American College of Physicians: Internal Medicine — Doctors for Adults ®


OIG's new rules on how to steer clear of kickbacks

From the April 2000 ACP-ASIM Observer, copyright 2000 by the American College of Physicians-American Society of Internal Medicine.

By Janice Simmons

New long-awaited rules released by the HHS Office of Inspector General (OIG) give internists some new ground rules on how they can conduct specialty referrals, invest in joint ventures in underserved areas and invest in ambulatory surgical centers without being prosecuted under the federal government's antikickback law.

The OIG released eight new "safe harbors" for providers late last year that define acceptable business practices for providers who participate in the Medicare and Medicaid programs. Physicians and providers who follow the safe harbors are theoretically protected from being prosecuted under the federal government's antikickback law. The government has used the law to force large medical systems to pay fines to settle alleged misconduct in federal health care programs.

Over the last decade, the OIG has issued 13 other safe harbors and two interim safe harbors for managed care. The newest safe harbors regulate activities such as patient referrals, physician recruitment and investments in health care facilities. (The safe harbors appear in the Nov. 19, 1999, Federal Register, which is available on the Government Printing Office Web site at

While the OIG's latest safe harbors offer few surprises for internists and largely formalize business practices that many physicians already follow, analysts say that internists should at least be familiar with the new provisions because they address issues that doctors deal with on a daily basis. Here is a summary of some of the new safe harbors that experts say are most important to internists and how they might apply to your practice:

  • Referrals for specialty services. When a general internist refers a patient to a subspecialty physician, there is often an understanding that the consultant will refer the patient back to the general internist. While this is common practice, the OIG finds some potential for that process to be tainted by an exchange of fees for referrals.

"The OIG says that even though no cash changes hands, there is value in this agreement to refer back, and that agreement is potentially an inducement for the physician to refer the patient in the first place," said Robert Saner, JD, legal counsel to the Medical Group Management Association (MGMA) and a partner with the Washington law firm of Powers, Pyles, Sutter and Verville.

While the OIG is still closely watching this type of referral situation, its newest safe harbor will allow physicians to refer a patient to a specialist with an understanding that the specialist will refer that patient back—if several conditions are met.

First, the referring physician must send patients to a physician with expertise in the patient's condition, and the referring physician must not have expertise in that condition himself. Second, the consulting physician must send the patient back to the referring physician in what the OIG defines as a "clinically appropriate" timeframe, typically a period agreed upon by both the consultant and referring physician. Finally, the two physicians cannot share or split any payments or global fees from any federal health payer that relate to the patient.

  • Physician recruitment in medically underserved areas. This new safe harbor makes it easier for hospitals to pay physicians and other health care providers to attract them to "health professional shortage areas" in both rural and urban locations. (The previous safe harbor had allowed incentives to be used only in rural areas.) The new safe harbor also eliminates an old rule that required physicians to relocate from at least 100 miles away to qualify for the safe harbor. The catch? The new safe harbor now requires that recruited doctors generate at least 75% of their revenues from patients residing within the medically underserved area.
  • Sales of physician practices to hospitals in underserved areas. The new safe harbor allows hospitals in underserved areas to buy and "hold" a retiring physician's practice until a new physician can be recruited to replace that physician. To qualify for the safe harbor, the practice must be sold to another physician within three years and the hospital must engage in good faith efforts to recruit a new physician.
  • Joint ventures in medically underserved areas. This safe harbor revises an old rule and permits a higher percentage of physicians to invest in joint ventures in medically underserved areas. Under the old rule, only 40% of investors in a small entity in a medically underserved area could be physicians. Under the new rule, 50% of investors can be physicians. The new safe harbor also permits joint ventures in medically underserved areas to earn unlimited revenues from physicians who have invested in the venture.
  • Investments in ambulatory surgical centers. Subspecialists such as gastroenterologists or cardiologists who have invested in multispecialty ambulatory surgical centers (ASCs) or hospital/physician ASCs should receive some protection under this safe harbor. Seven years ago, the OIG had considered narrowing the definition of who could invest in ASCs, but last year it decided that physicians "should be able to invest in ASCs where they are truly an extension of their office practice," said Mark Fitzgerald, JD, a partner with Powers, Pyles, Sutter and Verville.

The downside? The OIG has put in "one-third" tests that these physicians would have to meet to gain protection under the safe harbor: At least one-third of their annual practice revenue would have to come from the ASC and one-third of all procedures they perform would be done at the ASC.

  • Investments in group practices. This safe harbor allows physicians to invest in their own group practices as long as the practice meets the definition of a group under federal law governing self-referrals. (In part, this definition requires a group to consist of two or more physicians who are legally organized in one of many forms including a partnership, professional corporation, etc.) The safe harbor, however, does not protect investments by group practices or members of group practices in the joint ventures of ancillary services.

Gray zone

Analysts are quick to emphasize that even with these new expansions, many physicians and their practices may still fall outside the OIG safe harbors. "A fair amount of activity is essentially going to be unprotected by any safe harbor and therefore put in the gray zone," said Diane Millman, JD, a partner with the Washington firm of McDermott, Will & Emery.

Legal experts also point out that just because your practice's activity falls outside a safe harbor does not necessarily mean you are violating the antikickback law. But Mr. Saner added that knowing the safe harbors—and following them as closely as possible—"shows a good faith effort on your part to accommodate the objectives that the OIG has set forth. It doesn't get you total safety, but it shows you take this seriously."

Mr. Saner also emphasized that just because you meet the safe harbor regulations does not mean that you are complying with the proposed self-referral regulations. The Stark II provisions and the federal government's antikickback law, he said, are distinct and often offer different interpretations of how to steer clear of trouble with the government.

If you have questions about any areas that could raise federal scrutiny, there are several ways to get information without contacting the OIG for an advisory opinion, according to Mark Gorden, ACP-ASIM's Senior Associate for Managed Care and Regulatory Affairs. First, check with ACP-ASIM's Washington Office (800-338-2746, ext. 4544) to review current requirements and discuss individual situations. The OIG Web site ( can also provide a listing of recent advisory opinion cases.

If you're involved in a riskier situation, contact a health care attorney who specializes in this area. Mr. Gorden suggested contacting the OIG for a specific advisory opinion only after talking to an attorney.

Janice Simmons is a Washington writer who specializes in health care.

This is a printer-friendly version of this page

Print this page  |  Close the preview




Internist Archives Quick Links

Not an ACP Member?

Join today and discover the benefits waiting for you.

Not an ACP Member? Join today and discover the benefits waiting for you

ACP offers different categories of membership depending on your career stage and professional status. View options, pricing and benefits.

A New Way to Ace the Boards!

A New Way to Ace the Boards!

Ensure you're board-exam ready with ACP's Board Prep Ace - a multifaceted, self-study program that prepares you to pass the ABIM Certification Exam in internal medicine. Learn more.