[Federal Register Volume 70, Number 126 (Friday, July 1, 2005)]
[Proposed Rules]
[Pages 38081-38089]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-13049]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
Office of Inspector General
42 CFR Part 1001
RIN 0991-AB38
Medicare and State Health Care Programs: Fraud and Abuse; Safe
Harbor for Federally Qualified Health Centers Under the Anti-Kickback
Statute
AGENCY: Office of Inspector General (OIG), HHS.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: In accordance with section 431 of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (MMA), Public Law 108-
173, this proposed rule would establish regulatory standards for the
new safe harbor under the Federal anti-kickback statute for certain
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. Under this proposed safe harbor, 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.
DATES: We will consider comments if we receive them at the appropriate
address, as provided in the address section below by no later than 5
p.m. on August 1, 2005.
ADDRESSES: You may submit comments by any of the methods set forth
below. In all cases, when commenting, please refer to file code OIG-67-
P.
Mail--Office of Inspector General, Department of Health
and Human Services, Attention: OIG-67-P, Room 5246, Cohen Building, 330
Independence Avenue, SW., Washington, DC 20201.
Please allow sufficient time for us to receive mailed comments by
the due date in the event of delivery delays.
Hand delivery/courier--Cohen Building, 330 Independence
Avenue, SW., Washington, DC 20201.
Because access to the Cohen Building is not readily available to
persons without Federal Government identification, commenters are
encouraged to leave their comments in OIG's drop box located in the
main lobby of the building.
Federal eRulemaking Portal: http://www.regulations.gov.
Include agency name and identifier RIN 0991-AB37.
Because of staff and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. For information on viewing
public comments, see section IV in the SUPPLEMENTARY INFORMATION
section.
FOR FURTHER INFORMATION CONTACT: Julie Taitsman, Office of Counsel to
the Inspector General, (202) 619-0335.
SUPPLEMENTARY INFORMATION:
I. Background
A. The Anti-Kickback Statute and Safe Harbors
Section 1128B(b) of the Social Security Act (the Act) (42 U.S.C.
1320a-7b(b), the anti-kickback 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 5 years. Violations of the anti-kickback statute
may also result in the imposition of a civil money penalty (CMP) under
section 1128A(a)(7) of the Act (42 U.S.C. 1320a-7a(a)(7)) or 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 covered specifically include, without
limitation, kickbacks, bribes, and rebates, whether made directly or
indirectly, overtly or covertly, in cash or in kind. In addition,
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.
Section 14 of the Medicare and Medicaid Patient and Program
Protection Act of 1987, Public Law 100-93, specifically required the
development and promulgation of regulations, the so-called ``safe
harbor'' provisions, that would specify various payment and business
practices that would not be treated as criminal offenses under the
anti-kickback statute, even though they may potentially be capable of
inducing referrals of business under the Federal health care programs.
Since July 29, 1991, we have 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);
and 66 FR 62979 (December 4, 2001).
---------------------------------------------------------------------------
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 any enforcement action under the anti-
kickback statute, the CMP provision for anti-kickback violations, or
the program exclusion authority related to kickbacks. In giving the
Department of Health and Human Services the authority to protect
certain arrangements and payment practices under the anti-kickback
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 330-Funded 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
[[Page 38082]]
services. In the Health Centers Consolidation Act of 1996, Public Law
104-299, Congress consolidated the four then-existing 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. 104-186 (December 15, 1995). In 2003, the Federal
health center programs supported 890 organizations that provided care
to over 12 million patients at 3,600 health care service delivery
sites.\2\
---------------------------------------------------------------------------
\2\ Bureau of Primary Health Care, ``Section 330 Grantees
Uniform Data System: Calendar Year 2003 Data'' (available at http://www.bphc.hrsa.gov/uds/data.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 tax-exempt (Internal Revenue Code section
501(c)(3) corporations) 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)(l). 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)(l). 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
occupation-related 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
the 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 low-income
individuals, including some beneficiaries of the Medicare and Medicaid
programs. In 2003, 36 percent of patients treated by section 330 grant
recipients were beneficiaries of a Medicaid program, 7 percent were
beneficiaries of the Medicare program, and 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 2003, this number had increased to 4.9
million, representing 39 percent of patients treated at those centers
during that year.\5\
---------------------------------------------------------------------------
\4\ Bureau of Primary Health Care, ``Section 330 Grantees
Uniform Data System: Calendar Year 2003 Data''--Table 4: Users by
Socioeconomic Characteristics (available at http://www.bphc.hrsa.gov/uds/data.htm).
\5\ Bureau of Primary Health Care, ``Section 330 Grantees
Uniform Data System: Calendar Year 2003 Data''--UDS Trend Data for
Years 1996 through 2003 (available at http://www.bphc.hrsa.gov/uds/data.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)(l)(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. In general, section 330 grant funds help make up for
shortfalls in health center revenues. Thus, 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 third-party 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 25 to 30
percent of revenue for health centers receiving such grants. The
majority of health center funding derives from charges for patient
services. On average, approximately 6.2 percent of health center
revenues come from private third-party reimbursement, 35.5 percent from
Medicaid payments, 5.5 percent from Medicare payments, and 5.9 percent
from self-payments from patients.\6\
---------------------------------------------------------------------------
\6\ Bureau of Primary Health Care, ``Section 330 Grantees
Uniform Data System: Calendar Year 2003 Data''--Exhibit A: Total
Revenue Received by BPHC Grantees (available at http://www.bphc.hrsa.gov/uds/data.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
[[Page 38083]]
in-kind 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 community-based 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. 104-186 at p. 11.
Some providers and suppliers have 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 amends the anti-kickback 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
anti-kickback 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, i.e., 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 exception to certain health centers engaged in
arrangements involving specific types of identifiable remuneration.
Section 431(b) of MMA requires the Department to promulgate
regulatory standards relating to the new safe harbor. In establishing
the standards, Congress directed the Department to consider the
following factors:
Whether the arrangement results in savings of Federal
grant funds or increased revenues to the health center. We believe this
factor evidences Congress's intent that a protected arrangement
directly benefit the health center economically and that the benefits
of the arrangement primarily inure to the health center, rather than
the individual or entity providing the remuneration.
Whether the arrangement restricts or limits patient
freedom of choice. We believe this factor evidences Congress's intent
that protected arrangements not result in inappropriate steering of
patients. Under the safe harbor, patients remain free to obtain
services from any provider or supplier willing to furnish them.
Whether the arrangement protects the independent medical
judgment of health care professionals regarding medically appropriate
treatment for patients. We believe this factor evidences Congress's
intent to safeguard the integrity of medical decision-making and ensure
it is untainted by direct or indirect financial interests. In all
cases, the best interests of the patient should guide the medical
decision-making of health centers and their affiliated health care
professionals.
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. Section 431(b)(1)
of MMA. Accordingly, we interpret the statute to permit us to consider
other relevant factors and to establish other relevant safe harbor
standards consistent with the anti-kickback statue and the health
center exception. 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 populations--without adversely
impacting other Federal programs or their beneficiaries.
II. Provisions of the Proposed Rule
This proposed rule would establish standards for a safe harbor
under the anti-kickback statute that would protect certain remuneration
provided by an individual or entity to certain health centers funded
under section 330 of the PHS Act when all safe harbor conditions are
satisfied.
A. Statutory Elements
1. Protected Health Centers
The health center safe harbor would be limited to health centers
described under section 1905(l)(2)(B)(i) or 1905(l)(2)(B)(ii) of the
Act. These sections describe health centers that satisfy all
requirements for a section 330 grant and: (i) Directly receive such a
grant; or (ii) receive such grant funding under contract with a grant
recipient. For the purposes of these regulations, the facilities
described in sections 1905(l)(2)(B)(i) and 1905(l)(2)(B)(ii) of the Act
are referred to as ``health centers.'' These health centers are two of
the four types of Federally qualified health centers (FQHCs) described
in section 1905(l)(2)(B) of the Act. Congress excluded from safe harbor
protection the two other types of FQHCs described in sections
1905(l)(2)(B)(iii) and 1905(l)(2)(B)(iv) of the Act. Although these or
other ``look-alike'' facilities might qualify for section 330 grant
funding, they do not actually receive section 330 grant funding and are
not similarly subject to Government oversight inherent in the grant
approval and administration processes. We note that arrangements
involving these other types of facilities that do not qualify for safe
harbor protection are not necessarily unlawful under the anti-kickback
statute; rather, such arrangements must be evaluated on a case-by-case
basis for compliance with the anti-kickback statute.
2. Protected Remuneration
Section 431(a)(3) of MMA defines the scope of protected
remuneration as ``goods, items, services, donations, loans, or a
combination thereof'' provided by an individual or entity to a
qualifying health center.\8\ Other forms of remuneration fall outside
the scope of the safe harbor. To ensure that protected arrangements
further the purposes of the safe harbor, we would require that the
remuneration must be medical or clinical in nature or relate directly
to patient services furnished by the health center as part of the scope
of the health center's section 330 grant (including, for example,
billing services, administrative support services, technology support,
and enabling services, such as case management, transportation, and
translation services).
---------------------------------------------------------------------------
\8\ We note that the ``Stark law'' (section 1877 of the Act, 42
U.S.C. 1395nn) will apply to financial relationships between a
health center and a physician who refers Medicare or Medicaid
patients to the health center for ``designated health services''
(defined in the statute at 42 U.S.C. 1395nn(h)(6) and in the
regulations at 42 CFR 411.351). All such arrangements must fit in a
Stark law exception. See generally 42 U.S.C. 1395nn and 42 CFR part
411.
---------------------------------------------------------------------------
We interpret section 431 of MMA as applying to remuneration
provided by an individual or entity to the health center. Section 431
of MMA does not protect remuneration from a health
[[Page 38084]]
center to an individual or entity. Any such arrangements must be
evaluated on a case-by-case basis to ensure compliance with the anti-
kickback statute.\9\ This interpretation is consistent with: (i) The
statutory requirement that the remuneration contribute to the health
center's ability to maintain or increase the availability or quality of
services provided to medically underserved populations; and (ii) the
factors set out in section 431(b), including, specifically, the factor
at section 431(b)(i) related to the economic benefit to the health
center.
---------------------------------------------------------------------------
\9\ We note that some such arrangements may fit in other
available safe harbors, such as the safe harbors for personal
services and management contracts, employees, or practitioner
recruitment, 42 CFR 1001.952(d), (i), and (n).
---------------------------------------------------------------------------
Moreover, section 431(a)(3) of MMA makes clear that the health
center exception only protects remuneration provided to a health center
and does not protect remuneration provided to individuals affiliated
with a health center, such as board members, physicians or other health
care professionals, administrators, or others. Where remuneration
results in personal gain for an individual in a position to influence
the referral or award of business, there is an elevated risk of fraud
or abuse.
Similarly, the exception, by its terms, does not protect
remuneration offered by providers and suppliers to patients of the
health center. Where the remuneration inures to the financial benefit
of the patient, rather than the economic benefit of the health center,
we believe the existing prohibitions on offering inducements to Federal
health care program beneficiaries apply.\10\ These existing
prohibitions are intended to prevent unscrupulous providers and
suppliers from luring vulnerable patients to receive unnecessary,
substandard, or overpriced services.\11\ Notwithstanding, we make the
following observations:
---------------------------------------------------------------------------
\10\ These prohibitions are the CMP law against offering
inducements to Medicare or Medicaid beneficiaries, section
1128A(a)(5) of the Act, and the anti-kickback statute. Exceptions to
section 1128A(a)(5) of the Act are set forth at section 1128A(i)(6)
of the Act.
\11\ In August 2002, we issued a Special Advisory Bulletin on
``Offering Gifts and Other Inducements to Beneficiaries'' (available
on our web site at http://www.oig.hhs.gov/fraud/docs/alertsandbulletins/SABGiftsandInducements.pdf) that explains our
concerns regarding improper beneficiary inducements and our
interpretation of the existing prohibitions.
---------------------------------------------------------------------------
Remuneration, such as reduced charges or free services,
offered by providers and suppliers to uninsured patients is not
prohibited by the Federal fraud and abuse laws, except in the unusual
circumstances where a patient is a potential source of referrals of
Federal health care program business (for example, the patient is an
uninsured referring physician or an uninsured spouse or child of a
referring physician).\12\
---------------------------------------------------------------------------
\12\ In February 2004, we issued a guidance document on
discounts for patients who cannot afford to pay their hospital bills
(available on our web site at http://www.oig.hhs.gov/fraud/docs/alertsandbulletins/2004/FA021904hospitaldiscounts).The analytical
framework contained in this guidance would apply similarly to
discounts offered to uninsured patients by other types of providers
or suppliers.
---------------------------------------------------------------------------
Providers and suppliers may waive the cost-sharing amounts
for Federal health care program patients who have financial need,
provided the provider or supplier does not routinely waive copayments;
the waivers are not offered as part of an advertisement or
solicitation; and the copayments are waived only after a good faith
individualized determination of financial need or the failure of
reasonable collection efforts.\13\
---------------------------------------------------------------------------
\13\ See, e.g., section 1128A(i)(6) of the Act; Special Fraud
Alert, ``Routine Waiver of Part B Co-payments/Deductibles''
(available on our Web site at http://www.oig.hhs.gov/fraud/docs/alertsandbulletins/121994.html); Special Advisory Bulletin,
``Offering Gifts and Other Inducements to Beneficiaries'' (id. at
fn. 9). We also note that the anti-kickback statute allows health
centers to waive copayments under a special exception at 42 U.S.C.
1320a-7b(b)(3)(D); 42 CFR 1001.952(k)(2).
---------------------------------------------------------------------------
To further ensure transparency and untainted medical decision-
making, we would require that the goods, items, services, donations, or
loans to be provided under a protected arrangement must be specified
and fixed in advance in the agreement between the parties in the form
of a fixed amount or sum, fixed percentage, or other fixed
methodology.\14\ The fixed amount or sum, fixed percentage, or other
methodology must not be conditioned on the volume or value of Federal
health care program business generated between the parties. Requiring
that the remuneration (or methodology for determining the remuneration)
be fixed in advance would prevent the parties from subsequently
adjusting the nature or quantity of the remuneration based on the
volume or value of Federal health care program referrals generated by
the health center. In addition, the requirement that the remuneration
be fixed in advance and not conditioned on referrals would help protect
the independent medical judgment of health care professionals.
---------------------------------------------------------------------------
\14\ In the unique and limited context of arrangements described
in this 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
calculating the compensation (e.g., $ x per hour or $ x per service)
is fixed in advance and not conditioned on referrals to the
supplier.
---------------------------------------------------------------------------
3. Documentation Requirements
Section 431(a)(3) of MMA specifies that protected arrangements be
``pursuant to a contract, lease, grant, loan, or other agreement.'' To
enable the parties and the government to verify compliance with the
safe harbor, we would require that the agreement: (i) Be in writing;
(ii) be signed by the parties; and (iii) cover all the goods, items,
services, donations, and loans provided by the individual or entity to
the health center. These requirements would be satisfied by one
comprehensive writing or by means of multiple writings that cross-
reference or otherwise incorporate other agreements between the
parties. These proposed documentation conditions are consistent with
other safe harbors at 42 CFR 1001.952. Moreover, we believe these
proposed documentation practices are consistent with existing prudent
business practices of health centers. Importantly, the conduct of the
arrangement must comport with the terms of the written agreement.
4. Benefit to a Medically Underserved Population
Section 431(a)(3) of MMA requires that a protected arrangement
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 served by the health center.''
This benefit to a medically underserved population is a critical factor
distinguishing the safe harbored conduct from many otherwise
potentially abusive arrangements.
Under existing program rules, health centers serve: (i) Populations
that are medically underserved; or (ii) special medically underserved
populations comprised of migratory and seasonal agricultural workers,
homeless people, and residents of public housing. 42 U.S.C. 254b(a)(1).
The term ``medically underserved population'' means ``the population of
an urban or rural area designated by the Secretary as an area with a
shortage of personal health services or a population group designated
by the Secretary as having a shortage of such services.'' 42 U.S.C.
254b(b)(3)(A). The Secretary bases such determinations on the health
status of the population, as well as its ability to access and pay for
needed services. Accordingly, for purposes of this safe harbor, we
would define ``medically underserved population'' with reference
[[Page 38085]]
to the existing definition at 42 U.S.C. 254b(b)(3)(A) and the
corresponding regulations at 42 CFR 51c.102(e). All health centers that
qualify for section 330 funding serve at least one medically
underserved population.
While the statute requires that a protected arrangement benefit a
medically underserved population served by the health center by
maintaining or increasing the availability or quality of services
provided to the medically underserved population, Congress established
no specific methodology for determining whether this benefit standard
is satisfied. Having considered various options, we have concluded that
Congressional intent would best be served by assessing whether an
arrangement would result in the required benefit based upon the
particular facts and circumstances. We believe health centers are well
situated in the first instance to make a reasonable determination
whether an arrangement will increase the availability, or enhance the
quality, of services provided to a medically underserved population.
We do not interpret the statute as protecting arrangements in which
the benefit to the health center and the medically underserved
population it serves is merely incidental or where the arrangement
primarily benefits the donor (e.g., through referrals of Federally
billable business) rather than the health center. An incidental benefit
to a medically underserved population tangentially related to an
arrangement would not suffice to protect an arrangement under this
proposed safe harbor. Accordingly, the proposed regulations would
require that the arrangement must 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 served by the health center.
In determining whether an arrangement would result in a meaningful
benefit to a medically underserved population, the following factors,
among others, should be considered:
Does the arrangement directly benefit a medically
underserved population (e.g., additional services of physicians or
allied health professionals at the health center)?
Does the arrangement involve goods, items, or services of
a type that are commonly or typically purchased by the health center,
such that the arrangement results in measurable savings that will
benefit a medically underserved population?
If the arrangement involves a donation to the health
center, would the donation result in the increased availability of an
item, good, device, service, technology, or treatment needed by a
medically underserved population, but not previously available in
sufficient quantities due to financial limitations?
Does the health center need the donated items, goods, or
services, or the loaned funds to satisfy the scope of its section 330
grant? It is important to note that this safe harbor only protects
arrangements involving remuneration that helps the health center
fulfill its section 330-grant mission (including, for example,
transportation and other enabling services that help patients access
the services available from the health center), but does not protect
remuneration that does not further the health center's mission (e.g.,
unnecessary office space, superfluous supplies, or expired
medications).
These factors are illustrative, not exhaustive, of relevant
considerations. No one factor would be dispositive in determining
whether an arrangement confers the benefit required for safe harbor
protection. We are soliciting public comments on methods for
establishing that an arrangement will confer the requisite benefit to a
medically underserved population.
Health centers would be required to take reasonable and verifiable
steps to ensure that all arrangements meaningfully contribute to the
quality or availability of services the center provides to a medically
underserved population. Specifically, to qualify for safe harbor
protection, the health center would have to:
Reasonably determine before entering into the 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 to a medically underserved population. Health
centers would have to apply reasonable, consistent, and uniform
standards for determining this benefit to all proposed arrangements
involving similar items, goods, services, loans, or donations. Assuming
there is a reasonable and documented expectation of sufficient benefit
at the onset of an agreement, the arrangement would not lose its safe
harbor protection retroactively if the expected benefit were not, in
fact, realized for reasons beyond the control of the parties.
Periodically re-evaluate agreements to ensure ongoing
compliance with the benefit standard and terminate as expeditiously as
possible any arrangements that are not reasonably expected to continue
to meet the standard. Re-evaluation would need to be conducted at
reasonable intervals not to exceed one year, applying reasonable,
consistent, and uniform standards. Terminated agreements would not be
able to be renegotiated in a manner that is conditioned on the volume
or value of Federal health care program referrals. Similarly,
arrangements would not be able to be renewed unless the health center
reasonably expected the benefit to a medically underserved population
standard to be satisfied in the next agreement term.
Document the initial determination and any re-evaluations
contemporaneously. The nature of the documentation would need to be
reasonable under the circumstances. Acceptable documentation might
include, for example, an estimate of the value of the remuneration
exchanged in the particular arrangement and its usefulness to the
health center. For example, for an arrangement involving donated
equipment, the health center might document the fair market value of
the donated equipment or the expenses the health center would have
otherwise incurred to purchase or lease similar equipment, as well as
the extent to which accepting the donated equipment would increase the
quantity or quality of services provided to health center patients.
Similarly, for an arrangement involving a monetary donation, the health
center might document the amount of the donation and the estimated
health care services to be purchased or furnished with the funds. The
health center would need to make this documentation available to the
Secretary upon request.
We think it likely that many of these steps are those that a
prudent health center would otherwise take when evaluating an offer
from an individual or entity.
B. Additional Regulatory Standards
Section 431(b) of MMA authorizes us to add additional standards or
criteria consistent with Congress's intent in creating an exception
under the anti-kickback statute for certain arrangements involving
health centers. As discussed above, Congress set forth specific factors
that we must consider when establishing safe harbor standards.
1. Freedom of Choice and Independent Medical Judgment
Section 431(b) of MMA directs us to consider the impact of a health
center's arrangement on patient freedom of choice and the independent
medical judgment of health care professionals.
[[Page 38086]]
As these two factors are related, we will address them together. In
identifying these two factors, Congress emphasized an important patient
protection function of the anti-kickback statute: Preventing both the
corruption of medical judgment by financial incentives and improper
steering of patients. We are proposing in the safe harbor regulation
the following standards intended to ensure that protected arrangements
do not impair patient freedom of choice or the independent medical
judgment of health care professionals:
First, under the arrangement, health centers must not be
required to refer patients to a particular provider or supplier, and
there must be no restrictions on the health center's or its health care
professionals' freedom to refer patients to any provider or supplier.
For example, a protected arrangement could not require a health center
to refer a certain number or proportion of its patients, or a
particular category of patients, to a particular provider or supplier.
Second, individuals and entities 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. The provider or
supplier may impose reasonable overall limits related to the resources
it will devote to health center patients. For example, a provider can
cap the aggregate number of health center patients it has the capacity
to treat, but it cannot determine that it will only treat health center
patients who are Medicare beneficiaries. This standard is intended to
prevent providers or suppliers in an arrangement with a health center
from ``cherry picking'' particular types of health center patients. In
addition, this standard helps ensure that health centers remain free to
refer patients based on the patient's health care needs.
Third, the protected arrangement cannot be exclusive. The
individual or entity cannot restrict the health center's ability, if it
chooses, to enter into agreements with other providers or suppliers of
comparable goods, items, or services, or with other lenders or donors.
Where a health center has multiple providers or suppliers willing to
offer comparable remuneration, the health center must employ a
reasonable methodology to determine which prospective partners to
select and must document its determination. In making these
determinations, health centers should look to the procurement standards
for recipients of Federal grants. See 45 CFR 74.40 et seq.
Fourth, health centers must provide effective notification
to patients of their freedom to choose any willing provider or
supplier. Moreover, a health center must disclose the existence and
nature of a protected arrangement: (i) To any patient who inquires; and
(ii) to any patient referred to an individual or entity that is a party
to the protected arrangement for the furnishing of separately billable
items or services (i.e., an item or service for which the patient or a
third-party payor, rather than the health center, may be obligated to
pay). Such disclosure need only be made to a patient the first time the
patient is referred to the particular individual or entity. This
transparency will help protect the informed decision-making of
patients, enhancing their ability to act as prudent consumers of health
care services and preserving freedom of choice. The health center must
provide required patient disclosures in a timely fashion and in a
manner reasonably calculated to provide effective notice and to be
understood by the patient. The appropriate disclosure method will
necessarily vary depending on the individual characteristics of the
health center and its patients. We are electing not to require broader
disclosure to patients of all relationships covered by the safe harbor,
because we do not believe broader disclosure would be an effective
means of preserving health center patients' freedom of choice and, in
some situations, might be confusing to the patients served by the
health center. Notwithstanding, health centers would be encouraged to
consider whether broader disclosure would benefit their patients and,
if so, how best to convey useful information to patients. We note that,
in many situations, it may be feasible for health centers to provide
the required notice through posting lists of arrangements in
conspicuous places in the health center and directing patients to those
postings.
2. Additional Standards To Prevent Abuse of Federal Health Care
Programs and To Protect Patients
As noted above, in accordance with our authority under section
431(b)(1) of MMA to consider other factors and to add additional
standards and criteria, we have also considered whether arrangements
between health centers and individuals or entities may pose a risk of
abuse to Federal health care programs other than the section 330 grant
program, such as Medicare or Medicaid, or to beneficiaries. To
safeguard these programs and their beneficiaries, we propose adding the
following standards to the safe harbor:
First, the health center may elect to require that an
individual or entity 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 (where the discount applies to the total charge and not
just to the cost-sharing portion owed by an insured patient). This
condition would apply when the individual or entity is billing patients
or third parties, rather than the health center, for the items or
services.
Second, no arrangement may enjoy protection under this
safe harbor unless it complies with the requirements of the health
center's section 330 grant funding.
We further note that providers and suppliers who furnish items and
services to Federal health care program patients referred by a health
center must comply with all Federal and State laws, including, without
limitation, relevant Federal health care program rules governing
billing and claims submission. We are concerned that some providers and
suppliers may seek to recoup amounts donated to a health center through
improper billing of Federal health care programs or inappropriate
transfers of governmental funds. We will give further consideration to
this potential problem in the final regulations. Once the final
regulations are promulgated, we intend to monitor participants in the
safe-harbored arrangements for compliance with billing rules.
We are soliciting public comments on these standards, as well as
any other standards or criteria that should be included in this safe
harbor to achieve its purpose of protecting beneficial, low-risk
arrangements.
III. Regulatory Impact Statement
A. Regulatory Analysis
We have examined the impact of this proposed rulemaking as required
by Executive Order 12866, the Unfunded Mandates Reform Act of 1995, the
Regulatory Flexibility Act (RFA) of 1980, and Executive Order 13132.
Executive Order 12866
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulations are
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health, and safety
effects; distributive impacts; and equity). A regulatory impact
[[Page 38087]]
analysis must be prepared for major rules with economically significant
effects (i.e., $100 million or more in any given year).
This is not a major rule, as defined at 5 U.S.C. 804(2), and it is
not economically significant since the overall economic effect of the
rule is less than $100 million annually. This proposed safe harbor is
designed to allow health centers to enter into certain beneficial
arrangements with individuals or entities providing goods, items,
services, donations, loans, or a combination thereof to the health
center. In doing so, this regulation would impose no requirements on
any party. Health centers may voluntarily seek to comply with final
regulations, once promulgated, so that they have assurance that
participating in covered agreements will not subject them to any
enforcement actions under the anti-kickback statute. The safe harbor
would facilitate health centers' ability to provide important health
care services to communities in need and help these centers fulfill
their mission as integral components of the health care safety net. As
such, we believe that the aggregate economic impact of this rulemaking
would be minimal and would have no effect on the economy or on Federal
or State expenditures. To the extent that there is any economic impact,
that impact would likely result in savings of Federal grant dollars.
Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4, requires that agencies assess anticipated costs and benefits
before issuing any rule that may result in expenditures in any one year
by State, local or tribal governments, in the aggregate, or by the
private sector, of $110 million. Since compliance with safe harbor
requirements is voluntary, we believe that there are no significant
costs associated with this proposed safe harbor that would impose any
mandates on State, local, or tribal governments, or the private sector
that would result in an expenditure of $110 million or more (adjusted
for inflation) in any given year, and that a full analysis under the
Unfunded Mandates Reform Act is not necessary.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) and the Small Business
Regulatory Enforcement and Fairness Act of 1996, which amended the RFA,
require agencies to analyze options for regulatory relief of small
entities. For purposes of the RFA, small entities include small
businesses, certain nonprofit organizations, and small governmental
jurisdictions. Individuals and States are not included in the
definition of a small entity. Pursuant to the RFA, some of the health
centers that may avail themselves of the protections of the safe harbor
are considered to be small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA.
While this proposed safe harbor may have an impact on small rural
hospitals, we believe that the aggregate economic impact of this
rulemaking would be minimal, since it is the nature of the violation
and not the size or type of the entity that would result in a violation
of the anti-kickback statute. Moreover, the safe harbor should benefit
small rural hospitals (and their patients) that have relationships with
health centers by increasing their flexibility to engage in
transactions involving goods, items, services, donations, and loans
that result in conservation of Federal grant dollars and other funding
without any risk under the anti-kickback statute. The safe harbor
should effectively expand opportunities for health centers to engage in
arrangements beneficial for fulfilling their mission. For these
reasons, and because the vast majority of entities potentially affected
by this rulemaking do not engage in prohibited arrangements, schemes,
or practices in violation of the law, we have concluded that this
proposed rule should not have a significant impact on a substantial
number of small rural hospitals, and that a regulatory flexibility
analysis is not required for this rulemaking.
Executive Order 13132
Executive Order 13132, Federalism, establishes certain requirements
that an agency must meet when it promulgates a rule that imposes
substantial direct requirements or costs on State and local
governments, preempts State law, or otherwise has Federalism
implications. In reviewing this rule under the threshold criteria of
Executive Order 13132, we have determined that this proposed rule would
not significantly limit the rights, roles, and responsibilities of
State or local governments. We have determined, therefore, that a full
analysis under these Acts is not necessary.
The Office of Management and Budget (OMB) has reviewed this
proposed rule in accordance with Executive Order 12866.
B. Paperwork Reduction Act
In accordance with section 3506(c)(2)(A) of the Paperwork Reduction
Act of 1995 (PRA), we are required to solicit public comments, and
receive final OMB approval, on any information collection requirements
set forth in rulemaking.
This proposed safe harbor would impose some minimal information
collection requirements on health centers. Specifically, for an
arrangement to fall within the proposed safe harbor it would have to
fulfill the following documentation requirements: (1) It must be in
writing; (2) the written agreement must be signed by the parties; (3)
the written agreement must cover all the goods, items, services,
donations, and loans provided to the health center; and (4) the health
center must document a potential benefit to a medically underserved
population. However, these requirements deviate minimally, if at all,
from the information these entities would routinely collect in their
normal course of business. The statute applies only to the health
centers' receipt of goods, items, services, donations, or loans
pursuant to a contract, lease, grant, loan, or other agreement. As
recipients of Federal grant money, these health centers are already
obligated to comply with the administrative requirements, including
certain documentation requirements, outlined in 45 CFR part 74. We
believe it is usual and customary for health centers to memorialize
contracts, leases, grants, loans, and other similar agreements in
writing. Ensuring that such writings are comprehensive and that the
actual business activities are accurately reflected by documentation
are standard prudent business practices. The only documentation
requirement of the safe harbor that potentially imposes an additional
recordkeeping burden is the requirement that health centers document
the statutorily mandated expected benefit to a medically underserved
population. Since serving a medically underserved population is central
to the underlying mission of the health centers (and all health centers
serve at least one such population) and the section 330 grant program,
documentation of such benefit would seem to be a prudent business
practice to ensure continued compliance not only with the proposed safe
harbor but also with the section 330 grant program.
Under certain circumstances, we would require health centers to
provide effective notification to patients, disclosing the existence of
arrangements protected under this safe harbor and reminding patients of
their freedom to
[[Page 38088]]
choose any willing provider or supplier. Disclosures would not need to
be in writing; rather, we would require that health centers provide
patient disclosures in a manner reasonably calculated to provide
effective notice and to be understood by the patient. The type of
notice provided may vary depending on the health center and its
patients. We believe this notification requirement would achieve the
goal of protecting patients without imposing a significant additional
administrative burden on health centers. Moreover, we believe the
notification requirement would be consistent with health centers'
existing interest in protecting their vulnerable patient populations.
It should be noted that compliance with a safe harbor under the
Federal anti-kickback statute is voluntary, and no party is ever
required to comply with a safe harbor. Instead, safe harbors merely
offer an optional framework regarding how to structure business
arrangements to ensure compliance with the anti-kickback statute. All
parties remain free to enter into arrangements without regard to a safe
harbor, so long as the arrangements do not involve unlawful payments
for referrals under the anti-kickback statute.
Thus, we believe that the documentation requirements necessary to
enjoy safe harbor protection would not qualify as an added paperwork
burden in accordance with 5 CFR 1320.3(b)(2), because the requirements
are consistent with the usual and customary business practices of
health centers and because the time, effort, and financial resources
necessary to comply with the requirements would largely be incurred by
health centers in the normal course of their business activities. With
respect to the patient notification requirement, we do not believe the
requirement would impose an added paperwork burden because the notice
need not be written. Furthermore, the notice would only need to be
provided in a limited number of circumstances and the requirement is
consistent with the health centers' ongoing mission to protect
vulnerable patients.
We are specifically soliciting public comments with respect to
these requirements. Comments on these requirements should be sent to
the following address within 60 days following the Federal Register
publication of this interim final rule:
HHS OIG Desk Officer, Office of Management and Budget, Room 10235,
New Executive Office Building, 725 17th Street, NW., Washington, DC
20053, FAX: (202) 395-6974.
IV. Public Inspection of Comments and Response to Comments
Comments will be available for public inspection beginning on July
15, 2005 in Room 5518 of the Office of Inspector General at 330
Independence Avenue, SW., Washington, DC on Monday and through Friday
of each week (Federal holidays excepted) between the hours of 8 a.m.
and 4 p.m., (202) 619-0089. Because of the large number of comments we
normally receive on regulations, we cannot acknowledge or respond to
comments individually. However, we will consider all timely and
appropriate comments when determining whether to revise this interim
final rule.
List of Subjects in 42 CFR Part 1001
Administrative practice and procedure, Fraud, Grant programs--
health, Health facilities, Health professions, Maternal and child
health, Medicaid, Medicare.
Accordingly, 42 CFR part 1001 would be amended as set forth below:
PART 1001--[AMENDED]
1. The authority citation for part 1001 would continue to read as
follows:
Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(j),
1395u(k), 1395y(d), 1395y(e), 1395cc(b)(2)(D), (E) and (F), and
1395hh; and sec. 2455, Pub. L. 103-355, 108 Stat. 3327 (31 U.S.C.
6101 note).
2. Section 1001.952 would be amended by republishing the
introductory paragraph for this section and by adding a new paragraph
(w) as follows:
Sec. 1001.952 Exceptions.
The following payment practices shall not be treated as a criminal
offense under section 1128B of the Act and shall not serve as the basis
for an exclusion:
* * * * *
(w) Health centers. As used in section 1128B of the Act,
``remuneration'' does not include the transfer of any goods, items,
services, donations, loans, or combination thereof from an individual
or entity to a health center (as defined in this paragraph), as long as
the following eleven standards are met--
(1) The transfer is made pursuant to a contract, lease, grant,
loan, or other agreement that is set out in writing, signed by the
parties, and covers all the goods, items, services, donations, and
loans to be provided by the individual or entity to the health center.
(2) The goods, items, services, donations, or loans are medical or
clinical in nature or relate directly to patient services furnished by
the health center as part of the scope of the health center's section
330 grant (including, by way of example, billing services,
administrative support services, technology support, and enabling
services, such as case management, transportation, and translation
services, that are within the scope of the grant).
(3) The written agreement specifies and sets forth the amount of
goods, items, services, donations, or loans to be provided to the
health center (where such amount may be a fixed sum, fixed percentage,
or set forth by a fixed methodology), and the amount is not conditioned
on the volume or value of Federal health care program business
generated between the parties.
(4) The health center reasonably expects the arrangement 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 served by the health center, and
the health center documents the basis for the reasonable expectation
prior to entering the arrangement. Health centers must apply
reasonable, consistent, and uniform standards when making the
determination. The documentation must be made available to the
Secretary upon request.
(5) At reasonable intervals, but at least annually, the health
center must re-evaluate the arrangement to ensure that the arrangement
is expected to continue to satisfy the standard set forth in paragraph
(w)(4) of this section. The health center must apply reasonable,
consistent, and uniform standards when making the re-evaluation, and
must document the re-evaluation contemporaneously. The documentation
must be made available to the Secretary upon request. Noncompliant
arrangements must be promptly terminated. Terminated agreements must
not be renegotiated in a manner that is conditioned on the volume or
value of Federal health care program business generated between the
parties. Similarly, arrangements must not be renewed or renegotiated
unless the health center reasonably expects the standard set forth in
paragraph (w)(4) of this section to be satisfied in the next agreement
term. Renewed or renegotiated agreements must comply with the
requirements of paragraph (w)(4) of this section.
(6) The health center (and its affiliated health care
professionals) must not be required to refer patients to a particular
individual or entity, and the health center (and its affiliated health
care professionals) must be free to refer patients to any provider or
supplier.
[[Page 38089]]
(7) Individuals and entities that offer to provide goods, items, or
services to health center patients must accept all referrals of
patients from the health center who clinically qualify for the goods,
items, or services, regardless of the patient's payor status or ability
to pay. The individual or entity may impose reasonable limits on the
aggregate volume or value of referrals it will accept.
(8) The agreement must not restrict the health center's ability, if
it chooses, to enter into agreements with other providers or suppliers
of comparable goods, items, or services, or with other lenders or
donors. Where a health center has multiple individuals or entities
willing to offer comparable remuneration, the health center must employ
a reasonable methodology to determine which prospective partners to
select and must document its determination. In making these
determinations, health centers should look to the procurement standards
for recipients of Federal grants. See 45 CFR 74.40 et seq.
(9) The health center must provide effective notification to
patients of their freedom to choose any willing provider or supplier.
In addition, the health center must disclose the existence and nature
of an arrangement under this paragraph to any patient who inquires and
upon the initial such referral, to any patient referred to an
individual or entity that is a party to the arrangement for the
furnishing of separately billable items or services (i.e., an item or
service for which the patient or a third-party payor, rather than the
health center, may be obligated to pay). The health center must provide
required patient disclosures in a timely fashion and in a manner
reasonably calculated to be effective and understood by the patient.
(10) Under the arrangement, the health center may elect to require
that the individual or entity charge a referred health center patient
the same rate it charges other patients not referred by the health
center or that the individual or entity charge a referred health center
patient a reduced rate (where the discount applies to the total charge
and not just to the cost-sharing portion owed by an insured patient).
(11) The agreement must comply with all relevant requirements of
the health center's section 330 grant funding. For purposes of this
paragraph, the term ``health center'' means a Federally qualified
health center under section 1905(l)(2)(B)(i) or 1905(l)(2)(B)(ii) of
the Act, and ``medically underserved population'' means a medically
underserved population as defined in regulations at 42 CFR 51c.102(e).
Dated: January 31, 2005.
Daniel R. Levinson,
Acting Inspector General.
Approved: March 2, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-13049 Filed 6-30-05; 8:45 am]
BILLING CODE 4150-01-P