED IN 1972 AND REVISED IN 1977 (NOW CODIFIED
     AT 42 U.S.C.  1320a-7b(b)).

ø    THE STATUTE PROHIBITS INTENTIONALLY PAYING ANYTHING OF VALUE
     TO INFLUENCE THE REFERRAL OF MEDICARE AND STATE HEALTH CARE
     PROGRAM (PRINCIPALLY MEDICAID) BUSINESS.

ø    THE STATUTE IS PRINCIPALLY INTENDED TO RESTRICT THE CORRUPT
     INFLUENCE OF MONEY ON PHYSICIANS' DECISIONS REGARDING WHEN
     AND WHERE TO REFER PATIENTS.

ø    AS A CRIMINAL FELONY STATUTE, A VIOLATION IS PUNISHABLE BY A
     FINE OF UP TO $25,000 OR JAIL FOR UP TO 5 YEARS.

ø    THE MEDICARE-MEDICAID PATIENT PROGRAM PROTECTION ACT OF 1987
     (PUB. L. 100-93) MADE 2 CHANGES IN THE STATUTE:

     1.   AN ALTERNATIVE CIVIL REMEDY WAS ADDED OF EXCLUSION FROM
          MEDICARE AND STATE HEALTH CARE PROGRAMS FOR VIOLATIONS
          OF THE STATUTE.

     2.   CONGRESS REQUIRED THE DEPARTMENT TO ISSUE THIS SAFE
          HARBOR REGULATION.

ø    THE SAFE HARBOR REGULATION PROTECTS BUSINESS ARRANGEMENTS
     FROM BEING THE SUBJECT OF CIVIL OR CRIMINAL PROSECUTION.

ø    THE SAFE HARBOR REGULATION IMMUNIZES LEGITIMATE AND
     BENEFICIAL BUSINESS ARRANGEMENTS THAT WOULD OTHERWISE BE
     ILLEGAL UNDER THE STATUTE.

ø    THE PURPOSE OF THE SAFE HARBOR REGULATION IS TWO-FOLD:

     1.   GIVE HEALTH CARE PROVIDERS GUIDANCE HOW TO OPERATE IN A
          LAWFUL MANNER VIS-A-VIS THE STATUTE.

     2.   ENCOURAGE HEALTH CARE PROVIDERS TO ENGAGE IN HEALTHY
          COMPETITION THAT HELPS RESTRAIN HEALTH CARE COSTS.

ø    A NOTICE OF INTENT TO DEVELOP REGULATIONS WAS PUBLISHED IN
     THE FEDERAL REGISTER ON OCTOBER 21, 1987 (52 FR 38794).

ø    IN A PROPOSED RULE (NPRM) PUBLISHED ON JANUARY 23, 1989 (54
     FR 3088), THE OIG INVITED COMMENT ON TEN SAFE HARBOR AREAS
     PLUS FOUR BROAD SUBJECT AREAS.

ø    THE OIG RECEIVED OVER 750 COMMENTS TO THIS NPRM.

ø    THIS FINAL RULE CONTAINS 11 SAFE HARBORS.