Anti-Kickback Safe Harbors for Physician Groups

The federal Anti-Kickback Statute (“AKS”) makes it unlawful to knowingly or willfully pay, offer, solicit or receive any “remuneration” in exchange for referrals of any services or items payable under a federal health care program. There are a number of “safe harbors” to this general prohibition, including safe harbors for office space, equipment rental, and personal services.
These three safe harbors were recently discussed in U.S. v. Gills, M.D. Fla., No.8:08-cv-2374. In Gills, the government, through a relator, sought to enforce the AKS against a physician group that rented office space, equipment, and personal services to a physician that received referrals from the group. The relator alleged that the payments made by the referring physician to the physician group pursuant to the “turn-key” rental agreements were intended to induce referrals of patients to the physician and therefore violated the AKS. The physician group contended that the arrangement fell within an AKS safe harbor, specifically those provisions relating to “space rental,” “equipment rental,” and “personal services and management contracts.” See 42 C.F.R. §1001.952(b)-(d). These safe harbors require that the compensation arrangement be in writing; set in advance without regard to referrals; specify the services, equipment, or premises covered by the agreement; and be at least one year in length, signed by the parties, and negotiated in an arm’s length transaction.
The agreements at issue were originally entered into in 1998 and contemplated a single payment under all three agreements. Because only one payment was made for “multiple purposes”, the court evaluated whether each separate aspect of the payment complied with the respective safe harbor provision. The court found that the agreements clearly complied with all of the safe harbor requirements except for the requirement that the agreements specify the premises, equipment, and services covered.
In its opinion, the district court found that even though the actual space occupied by the referring physician changed over time and the lease rate adjusted accordingly, the description in the lease was nonetheless sufficient. The court held that the safe harbor regulations “do not require an explanation in the contract of the rationale behind rental payments, amounts, or charges.”  Similarly, the court found that the services agreement was sufficiently specific even though it provided for only “sufficient Non-Medical Personnel for reasonable administrative support…” Because the agreement went on to define Non-Medical Personnel by listing the specific support staff positions needed, the court held that the agreement specified the services to be provided and therefore complied with the safe harbor requirement. For these reasons, the court denied the government’s motion for summary judgment.
Unlike the Stark law, the federal Anti-Kickback Statute looks to the intent of the arrangement to determine compliance. The court in Gills found that the arrangement provided the “transparency and verifiability” that the safe harbors were intended to ensure. Nevertheless, the Gills case illustrates the need for extreme attention to detail when physicians enter into financial relationships with other physicians. Even though the court denied summary judgment on the AKS issue, the entire lawsuit could have been avoided by well-drafted rental and services agreements.