OIG Establishes New Safe Harbors for Antikickback Law


© 2001 – Haynes and Boone, LLP

On November 19, 1999, the Office of Inspector General ("OIG") published in the Federal Register eight final regulatory safe harbors to the antikickback statute, which prohibits the knowing and willful offer, payment, solicitation, or receipt of remuneration to induce Federal health care program business.  (Click on one of these links to obtain the full text of the Federal Register publication –



The OIG also published clarifications to six of the original eleven safe harbors promulgated in 1991 and a new interim final rule for an  additional safe harbor.

The preamble to the new final rule summarizes each new safe harbor. The new safe harbors extend protection to the following areas: practitioner recruitment in underserved areas, obstetrical malpractice insurance subsidies in underserved areas, investments in group practices, cooperative hospital specialty services, investment interests in underserved areas, sales of physician practices, and investments in ambulatory surgical centers. The clarifications to the existing safe harbors address large- and small-entity investments, space rental, equipment rental, personal services and management contracts, referral services, and discounts. The interim final rule proposes two additional safe harbors for shared-risk arrangements.


1. Practitioner Recruitment in Underserved Areas

This safe harbor protects recruitment payments made by entities to attract physicians and other health care professionals to health professional shortage areas ("HPSAs"). The safe harbor requires at least 75% of the revenues of the new practice to be generated from new patients and from patients residing in an HPSA or medically underserved area ("MUA") or who are part of the medically underserved population ("MUP").

Although the safe harbor does not prescribe the forms of protected payments, it does limit the duration of these payments to three years. The safe harbor does not extend to payments made by hospitals to group practices to recruit physicians to the group, nor does it protect payments to existing practitioners. These arrangements are subject to a case-by-case review.

2. Obstetrical Malpractice Insurance Subsidies in Underserved Areas

This safe harbor protects an entity that pays all or part of the premium for the malpractice insurance policy or program for practitioners engaging in obstetrical practice.

The practitioner must certify that for the initial coverage period not to exceed one year, at least 75% of the practitioner's obstetrical patients will either reside in an HPSA or MUA or be part of an MUP. Thereafter, for each additional coverage period not to exceed one year, at least 75% of the practitioner's obstetrical patients treated must reside in an HPSA or MUA or be part of an MUP.

3. Investments in Group Practices

This safe harbor protects investments by physicians in their own group practices, if the group practice meets the Stark Law definition of "group practice" in Section 1877(h)(4) of the Social Security Act and implementing regulations. The safe harbor also protects investments in solo practices if the practice is conducted through the solo practitioner's professional corporation or other separate legal entity. It also protects revenues derived from in-office ancillary services pursuant to Section 1877(b)(2) of the Social Security Act and implementing regulations. It does not, however, cover investments by group practices or members of group practices in ancillary services joint ventures.

4. Cooperative Hospital Service Organizations

This safe harbor applies to cooperative hospital service organizations ("CHSOs") that qualify under section 501(e) of the Internal Revenue Code. CHSOs are formed by tax-exempt hospitals, known as patron hospitals, to provide specifically enumerated services. The safe harbor protects payments to CHSOs for operating expenses and to patron hospitals as required by IRS rules.

5. Investments in Ambulatory Surgical Centers ("ASCs")

As originally proposed, this safe harbor only protected Medicare-certified ASCs that were wholly owned by surgeons. The final rule extends protection to certain investment interests in four categories of free-standing Medicare-certified ASCs: surgeon-owned ASCs; single-specialty ASCs; multi-specialty ASCs; and hospital/physician ASCs. To fall under the safe harbor, physician investors must be those for whom the ASC is an extension of their office practice. Hospital investors must not be in a position to refer patients directly or indirectly to the ASC or any physician investor.

6. Referral Arrangements for Specialty Services

The safe harbor protects arrangements whereby an individual or entity refers a patient to another individual or entity in return for the receiving party's agreement to refer the patient back at a certain time or under certain circumstances. The receiving party must possess special medical expertise and the referral back to the originating source must be clinically appropriate. The safe harbor excludes arrangements involving parties that split a global from a federal program.

7. Investment Interests in Underserved Areas

The safe harbor affords protection for a broader range of investments in joint ventures in underserved areas than does the existing safe harbor. Safe harbor protection now includes urban underserved areas and permits an increased percentage of physician investors - up to 50 percent - and unlimited revenues from referral source investors.

8. Sale of Practice

This safe harbor protects a hospital or entity that acquires the practice of a retiring physician in an HPSA for the practitioner's specialty area. The hospital or entity must complete the sale within three years and engage in good faith efforts to recruit a new physician within one year.


In a second notice in the November 19 Federal Register
[TEXT] http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=1999_register&docid=99-29988-filed

[PDF] http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=1999_register&docid=99-29988-filed.pdf

, OIG published an "interim final rule with opportunity for comment" that established two new safe harbors to implement the exception created by Congress in 1996 for certain shared-risk arrangements.  Pursuant to Congress' command, DHHS developed its  regulation through a negotiated rulemaking process, resulting  in a negotiating-committee statement in January 1998 that served as a guideline for OIG's rulemaking. 

The first safe harbor protects various financial arrangements between managed care entities that receive a fixed or capitated amount from the federal health care programs and "first-tier" individuals and entities with whom the managed care entity contracts for the provision of health care items or services. The second safe harbor protects contractual relationships between managed care entities and their contractors and subcontractors where the contractors and subcontractors are at substantial financial risk for the cost or utilization of items or services they provide or order for federal health care program beneficiaries. 

Both safe harbors require a written agreement between the managed care entity and its contractors that specifies the items and services covered and is for at least a year.  In addition, the first safe harbor requires that "neither party [may] give[] or receive[] remuneration in return for or to induce the provision or acceptance of business (other than business covered by the agreement) for which payment may be made in whole or in part by a Federal health care program on a fee-for-service basis."  The key concept in the second safe harbor (for downstream shared-risk arrangements) is the "substantial risk" (defined by the OIG in excruciating detail) that contractors and subcontractors must assume in order to qualify for the safe harbor.

The shared-risk safe harbors protect remuneration between parties where the remuneration is a price reduction for the provision of health care items or services. Other remuneration, such as the distribution of profits  from investment interests in an entity with a risk sharing arrangement, is not protected by these safe harbors. Individuals or entities seeking safe harbor protection for such arrangements may meet the requirements of another safe harbor, such as the safe harbor for investment interests in small entities. 

In addition, if an arrangement covers both remuneration that qualifies for protection under a shared-risk safe harbor and remuneration that is not qualified for protection, the former remuneration remains protected. For example, a managed care plan may ``carve out'' transplant services from its capitated payment methodology and pay for those services on a fee-for-service basis. The remuneration for the transplant services would not be protected under these safe harbors. However, protection for the items or services covered by the capitation, assuming all safe harbor conditions are otherwise met, would not be lost. Further, an arrangement that potentially falls within more than one safe harbor need only meet the requirements of one safe harbor. The remuneration for the transplant services may be protected under a separate safe harbor, such as the personal services safe harbor.
Haynes and Boone attorneys have extensive experience advising their clients about the Medicare/Medicaid safe harbors.  Now that there are 23 safe harbors, the complexity of this area of law is manifest.  If you have any questions concerning the antikickback law and safe harbor regulations, please feel free to contact one of our health care attorneys listed at the top of the page.

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