Federal Register: October 4, 2007 (Volume 72, Number 192)
DOCID: fr04oc07-7 FR Doc E7-19636
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Inspector General Office, Health and Human Services Department
NOTICE: RULES
DOCID: fr04oc07-7
ACTION: Medicare and State healthcare programs; fraud and abuse:
DOCUMENT ACTION: Final rule.
SUBJECT CATEGORY:
Office of Inspector General
DATES: Effective Date: These regulations are effective on December 3, 2007.
DOCUMENT SUMMARY:
In accordance with section 431 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), this final rule sets forth a safe harbor under the antikickback statute to protect certain arrangements involving goods, items, services, donations, and loans provided by individuals and entities to certain health centers funded under section 330 of the Public Health Service Act. The goods, items, services, donations, or loans must contribute to the health center's ability to maintain or increase the availability, or enhance the quality, of services available to a medically underserved population.
SUMMARY:
Qualified health centers arrangements; safe harbor under Federal anti-kickback statute,
DOCUMENT BODY 2:
42 CFR Part 1001
Medicare and State Health Care Programs: Fraud and Abuse; Safe
Harbor for Federally Qualified Health Centers Arrangements Under the
AntiKickback Statute
SUPPLEMENTAL INFORMATION
I. Background
OverviewEstablishing New Safe Harbor for Arrangements Involving Federally Qualified Health Centers
This final regulation establishes safe harbor protection under the antikickback statute for certain arrangements involving Federally qualified health centers. Section I of this preamble contains a brief background discussion addressing the antikickback statute and safe harbors; a discussion of section 330funded health centers; a summary of the relevant MMA provisions; a summary of the proposed safe harbor; and a summary of the final safe harbor. Section II of this preamble sets forth a summary of the public comments and our responses to those comments.
A. The AntiKickback Statute and Safe Harbors
The antikickback statute provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce or reward the referral of business reimbursable under any of the Federal health care programs, as defined in section 1128B(f) of the Act. The offense is classified as a felony and is punishable by fines of up to $25,000 and imprisonment for up to five years. Violations of the antikickback statute may also result in the imposition of civil money penalties (CMPs) under section 1128A(a)(7) of the Act (42 U.S.C. 1320a7a(a)(7)), program exclusion under section 1128(b)(7) of the Act (42 U.S.C. 1320a 7(b)(7)), and liability under the False Claims Act, (31 U.S.C. 3729 33).
The types of remuneration prohibited specifically include, without limitation, kickbacks, bribes, and rebates, whether made directly or indirectly, overtly or covertly, in cash or in kind. Prohibited conduct includes not only the payment of remuneration intended to induce or reward referrals of patients, but also the payment of remuneration intended to induce or reward the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by any Federal health care program.
Because of the broad reach of the statute, concern was expressed
that some relatively innocuous commercial arrangements were covered by
the statute and, therefore, potentially subject to criminal
prosecution. In response, Congress enacted section 14 of the Medicare
and Medicaid Patient and Program Protection Act of 1987, Public Law
10093 (section 1128B(b)(3)(E) of the Act), which specifically required
the development and promulgation of regulations, the socalled ``safe
harbor'' provisions, which would specify various payment and business
practices that would not be treated as criminal offenses under the antikickback statute, even though they may potentially be
[[Page 56633]]
capable of inducing referrals of business under the Federal health care
programs. Since July 29, 1991, OIG has published in the Federal
Register a series of final regulations establishing ``safe harbors'' in
various areas.\1\ These OIG safe harbor provisions have been developed
``to limit the reach of the statute somewhat by permitting certain non
abusive arrangements, while encouraging beneficial or innocuous arrangements.'' (56 FR 35952, 35958; July 21, 1991).
\1\ 56 FR 35952 (July 29, 1991); 61 FR 2122 (January 25, 1996);
64 FR 63518 (November 19, 1999); 64 FR 63504 (November 19, 1999); 66
FR 62979 (December 4, 2001); and 71 FR 45110 (August 8, 2006).
Health care providers and others may voluntarily seek to comply with safe harbors so that they have the assurance that their business practices will not be subject to liability under the antikickback statute, the CMP provision for antikickback violations, or the program exclusion authority related to kickbacks. In giving the Department the authority to protect certain arrangements and payment practices from penalties under the antikickback statute, Congress intended the safe harbor regulations to be evolving rules that would be updated periodically to reflect changing business practices and technologies in the health care industry.
B. Section 330Funded Health Centers
Beginning in the 1960s, Congress enacted various health center programs to assist the large number of individuals living in medically underserved areas, as well as the growing number of special populations with limited access to preventive and primary health care services. In the Health Centers Consolidation Act of 1996, Public Law 104299, Congress consolidated the four thenexisting Federal health center grant programs (the Migrant Health Center Program, the Community Health Center Program, the Health Care for the Homeless Program, and the Health Services for Residents of Public Housing Program) into a single program under section 330 of the Public Health Service (PHS) Act. See S. Rep. 104186 (December 15, 1995). In the Health Care Safety Net Amendments of 2002, Public Law 107251, Congress reauthorized and strengthened the health centers program. In 2005, the Federal health center programs supported 954 organizations that provided care to over 14 million patients at 3,745 health care service delivery sites.\2\ \2\ HRSA Bureau of Primary Health Care, Uniform Data System: Calendar Year 2005 Data (available upon request at http://www.bphc.hrsa.gov/uds/default.htm ).
Section 330 grant recipients play a vital role in the health care
safety net, providing cost effective care for communities with limited
access to health care resources. All recipients of grants under section
330 are public, nonprofit, or taxexempt entities. The health centers
must serve ``a population that is medically underserved, or a special
medically underserved population comprised of migratory and seasonal
agricultural workers, the homeless, and residents of public housing.''
42 U.S.C. 254b(a)(1). Health centers must be community based; to this
end, a majority of a health center's governing board must be users of
the center and must, as a group, represent the individuals being served
by the center.\3\ 42 U.S.C. 254b(k)(3)(H)(i). Health centers receiving
section 330 grant funding must provide, either directly or through
contracts or cooperative arrangements, a broad range of required
primary health care services, including clinical services by
physicians, and, where appropriate, physician assistants, nurse
practitioners, and nurse midwives; diagnostic laboratory and
radiological services; preventive health services; emergency medical
services; certain pharmaceutical services; referrals to other providers
(including substance abuse and mental health services); patient case
management; services that enable individuals to use the services of the
health center (e.g., outreach, transportation, and translation
services); and patient and community education services. 42 U.S.C.
254b(b)(1). They may also provide certain additional health services
that are appropriate to serve the health needs of the population served
by the health center. 42 U.S.C. 254b(b)(2). These additional health
services may include mental health and substance abuse services;
recuperative care services; environmental health services; special
occupationrelated health services for migratory and seasonal
agricultural workers; programs to control infectious disease; and injury prevention programs.
\3\ Health centers receiving grant funding to serve migratory
and seasonal agricultural workers, homeless people, or residents of
public housing may, upon a showing of good cause, obtain a waiver of this requirement. 42 U.S.C. 254b(k)(3)(H).
Consistent with their mission and the terms of their PHS grants,
section 330 grant recipients serve predominantly lowincome
individuals, including some beneficiaries of the Medicare and Medicaid
programs. In 2005, 36 percent of patients treated by section 330 grant
recipients were beneficiaries of a Medicaid program, 7.5 percent were
beneficiaries of the Medicare program, and 2.3 percent were
beneficiaries of another public insurance program.\4\ Section 330 grant
recipients also treat a substantial and growing number of uninsured
patients. In 1996, section 330 grant recipients provided services to
3.2 million uninsured patients, and by 2005, this number had increased
to 5.6 million, representing nearly 40 percent of patients treated at those centers during that year.\5\
\4\ HRSA Bureau of Primary Health Care, Uniform Data System: Calendar Year 2005 DataTable 4: Users by Socioeconomic
Characteristics (available upon request at http://www.bphc.hrsa.gov/uds/default.htm ).
\5\ HRSA Bureau of Primary Health Care, Uniform Data System:
Calendar Year 2005 DataUDS Trend Data for Years 1996 through 2005
(available upon request at http://www.bphc.hrsa.gov/uds/default.htm ).
Section 330 grant recipients must serve all residents of their ``catchment'' area regardless of the patient's ability to pay and must establish a fee schedule with discounts to adjust fees on the basis of ability to pay. 42 U.S.C. 254b(a)(1)(B) and 254b(k)(3)(G)(i). Section 330 grant recipients must also make and continue ``every reasonable effort to establish and maintain collaborative relationships with other health care providers in the catchment area of the center'' (42 U.S.C. 254b(k)(3)(B)), and must ``develop an ongoing referral relationship'' with at least one hospital in the area. 42 U.S.C. 254b(k)(3)(L).
Section 330 grant funds are intended to defray the costs of serving uninsured patients. Grant recipients are required to seek reimbursement from those patients who are able to pay all or a portion of the charges for their care (applying a schedule of fees and a corresponding schedule of discounts adjusted on the basis of the patient's ability to pay) or who have private insurance or public coverage, such as Medicare or Medicaid. The amount of a section 330 grant may not exceed the amount by which the costs of operation of the health center in such fiscal year exceed the total of: (i) State, local, and other operational funding provided to the health center; and (ii) the fees, premiums, and thirdparty reimbursements that the center may reasonably be expected to receive for its operations in such fiscal year. By statute, nongrant funds must be used to further the objectives of the recipient's section 330 grant.
Section 330 grant funding accounts for approximately 20 percent of
revenue for health centers receiving such grants. The majority of
health center funding derives from charges for patient services. On average, the largest source
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of revenue, 37 percent comes from Medicaid payments, 6.5 percent of
health center revenues come from private thirdparty reimbursement, 6
percent from Medicare payments, and 6.5 percent from selfpayments from
patients. Remaining revenue comes from a mix of other Federal, State, local, and philanthropic sources.\6\
\6\ HRSA Bureau of Primary Health Care, Uniform Data System:
Calendar Year 2005 DataExhibit A: Total Revenue Received by BPHC
Grantees (available upon request at http://www.bphc.hrsa.gov/uds/default.htm ).
Frequently, health centers are provided with, or seek out,
opportunities to enter into arrangements with hospitals or other
providers or suppliers to further the health centers' patient care
mission.\7\ For example, providers or suppliers may agree to provide
health centers with capital development grants, low cost (or no cost)
loans, reduced price services, or inkind donations of supplies, equipment, or space.
\7\ Congress has previously recognized the importance of health
center affiliations with hospitals and other health care service
providers in promoting efficiency and quality of care. The Health
Centers Consolidation Act expressly requires health centers to
maintain collaborative relationships with other providers. With respect to integrated delivery systems, the Report states:
``The committee believes, based on expert testimony given at the
May 14, 1995, hearing, that the development of integrated health
care provider networks is key to preserving and strengthening access
to communitybased health care services in rural areas. Provider
networks offer a number of advantages: They can work to ensure that
a continuum of health care services is available, reduce the
duplication of services, produce savings in administrative and other
costs through shared services and an enhanced ability to negotiate
in the health care market place, and recruit and utilize health professionals more effectively and efficiently.''
S. Rep. 104186 at p. 11.
Some providers and suppliers expressed concern that remuneration offered to health centers might be viewed as suspect under the anti kickback statute, because the health centers are frequently in a position to refer Federal health care program beneficiaries to the provider or supplier. Accordingly, Congress enacted section 431 of MMA to enable some health centers to conserve section 330 and other monies by accepting needed goods, items, services, donations, or loans for free or at reduced rates from willing providers and suppliers. C. Section 431 of MMA
Section 431 of MMA amended the antikickback statute to create a new safe harbor for certain agreements involving health centers. Specifically, section 431(a) of MMA excludes from the reach of the antikickback statute any remuneration between: (i) A health center described under section 1905(l)(2)(B)(i) or 1905(l)(2)(B)(ii) of the Act; and (ii) an individual or entity providing goods, items, services, donations, loans, or a combination of these to the health center pursuant to a contract, lease, grant, loan, or other agreement, provided that such agreement contributes to the health center's ability to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population served by the health center.
In other words, Congress intended to permit health centers to accept certain remuneration that would otherwise implicate the anti kickback statute when the remuneration furthers a core purpose of the Federal health centers program: ensuring the availability and quality of safety net health care services to otherwise underserved populations. As discussed in greater detail below, Congress limited the scope of the safe harbor to certain health centers engaged in arrangements involving specific types of identifiable remuneration.
In establishing regulatory standards relating to the safe harbor, Congress directed the Department to consider the following factors:
Section 431(b)(1)(B) of MMA provides that these three factors are ``among'' the factors the Department may consider in establishing the safe harbor standards. The statute authorizes the Department to include ``other standards and criteria that are consistent with the intent of Congress in enacting'' the health center safe harbor. Accordingly, we interpret the statute to permit us to consider other relevant factors and to establish other relevant safe harbor standards consistent with the antikickback statute and the health center safe harbor. Among the factors we have considered is whether arrangements would pose a risk of fraud or abuse to any Federal health care programs or their beneficiaries. We believe Congress intended to protect arrangements that foster an important goal of the section 330 grant program assuring the availability and quality of needed health care services for medically underserved populationswithout adversely impacting other Federal programs or their beneficiaries.
D. Summary of Proposed Safe Harbor
On July 1, 2005, we issued a notice of proposed rulemaking (70 FR 38081) to set forth standards related to the safe harbor described in section 431 of MMA, in which we proposed: (1) To protect remuneration in the form of goods, items, services, donations, loans, or a combination thereof provided by an individual or entity (hereinafter in this preamble ``Donor'') to a qualifying health center; (2) that remuneration must be medical or clinical in nature or relate directly to patient services provided by the health center as part of the scope of the health center's section 330 grant; and (3) importantly, that a protected arrangement must contribute to the ability of the health center to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population.
The proposed regulation proposed that protected arrangements must
be pursuant to a comprehensive contract, lease, grant, loan, or other
agreement that is written and signed by the parties, and the amount of
the protected remuneration must not be conditioned on the volume or
value of Federal health care program business generated between the parties. As we said in the notice of proposed rulemaking:
``In the unique and limited context of arrangements described in
the proposed safe harbor, we would extend safe harbor protection to
arrangements where only the methodology, and not the absolute value
of the remuneration, is predetermined. For example, a health center
might agree to pay a supplier a set hourly or per visit fee that is
below fair market value for services furnished by the supplier to the health center, provided that the formula for
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calculating the compensation (e.g., $ x per hour or $ x per service)
is fixed in advance and not conditioned on referrals to the supplier.'' 70 FR 38084.
We proposed that health centers must reasonably determine before entering into an agreement that the arrangement is likely to contribute to the health center's ability to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population. We also proposed that health centers would have to periodically reevaluate agreements to ensure ongoing compliance with this benefit standard and terminate as expeditiously as possible any arrangements that are not reasonably expected to continue to meet the standard. We proposed that the initial determination and any reevaluations should be contemporaneously documented.
Our proposed rule stated that health centers must not be required to refer patients to a particular provider or supplier. In addition, we proposed that Donors that offer to provide goods, items, or services must accept all referrals of patients from the health center who clinically qualify for the goods, items, or services, regardless of payor status or ability to pay. We proposed that protected arrangements could not be exclusive. The proposed rule also required health centers to provide effective notification to patients of their freedom to choose any willing provider or supplier and to disclose the existence and nature of protected arrangements.
We proposed to give health centers the option of requiring that a Donor that enters into a protected arrangement charge a referred health center patient the same rate it charges other similarly situated persons not referred by the health center or that the items or services be furnished to health center patients at a reduced rate or free of charge.
Finally, we proposed that an arrangement could not be protected
under the safe harbor unless it complied with the requirements of the health center's section 330 grant funding.
E. Summary of Final Safe Harbor
1. Major Changes
We have modified the proposed rule in a number of areas in response
to public comments. The substantial changes and clarifications being made in the final regulations include:
2. Final Safe Harbor Conditions
As discussed more fully in this preamble and regulations, the health center safe harbor protects remuneration in the form of goods, items, services, donations or loans (whether the donation or loan is in cash or inkind), or a combination thereof provided by a Donor to a qualifying health center. Qualifying health centers are health centers described under section 1905(l)(2)(B)(i) or 1905(l)(2)(B)(ii) of the Act. Remuneration must be medical or clinical in nature or relate directly to services provided by the health center as part of the scope of the health center's section 330 grant. A protected arrangement must contribute to the ability of the health center to maintain or increase the availability of, or enhance the quality of, services provided to a medically underserved population.
Protected arrangements must be pursuant to a contract, lease, grant, loan, or other agreement that is written, signed by the parties, and covers all of the remuneration to be provided. The amount of the remuneration must be specified and not be conditioned on the volume or value of Federal health care program business generated between the parties.
Health centers must reasonably expect before entering into an agreement that the arrangement is likely to contribute to the health center's ability to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population as defined at 42 U.S.C. 254b(b)(3). Health centers must document the basis for their determination that the arrangement will yield such a benefit. Health centers must periodically reevaluate agreements to ensure ongoing compliance with the benefit standard. These determinations must be contemporaneously documented.
Health centers must not be required to refer patients to a particular provider or supplier under the arrangement, and must be free to refer patients to any provider or supplier. In addition, Donors that offer to furnish goods, items, or services for health center patients must furnish those goods, items, or services to all health center patients who clinically qualify for them, regardless of payor status or ability to pay.
Health centers are required to provide effective notification to patients of their freedom to choose any willing provider or supplier and to disclose to patients, upon request, the existence and nature of the arrangement with the Donor.
The safe harbor makes clear that a health center may, at its option, require a Donor that enters into a protected arrangement to charge a referred health center patient the same rate it charges other similarly situated persons not referred by the health center or furnish items or services to health center patients at a reduced rate (where the discount applies to the total charge and not just the costsharing portion owed by an insured patient).
II. Summary of Public Comments and OIG Responses
In response to our proposed rulemaking, OIG received a total of nine timely filed comments from trade associations, hospitals, health centers, and other interested parties. We have divided the summaries of the public comments and our responses into three parts: general comments; comments on statutory elements; and comments on additional regulatory standards.
A. General Comments
All the commenters supported the establishment of a safe harbor for arrangements involving Federally Qualified Health Centers. While some commenters expressed their support for all of the regulatory standards in the proposed rule, other commenters took issue with one or more specific aspects of the proposal.
Comment: A trade association objected to the number of standards in the proposed regulation. The commenter suggested that the number of standards is too high and might dissuade parties from participating in safe harbored arrangements.
Response: As discussed in detail elsewhere in this preamble, we
have reduced the number of standards from eleven in the proposed rule to nine in
[[Page 56636]]
the final rule. We do not believe that the regulatory standards should
create an undue burden or otherwise chill participation in arrangements under the safe harbor.
Comment: Several commenters responded to the statement in the preamble to the proposed rule that OIG intended to monitor participants in safe harbored arrangements for compliance with billing rules, in order to guard against improper billing of Federal health care programs or inappropriate transfers of governmental funds. See 70 FR 38086. Two trade associations requested that we remove any mention of such monitoring, lest it discourage parties from participating in arrangements under this safe harbor. Another trade association suggested that, in return for safe harbor protection, it would be appropriate that health centers be monitored closely for compliance with the requirements of section 330 funding to determine whether the funding is used for its intended purpose. In particular, the commenter stated that it is important to ensure that any government benefits provided to health centers to serve uninsured patients are used to provide services to those patients and not diverted to subsidizing unrelated service lines.
Response: Our use of the term ``monitor'' may have inadvertently created the misimpression that parties to arrangements under this safe harbor would be subject to a higher level of scrutiny than parties to other arrangements. We clarify that we were referring simply to our usual and customary oversight authorities and practices. Participation in a safe harbored arrangement would not necessarily make parties a target of OIG attention or subject parties to heightened scrutiny; however, as providers who receive funding from Federal health care programs, health centers remain subject to our general oversight tools, including monitoring for proper billing and appropriate transfers of governmental funds. With that clarification, we do not believe that referencing our longstanding oversight authority should discourage participation in safe harbored arrangements. We agree with the last commenter and affirm our continued commitment to ensuring that Government funding is used for its intended purposes.
Comment: A trade association requested that we remove the proposed requirement at Sec. 1001.952(w)(11), which would have required any safe harbored agreement to comply with all relevant requirements of the health center's section 330 grant funding. The commenter suggested that the requirement is unnecessary, because health centers already operate under an obligation to comply with all requirements of their section 330 grant funding. Moreover, the commenter observed that including this provision in the safe harbor regulations might chill a Donor's willingness to participate in safe harbored arrangements, if that Donor also becomes obligated to ensure that the arrangements comply with the terms of a health center's section 330 grant funding.
Response: We agree with this commenter and are eliminating the standard in the final rule. The remaining safe harbor conditions, in combination with health centers' existing obligations to comply with the requirements of their section 330 grant funding, should be sufficient to minimize any risk of fraud and abuse.
Comment: We received a comment from a health center network noting that the safe harbor only offers protection under the antikickback statute and does not offer protection under the physician selfreferral law, section 1877 of the Act (commonly known as the ``physician self referral law'' or ``Stark'' law). The commenter expressed concern that the need to comply with both statutes may prove burdensome for health centers, and suggested that the requirements of the two laws be consolidated.
Response: The commenter correctly notes that the safe harbor only
protects arrangements under the antikickback statute, and, where
applicable, parties would also need to comply with the physician self
referral law. An exception under the physician selfreferral law is
beyond the scope of this rulemaking. The antikickback statute and the
physician selfreferral law, while similar in that they both address
abuses of the Medicare and Medicaid programs, are different in scope
and application. Congress has made clear that the physician self
referral law and the antikickback statute are separate legal
authorities, and compliance with one does not necessarily ensure
compliance with the other. See, e.g., H.R. Conf. Rep. No. 386, 101st Cong., 1st session 856 (1989).
B. Comments on Statutory Elements
1. Protected Health Centers
Comment: A trade association suggested we broaden the scope of the safe harbor to apply to arrangements involving other types of health centers that are similar to the health centers described in sections 1905(l)(2)(B)(i) and 1905(l)(2)(B)(ii) of the Act, except for the fact that they lack section 330 funding. These other facilities are often called ``lookalike'' facilities.
Response: We decline to adopt this suggestion. Congress specifically provided that the safe harbor should apply to the facilities described in sections 1905(l)(2)(B)(i) and 1905(l)(2)(B)(ii) of the Act and not to other types of facilities. Moreover, we believe the lack of section 330 funding, which entails a higher level of Government oversight, constitutes a significant distinction between section 330funded health centers and lookalike facilities. Extending safe harbor protection to entities without such Government funding and such a level of oversight would pose a greater risk of fraud and abuse. We recognize that many lookalike facilities play important roles in the health care safety net, and we note that just because arrangements with lookalike facilities do not fall within the safe harbor does not mean they are necessarily illegal. The fact that the safe harbor does not apply simply means that such arrangements must be analyzed on a casebycase basis to determine whether they violate the antikickback statute.
Comment: A trade association asked us to commit to considering the issuance of a regulatory safe harbor protecting arrangements involving lookalike facilities.
Response: We may consider this option in the future, depending on our experience with this safe harbor in practice.
2. Protected Remuneration
Comment: Several commenters sought clarification as to whether
community benefit grants and other types of cash donations qualify as
protected remuneration under this safe harbor. A trade association
asked that we add language in Sec. 1001.952(w)(2) that clarifies that
donations and loans could include cash donations, such as community
benefit grants, and are not limited to inkind donations and loans. One commenter noted that some community benefit grants entail
reconciliation provisions, which allow the donor (i) to augment the
grant if grant funds fall short of actual health center expenditures or
(ii) to determine the use of excess funds where grant funds exceed
actual health center spending. Two trade associations requested
clarification of the definition of ``remuneration'' and assurance that
the definition includes community benefit grants or similar payments to
health centers by public hospitals and health systems, even if the amount of
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the payments are subject to reconciliation.
Response: The definition of ``remuneration'' at Sec. 1001.952(w) would generally extend to community benefit grants or similar payments, even where such grants or payments are subject to a reconciliation provision. So long as the reconciliation methodology is fixed in advance and does not hinge on the volume or value of referrals from the health center to the Donor, funding subject to reconciliation could comply with the condition at Sec. 1001.952(w)(1) and be protected remuneration under this safe harbor (provided all other safe harbor conditions are satisfied). Donations and loans need not be limited to inkind goods or services, and indeed may be in monetary form. We have clarified the scope of Sec. 1001.952(w) to make this point more explicit: ``As used in section 1128B of the Act, 'remuneration' does not include the transfer of any goods, items, services, donations or loans (whether the donation or loan is in cash or inkind), or combination thereof from an individual or entity to a health center * * *'' (emphasis added).
Comment: A trade association suggested we expand the scope of the safe harbor to cover arrangements whereby the remuneration is provided not to the health center, but from the health center to an individual or entity related to the health center. The commenter said there are arrangements not covered by other safe harbors where a health center could provide payments or other forms of support to a provider that would result in improving the overall health outcomes of patients.
Response: Section 431 of MMA does not protect remuneration from a health center to an individual or entity. We believe it is clear that Congress intended the safe harbor to enhance the resources available to health centers in order to help them achieve their community benefit mission, and we decline to adopt the commenter's recommendation. We recognize that there may be beneficial arrangements where remuneration flows away from the health center that may not fit within a safe harbor; such arrangements would be evaluated on a casebycase basis to ensure compliance with the antikickback statute. We note that some arrangements pursuant to which a health center provides remuneration to an individual or entity may qualify for other safe harbors, including, for example, the safe harbors for personal services, employees, practitioner recruitment, and electronic health records items a nd services. See Sec. Sec. 1001.952(d), (i), (n), and (y).
Comment: A trade association noted that our proposed rule stated that section 431 ``only protects remuneration provided to a health center and does not protect remuneration provided to individuals affiliated with a health center * * *.'' 70 FR 38084. The commenter asked whether, for purposes of this safe harbor, remuneration to the health center could include funds provided by a hospital, if such funds were used to help recruit a physician to the health center.
Response: The donation described by the commenter raises the possibility of two scenarios: one in which the donation could be used to recruit a physician to the health center primarily for the benefit of health center patients, and one where it could be used to recruit a physician primarily for the benefit of the donor hospital. If the hospital made the donation of funds to the health center primarily for the benefit of health center patients, then its donation of funds for the purpose of supporting general physician recruitment by the health center could qualify for protection under this safe harbor, if all safe harbor conditions are satisfied. Conversely, we believe Congress did not intend the safe harbor to protect arrangements where the donation primarily creates a benefit to the Donor instead of to the health center. Likewise, this safe harbor would not protect an arrangement where a Donor used the health center as a conduit to transfer remuneration to a particular recruited physician; to transfer remuneration specifically for the purpose of recruiting a physician to join the Donor's medical staff, or to practice in the Donor's service area; or to transfer remuneration to existing group practices. The safe harbor does not protect remuneration provided by Donors to individuals affiliated with the health center. Section 431 evidences Congress' intent to protect the provision of certain remuneration ``to'' a health center. It does not protect remuneration transferred to an individual affiliated with a health center, nor does it protect remuneration transferred from a health center to an individual or entity. We note that, depending on the circumstances, such a recruitment arrangement between a health center and a physician may be eligible for protection under another safe harbor, such as the safe harbor for practitioner recruitment at Sec. 1001.952(n). When evaluating arrangements with potential Donors for funds to support physician recruitment, health centers should consider whether the remuneration would be used for expenses commonly or typically borne by the health center, such that the arrangement results in measurable savings that will benefit a medically underserved population, or would be used to recruit a health care professional needed by the health center to serve a medically underserved population. If a recruited physician were to join the health center's medical staff, it would be some evidence that the benefit primarily runs to medically underserved populations served by the health center as opposed to the Donor.
Comment: We received several comments regarding the proposed regulatory text for Sec. 1001.952(w)(2), which provides examples of ``patient services furnished by the health center as part of its section 330 grant'' in the parenthetical portion of the text, but does not similarly list examples of ``goods, items, donations, or loans.'' The commenters expressed concern that this suggested that only services could constitute protected remuneration. These commenters requested that the regulatory text also supply examples of protected goods, items, donations, and loans.
Response: The commenters misread proposed Sec. 1001.952(w)(2).
Goods, items, donations, and loansand servicescan indeed constitute
protected remuneration under this safe harbor. In the interest of
clarifying Sec. 1001.952(w)(2) so that health centers and Donors do
not interpret the scope of protected remuneration to be narrower than
it actually is, we have deleted the term ``patient services furnished''
and replaced it with the term ``services provided.'' Section
1001.952(w)(2) now requires that goods, items, services, donations, or
loans (or combination thereof) must either (i) Be medical or clinical
in nature or (ii) relate directly to services provided by the health
center in furtherance of its section 330 grant. The parenthetical list
offers illustrative examples of the kind of services that meet the
latter test and makes clear that such services need not be medical or
clinical in nature. For example, goods, items, services, donations, or
loans directly related to a health center's billing, administrative,
social services, and health information functions can qualify. We note
that the term ``medical or clinical in nature'' broadly covers all
medical or clinical services (e.g., physician services, nurse
practitioner and physician assistant services, diagnostic services,
therapeutic services, etc.); medical or clinical goods and items (e.g.,
pharmaceuticals, knee braces, stethoscopes, xray machines, etc.);
donations of money or other forms of remuneration that the health center can use to furnish medical or clinical
[[Page 56638]]
services or to acquire goods, items, or services that are medical or
clinical in nature; and loans of money or other forms of remuneration
that the health center can use to furnish medical or clinical services
or to acquire goods, items, or services that are medical or clinical in nature.
Comment: A nonprofit organization and several health centers submitted comments seeking clarification that the definition of remuneration at Sec. 1001.952(w) would include pharmaceutical manufacturers' donations of pharmaceutical products to health centers with the intent that these products be used to treat patients of the health center. They requested that we amend Sec. 1001.952(w) specifically to include donations of pharmaceutical products from pharmaceutical manufacturers, citing concerns that absent such an explicit acknowledgement, pharmaceutical manufacturers would refuse to donate to health centers.
Response: Nothing in Sec. 1001.952(w) excludes donations of pharmaceuticals by pharmaceutical companies from protection by the safe harbor. To the contrary, as discussed in the preceding response, such donations are clearly within the meaning of the language ``goods * * * [that] are medical or clinical in nature'' in Sec. 1001.952(w)(2). Pharmaceutical donations can play an important role in ensuring a health center safety net for vulnerable patients, and many arrangements between health centers and pharmaceutical companies may be eligible for protection. That said, we are not enumerating in the regulatory text any particular types of Donors. Whether something fits in the definition of protected ``remuneration'' at Sec. 1001.952(w) turns on the nature of the remuneration, not on its source. By listing some Donors and not others, we might create a misimpression regarding the scope of the safe harbor.
Comment: A nonprofit organization sought clarification that a health center's practice of purchasing discounted drugs by means of participation in the 340B Drug Pricing Program would not preclude that health center from receiving free drugs pursuant to a donation protected under this safe harbor.
Response: We confirm that this safe harbor could protect arrangements involving the donation of pharmaceuticals to health centers, including to health centers that participate in the 340B Drug Pricing Program.
3. Documentation Requirements
Comment: Several commenters supported our documentation requirements at proposed Sec. Sec. 1001.952(w)(1) and (3) (consolidated at Sec. 1001.952(w)(1) of the final rule). A trade association commented that the documentation requirements at proposed Sec. Sec. 1001.952(w)(1) and (3) are inconsistent with statements in the preamble. According to the commenter, the use of the term ``written agreement'' in the proposed regulatory language implies that all arrangements between a health center and a Donor must be included in a single writing, while the preamble says that all such arrangements should be memorialized ``by one comprehensive writing or by means of multiple writings that crossreference and otherwise incorporate the agreements between the parties.''
Response: For clarity and ease of application, we have combined the documentation requirements at proposed Sec. Sec. 1001.952(w)(1) and (3) of the proposed rule into one requirement at Sec. 1001.952(w)(1) in the final rule. We confirm that it may be satisfied by one comprehensive writing or by multiple writings that crossreference and otherwise incorporate the agreements between the parties. We have revised the safe harbor to reflect this. We have also revised the safe harbor to provide the option of using a centralized master list in lieu of crossreferencing and incorporation of multiple agreements. The master list must be maintained centrally and in a manner that preserves the historical record of arrangements, kept up to date, and made available for review by the Secretary upon request. This flexibility should enhance the ability of Donors and health centers to use the safe harbor. The safe harbor does not require that all arrangements between a health center and a Donor be included in a single agreement that would qualify under the safe harbor.
Comment: A trade association sought clarification that the documentation requirements at proposed Sec. Sec. 1001.952(w)(1) and (3) (Sec. 1001.952(w)(1) of the final rule) apply only to arrangements related to a safe harbored arrangement, and not to other interactions between the health center and the Donor that truly are unrelated to a safe harbored arrangement. The commenter believed that the documentation requirements imply that all arrangements between a health center and a Donor must be included in a single arrangement that would qualify under the safe harbor. The commenter suggested that only arrangements that ``require safe harbor protection'' should require documentation.
Response: The safe harbor does not require that all arrangements between a health center and a Donor be included in a single arrangement that would qualify under the safe harbor. The documentation standards at Sec. 1001.952(w)(1) (Sec. Sec. 1001.952(w)(1) and (3) in our proposed rule) require that the written documentation ``cover all goods, items, services, donations, or loans to be provided to the health center.'' In the interest of providing brightline guidance with respect to what must be documented under Sec. 1001.952(w)(1), we clarify that this paragraph requires the documentation of all arrangements for the transfer of goods, items, services, donations, or loans from a Donor to a health center. With respect to the commenter's assertion that certain arrangements ``require safe harbor protection,'' we note that, like all safe harbors, compliance with this safe harbor is voluntary and no arrangement requires safe harbor protection. Rather, arrangements must comply with the antikickback statute. Compliance with a safe harbor is one option for ensuring compliance with the antikickback statute.
4. Benefit to a Medically Underserved Population
Comment: A trade association asked us to clarify Sec. 1001.952(w)(4) of the proposed rule (Sec. 1001.952(w)(3) of the final rule), which requires that arrangements protected under the safe harbor be reasonably expected to contribute meaningfully to the health center's ability to maintain or increase the availability, or enhance the quality of, services provided to a medically underserved population. Specifically, the commenter sought confirmation that, in order to contribute meaningfully, the arrangement need not result in a financial gain for the health center. The commenter asked us to consider the case of a health center that does not offer a particular service for its patients, but enters into an arrangement with a Donor for that service for free. The commenter observed that since the health center had not previously incurred expenses for the service, the new arrangement would not offer a financial gain to the health center. Another trade association requested confirmation that proposed Sec. 1001.952(w)(4) would not necessarily require direct savings of section 330 funding and could be satisfied without a monetary benefit to the health center.
Response: We confirm that proposed Sec. 1001.952(w)(4) (Sec. 1001.952(w)(3) of the final rule) does not require a
[[Page 56639]]
financial gain to the health center and does not require the direct
savings of section 330 funding. Whether the condition is satisfied will
depend on the specific facts and circumstances. As noted in the
preamble to the proposed rule at 70 FR 38085, we believe health centers
are wellsituated in the first instance to make a reasonable
determination whether an arrangement contributes meaningfully to the
health center's ability to maintain or increase the availability, or
enhance the quality of, services provided to a medically underserved
population, and we believe health centers should have flexibility in
making these determinations. In the preamble to the proposed rule at 70
FR 38085, we listed factors that are exemplars of the type that should be considered in making these determinations:
The arrangement described in the first commenter's example could contribute meaningfully, if it increased the availability of the service for the health center's medically underserved population. With respect to the second commenter, we observe that while an arrangement that conserves a health center's section 330 funding means the health center has more money available to provide or enhance services for a medically underserved population, there are many other ways that remuneration could maintain, increase, or enhance services for a medically underserved population without the direct savings of section 330 funding. For example, if an arrangement allowed a health center to begin delivering an important new clinical service, which the health center was not previously able to provide, a meaningful benefit to a medically underserved population would likely be achieved without a direct monetary gain to the health center.
Comment: A trade association had a concern regarding the significance of the list of factors in the preamble that we wrote ``should be considered'' in determining whether an arrangement would result in a meaningful benefit to a medically underserved population. See 70 FR 38085. The commenter asked for confirmation that the factors in the list are only examples, and that it is not necessary to satisfy all of the factors to demonstrate a meaningful benefit under proposed Sec. 1001.952(w)(4) (Sec. 1001.952(w)(3) of the final rule).
Response: The factors listed in the proposed rule and noted in the preceding response are examples of ways to analyze the existence of a meaningful benefit, and the commenter correctly understood that it is not necessary to satisfy each exemplary factor to establish the existence of a meaningful benefit to a medically underserved population under Sec. 1001.952(w)(3) of the final rule.
Comment: A trade association commented that our requirement at proposed Sec. 1001.952(w)(4) that health centers apply ``reasonable, consistent, and uniform standards'' when determining whether an arrangement bestows a meaningful benefit for services provided to a medically underserved population provides insufficient guidance to health centers for structuring arrangements. The commenter also objected to the proposed requirement that health centers document evaluation of such standards. It expressed concern that these requirements would have a chilling effect on parties' participation in safe harbored arrangements, as parties would be unsure whether their standards would satisfy the requirements of the safe harbor. The commenter requested that we provide examples of acceptable standards and how to document them, or eliminate the requirement all together.
Response: We intended the language ``reasonable, consistent and
uniform standards'' to give health centers flexibility in assessing
benefits to a medically underserved population, while at the same time
requiring accountability and providing safeguards against abuse. Upon
further consideration and consistent with our original intent, we have determined that proposed Sec. 1001.952(w)(4) (now Sec.
1001.952(w)(3)) can be simplified. Under Sec. 1001.952(w)(3) of the
final rule, parties need not develop or apply any separate
``standards,'' nor document that they have applied them. They must,
however, document the basis for the reasonable expectation of benefits
to a medically underserved population prior to entering the
arrangement. Parties may, as a matter of prudent business practice,
develop standards that are reasonable, uniform, and consistently
applied as part of the methodology they use in assessing the expected
benefit to a medically underserved population. We have similarly
changed the corresponding language in Sec. 1001.952(w)(4) of the final
rule, which concerns the reevaluation of arrangements. With respect to
the commenter's concern that proposed Sec. 1001.952(w)(4) (Sec.
1001.952(w)(3) in the final rule) will chill participation in the safe
harbor, we note that our approach here is consistent with several
existing safe harbors that provide parties with flexibility to
determine how to satisfy key conditions (e.g., how to determine fair
market value). A health center can document its determination of a
meaningful benefit to a medically underserved population, for example,
by maintaining written or electronic records of the data and
methodology used to assess the expected maintenance of, increase in, or
enhanced quality of services to a medically underserved population and
the outcome of such assessment. We believe that the documentation
necessary to satisfy this requirement is consistent with that generally
kept in the usual and customary course of a health center's business.
For example, in many cases a health center's section 330 grant
documents, in combination with the agreement required under Sec.
1001.952(w)(1), may serve as the documentation of a sufficient benefit
to a medically underserved population, to the extent they transparently
document that a volume of items or services specified by the section
330 grant requirements will be provided under the agreement. Parties
with concerns about their specific practices can avail themselves of OIG's advisory opinion process.
5. Periodic ReEvaluation of Arrangements
Comment: A health network supported the requirement at proposed
Sec. 1001.952(w)(5) (Sec. 1001.952(w)(4) of the final rule) that
parties periodically reevaluate arrangements. The commenter stated
that it seems reasonable and useful for health centers participating in
these arrangements to reevaluate agreements periodically and document
such factors as fair market value of equipment or costs of providing
services. A trade association requested that we eliminate the requirement that an arrangement that, upon reevaluation,
[[Page 56640]]
fails to meet the benefit standard be terminated. This commenter also
asked us to clarify that continuation of such an arrangement would not
automatically constitute a violation of the antikickback statute.
Response: We agree with these commenters. We have adopted the trade
association's recommendation to eliminate the language in Sec.
1001.952(w)(5) of the proposed rule that required noncompliant
arrangements to be promptly terminated. We also confirm that a decision
by a health center to continue participating in an arrangement that no
longer satisfies the requirements of Sec. 1001.952(w)(3) of the final
rule will not necessarily give rise to a violation of the antikickback
statute. Rather, the continuation of such an arrangement would fall
outside of the safe harbor, and its legality under the antikickback
statute would be determined on a casebycase basis, based on all the
facts and circumstances, including the intent of the parties. Finally,
we agree with the commenter that, depending on the arrangement, it
would be reasonable and useful for health centers participating in
these arrangements to reevaluate agreements periodically and document
such factors as fair market value of equipment or costs of providing services.
C. Comments on Additional Regulatory Standards
1. General Comments
Comment: A trade association asserted that the regulatory standards OIG proposed in accordance with section 431 of MMA should be limited to the factors set forth in section 431 and should not include additional requirements. As discussed in our preamble to the proposed rule at 70 FR 38083, in addition to the standards established by Congress, section 431 of MMA authorizes OIG to add other standards or criteria consistent with Congress' intent in creating this safe harbor. The commenter stated that establishing additional safe harbor standards consistent with the antikickback statute contravenes the plain language of the statute and Congress' intent. The commenter asked that the regulatory standards created in accordance with section 431 not include additional requirements that health centers and their partners would have to meet to be consistent with the antikickback statute. Finally, the commenter contended that these standards wrongly ``reconsider'' whether the arrangements pose a risk of fraud and abuse. According to the commenter, by definition, all the arrangements described in the safe harbor pose a risk of fraud and abuse, which is why they require safe harbor protection in the first place.
Response: We agree with the commenter's view that the regulatory
standards we create in accordance with section 431 must be consistent
with the language of section 431, and we believe that our regulations
meet that test. Section 431 explicitly requires us to consider health
center resources, patient freedom of choice, and independent medical
judgment; however, it further states that these factors are ``among''
those to be considered and that ``the Secretary may also include other
standards and criteria that are consistent with the intent of Congress
in enacting the exception established under this section.'' Every safe
harbor is established to protect arrangements that otherwise implicate
the antikickback statute. Therefore, we believe Congress charged the
Secretary with promulgating regulations implementing the health center
safe harbor in a manner that furthers beneficial health center
arrangements without posing an undue risk of fraud and abuse under the
antikickback statute. This approach is consistent with our
longstanding approach to safe harbor rulemaking. For instance, in our
preamble to the proposed rule for the first ten safe harbors we stated
that: ``[w]e have attempted in these proposed regulations to permit
physicians to freely engage in business practices and arrangements that
encourage competition, innovation and economy. However, we have added
criteria to each `safe harbor' in order to reduce the potential for
abuse.'' (50 FR 3088; January 23, 1989) Congress enacted section 431 in
the context of this regulatory history. Moreover, we do not believe
Congress intended to protect arrangements that pose significant risk to
Federal health care programs or their beneficiaries. We believe our
regulations directly and reasonably derive from the guidelines
specifically enacted in section 431 and Congress' invitation to include
other standards consistent with the establishment of the safe harbor.
With respect to the commenter's final comment, historically, regulatory
safe harbors were initiated in response to concerns that the anti
kickback statute covered some relatively innocuous commercial
arrangements. (See 50 FR 3088; January 23, 1989 and 56 FR 35952; July
29, 1991) These safe harbors are meant to protect arrangements that do
not pose undue risk for Federal health care programs or beneficiaries;
they are not meant to protect arrangements that pose high risks to Federal health care programs.
2. Patient Freedom of Choice and Independent Medical Judgment
Comment: A trade association sought clarification that proposed Sec. Sec. 1001.952(w)(6) and (8) (Sec. Sec. 1001.952(w)(5) and (7) of the final rule) would permit a health center to select a single supplier of particular goods or services if the health center followed the procurement rules applicable to health centers set forth at 45 CFR 74.40 through 74.48. The commenter presented the scenario of a health center purchasing laboratory services where the health center has a choice of suppliers, which are equal in all respects except that one prospective supplier will offer free laboratory services for uninsured patients while the other will not. The commenter suggested that it may be appropriate for the health center to enter into an exclusive contract with the supplier that offers free services.
Response: Where a health center purchases or receives a particular good or service from a supplier, the health center may limit the number of suppliers with which it contracts, in keeping with health center procurement rules. Nothing in this safe harbor is to the contrary. We agree that in some circumstances it would be appropriate for a health center to contract with one supplier (e.g., a single supplier of laboratory services), and that such an arrangement would not be likely to impinge unduly or significantly on the freedom of choice of patients seeking care at a section 330 health center. We have made clarifying revisions to Sec. 1001.952(w)(5) of the final rule to reflect that a Donor may not require a health center to refer patients to a particular individual or entity. Nothing in this provision limits a health center's ability to contract with one supplier consistent with the procurement rules.
Similarly, proposed Sec. 1001.952(w)(8) (Sec. 1001.952(w)(7) of
the final rule) prohibits a Donor from requiring the health center to
forego arrangements with other prospective Donors, but does not
prohibit the health center from entering into an exclusive arrangement
with a provider or supplier when the health center so chooses, and when
it can do so in compliance with relevant procurement rules. In the
commenter's example, a health center can accept the offer of free
laboratory services for uninsured patients under the safe harbor,
provided all other safe harbor conditions are met. We emphasize that
this safe harbor is unique to Federally Qualified Health Centers. In general,
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arrangements where a provider or supplier offers free or discounted
items or services to a potential referral source that would otherwise
incur outofpocket costs for such items or services pose a substantial
risk of fraud under the antikickback statute. Nevertheless, Congress
enacted a law that protects such arrangements in the health center
context, where the remuneration inures to the benefit of a section 330
health center and its medically underserved patients, and where other
appropriate safeguards are in place. Other similar arrangements outside
the health center context are fundamentally different and pose substantial risk under the antikickback statute.
Comment: A trade association offered mixed reactions to proposed Sec. 1001.952(w)(7) (Sec. 1001.952(w)(6) in the final rule), which provides that Donors who offer to provide goods, items, or services to health center patients cannot limit their acceptance of health center patient referrals based on a patient's insura
FOR FURTHER INFORMATION CONTACT
Spencer Turnbull, Office of Counsel to the Inspector General, (202) 6190335.