42 C.F.R. § 411.357 Exceptions to the referral prohibition related to compensation arrangements.
Title 42 - Public Health
Link to an amendment published at 71 FR 45169, Aug. 8, 2006. For purposes of §411.353, the following compensation arrangements do not constitute a financial relationship: (a) Rental of office space. Payments for the use of office space made by a lessee to a lessor if there is a rental or lease agreement that meets the following requirements: (1) The agreement is set out in writing, is signed by the parties, and specifies the premises it covers. (2) The term of the agreement is at least 1 year. To meet this requirement, if the agreement is terminated during the term with or without cause, the parties may not enter into a new agreement during the first year of the original term of the agreement. (3) The space rented or leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease or rental and is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the lessor), except that the lessee may make payments for the use of space consisting of common areas if the payments do not exceed the lessee's pro rata share of expenses for the space based upon the ratio of the space used exclusively by the lessee to the total amount of space (other than common areas) occupied by all persons using the common areas. (4) The rental charges over the term of the agreement are set in advance and are consistent with fair market value. (5) The rental charges over the term of the agreement are not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties. (6) The agreement would be commercially reasonable even if no referrals were made between the lessee and the lessor. (7) A holdover month-to-month rental for up to 6 months immediately following an agreement of at least 1 year that met the conditions of this paragraph (a) will satisfy this paragraph (a), provided the holdover rental is on the same terms and conditions as the immediately preceding agreement. (b) Rental of equipment. Payments made by a lessee to a lessor for the use of equipment under the following conditions: (1) A rental or lease agreement is set out in writing, is signed by the parties, and specifies the equipment it covers. (2) The equipment rented or leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease or rental and is used exclusively by the lessee when being used by the lessee and is not shared with or used by the lessor or any person or entity related to the lessor. (3) The agreement provides for a term of rental or lease of at least 1 year. To meet this requirement, if the agreement is terminated during the term with or without cause, the parties may not enter into a new agreement during the first year of the original term of the agreement. (4) The rental charges over the term of the agreement are set in advance, are consistent with fair market value, and are not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties. (5) The agreement would be commercially reasonable even if no referrals were made between the parties. (6) A holdover month-to-month rental for up to 6 months immediately following an agreement of at least 1 year that met the conditions of this paragraph (b) will satisfy this paragraph (b), provided the holdover rental is on the same terms and conditions as the immediately preceding agreement. (c) Bona fide employment relationships. Any amount paid by an employer to a physician (or immediate family member) who has a bona fide employment relationship with the employer for the provision of services if the following conditions are met: (1) The employment is for identifiable services. (2) The amount of the remuneration under the employment is— (i) Consistent with the fair market value of the services; and (ii) Except as provided in paragraph (c)(4) of this section, is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician. (3) The remuneration is provided under an agreement that would be commercially reasonable even if no referrals were made to the employer. (4) Paragraph (c)(2)(ii) of this section does not prohibit payment of remuneration in the form of a productivity bonus based on services performed personally by the physician (or immediate family member of the physician). (d) Personal service arrangements. (1) General—Remuneration from an entity under an arrangement or multiple arrangements to a physician, an immediate family member of the physician, or to a group practice, including remuneration for specific physician services furnished to a nonprofit blood center, if the following conditions are met: (i) Each arrangement is set out in writing, is signed by the parties, and specifies the services covered by the arrangement. (ii) The arrangement(s) covers all of the services to be furnished by the physician (or an immediate family member of the physician) to the entity. This requirement will be met if all separate arrangements between the entity and the physician and the entity and any family members incorporate each other by reference or if they cross-reference a master list of contracts that is maintained and updated centrally and is available for review by the Secretary upon request. The master list should be maintained in a manner that preserves the historical record of contracts. A physician or family member can “furnish” services through employees whom they have hired for the purpose of performing the services; through a wholly owned entity; or through locum tenens physicians (as defined in §411.351, except that the regular physician need not be a member of a group practice). (iii) The aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement(s). (iv) The term of each arrangement is for at least 1 year. To meet this requirement, if an arrangement is terminated during the term with or without cause, the parties may not enter into the same or substantially the same arrangement during the first year of the original term of the arrangement. (v) The compensation to be paid over the term of each arrangement is set in advance, does not exceed fair market value, and, except in the case of a physician incentive plan, is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties. (vi) The services to be furnished under each arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any State or Federal law. (2) Physician incentive plan exception. In the case of a physician incentive plan (as defined in §411.351) between a physician and an entity (or downstream subcontractor), the compensation may be determined in a manner (through a withhold, capitation, bonus, or otherwise) that takes into account directly or indirectly the volume or value of any referrals or other business generated between the parties, if the plan meets the following requirements: (i) No specific payment is made directly or indirectly under the plan to a physician or a physician group as an inducement to reduce or limit medically necessary services furnished with respect to a specific individual enrolled with the entity. (ii) Upon request of the Secretary, the entity provides the Secretary with access to information regarding the plan (including any downstream subcontractor plans), in order to permit the Secretary to determine whether the plan is in compliance with paragraph (d)(2) of this section. (iii) In the case of a plan that places a physician or a physician group at substantial financial risk as defined in §422.208, the entity (and/or any downstream contractor) complies with the requirements concerning physician incentive plans set forth at §422.208 and §422.210 of this chapter. (e) Physician recruitment. (1) Remuneration provided by a hospital to recruit a physician that is paid directly to the physician and that is intended to induce the physician to relocate his or her medical practice to the geographic area served by the hospital in order to become a member of the hospital's medical staff, if all of the following conditions are met: (i) The arrangement is set out in writing and signed by both parties; (ii) The arrangement is not conditioned on the physician's referral of patients to the hospital; (iii) The hospital does not determine (directly or indirectly) the amount of the remuneration to the physician based on the volume or value of any actual or anticipated referrals by the physician or other business generated between the parties; and (iv) The physician is allowed to establish staff privileges at any other hospital(s) and to refer business to any other entities (except as referrals may be restricted under a separate employment or services contract that complies with §411.354(d)(4)). (2) The “geographic area served by the hospital” is the area composed of the lowest number of contiguous zip codes from which the hospital draws at least 75 percent of its inpatients. A physician will be considered to have relocated his or her medical practice if— (i) The physician moves his or her medical practice at least 25 miles; or (ii) The physician's new medical practice derives at least 75 percent of its revenues from professional services furnished to patients (including hospital inpatients) not seen or treated by the physician at his or her prior medical practice site during the preceding 3 years, measured on an annual basis (fiscal or calendar year). For the initial “start up” year of the recruited physician's practice, the 75 percent test in the preceding sentence will be satisfied if there is a reasonable expectation that the recruited physician's medical practice for the year will derive at least 75 percent of its revenues from professional services furnished to patients not seen or treated by the physician at his or her prior medical practice site during the preceding 3 years. (3) Residents and physicians who have been in practice 1 year or less will not be subject to the relocation requirement of this paragraph, except that the recruited resident or physician must establish his or her medical practice in the geographic area served by the hospital. (4) In the case of remuneration provided by a hospital to a physician either indirectly through payments made to another physician or physician practice, or directly to a physician who joins a physician practice, the following additional conditions must be met: (i) The written agreement in §411.357(e)(1) is also signed by the party to whom the payments are directly made; (ii) Except for actual costs incurred by the physician or physician practice in recruiting the new physician, the remuneration is passed directly through to or remains with the recruited physician; (iii) In the case of an income guarantee made by the hospital to a recruited physician who joins a physician or physician practice, the costs allocated by the physician or physician practice to the recruited physician do not exceed the actual additional incremental costs attributable to the recruited physician; (iv) Records of the actual costs and the passed through amounts are maintained for a period of at least 5 years and made available to the Secretary upon request; (v) The remuneration from the hospital under the arrangement is not to be determined in a manner that takes into account (directly or indirectly) the volume or value of any actual or anticipated referrals by the recruited physician or the physician practice (or any physician affiliated with the physician practice) receiving the direct payments from the hospital; (vi) The physician or physician practice may not impose additional practice restrictions on the recruited physician other than conditions related to quality of care; and (vii) The arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. (5) This paragraph (e) applies to remuneration provided by a federally qualified health center in the same manner as it applies to remuneration provided by a hospital, so long as the arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. (f) Isolated transactions. Isolated financial transactions, such as a one-time sale of property or a practice, if all of the following conditions are met: (1) The amount of remuneration under the isolated transaction is— (i) Consistent with the fair market value of the transaction; and (ii) Not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician or other business generated between the parties. (2) The remuneration is provided under an agreement that would be commercially reasonable even if the physician made no referrals. (3) There are no additional transactions between the parties for 6 months after the isolated transaction, except for transactions that are specifically excepted under the other provisions in §411.355 through §411.357 and except for commercially reasonable post-closing adjustments that do not take into account (directly or indirectly) the volume or value of referrals or other business generated by the referring physician. (g) Certain arrangements with hospitals. Remuneration provided by a hospital to a physician if the remuneration does not relate, directly or indirectly, to the furnishing of DHS. To qualify as “unrelated,” remuneration must be wholly unrelated to the furnishing of DHS and must not in any way take into account the volume or value of a physician's referrals. Remuneration relates to the furnishing of DHS if it— (1) Is an item, service, or cost that could be allocated in whole or in part to Medicare or Medicaid under cost reporting principles; (2) Is furnished, directly or indirectly, explicitly or implicitly, in a selective, targeted, preferential, or conditioned manner to medical staff or other persons in a position to make or influence referrals; or (3) Otherwise takes into account the volume or value of referrals or other business generated by the referring physician. (h) Group practice arrangements with a hospital. An arrangement between a hospital and a group practice under which DHS are furnished by the group but are billed by the hospital if the following conditions are met: (1) With respect to services furnished to an inpatient of the hospital, the arrangement is pursuant to the provision of inpatient hospital services under section 1861(b)(3) of the Act. (2) The arrangement began before, and has continued in effect without interruption since, December 19, 1989. (3) With respect to the DHS covered under the arrangement, at least 75 percent of these services furnished to patients of the hospital are furnished by the group under the arrangement. (4) The arrangement is in accordance with a written agreement that specifies the services to be furnished by the parties and the compensation for services furnished under the agreement. (5) The compensation paid over the term of the agreement is consistent with fair market value, and the compensation per unit of service is fixed in advance and is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties. (6) The compensation is provided in accordance with an agreement that would be commercially reasonable even if no referrals were made to the entity. (i) Payments by a physician. Payments made by a physician (or his or her immediate family member)— (1) To a laboratory in exchange for the provision of clinical laboratory services; or (2) To an entity as compensation for any other items or services that are furnished at a price that is consistent with fair market value, and that are not specifically excepted under another provision in §411.355 through §411.357 (including, but not limited to, §411.357(l)). “Services” in this context means services of any kind (not just those defined as “services” for purposes of the Medicare program in §400.202). (j) Charitable donations by a physician. Bona fide charitable donations made by a physician (or immediate family member) to an entity if all of the following conditions are satisfied: (1) The charitable donation is made to an organization exempt from taxation under the Internal Revenue Code (or to a supporting organization); (2) The donation is neither solicited, nor made, in any manner that takes into account the volume or value of referrals or other business generated between the physician and the entity; and (3) The donation arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. (k) Non-monetary compensation up to $300. (1) Compensation from an entity in the form of items or services (not including cash or cash equivalents) that does not exceed an aggregate of $300 per year, if all of the following conditions are satisfied: (i) The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician. (ii) The compensation may not be solicited by the physician or the physician's practice (including employees and staff members). (iii) The compensation arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act) or any Federal or State law or regulation governing billing or claims submission. (2) The $300 limit in this paragraph (k) will be adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index-Urban All Items (CPI-U) for the 12–month period ending the preceding September 30. CMS intends to display as soon as possible after September 30 each year, both the increase in the CPI-U for the 12–month period and the new non-monetary compensation limit on the physician self-referral Web site: http://cms.hhs.gov/medlearn/refphys.asp. (l) Fair market value compensation. Compensation resulting from an arrangement between an entity and a physician (or an immediate family member) or any group of physicians (regardless of whether the group meets the definition of a group practice set forth in §411.352) for the provision of items or services by the physician (or an immediate family member) or group of physicians to the entity, if the arrangement is set forth in an agreement that meets the following conditions: (1) The arrangement is in writing, signed by the parties, and covers only identifiable items or services, all of which are specified in the agreement. (2) The writing specifies the timeframe for the arrangement, which can be for any period of time and contain a termination clause, provided the parties enter into only one arrangement for the same items or services during the course of a year. An arrangement made for less than 1 year may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change. (3) The writing specifies the compensation that will be provided under the arrangement. The compensation must be set in advance, consistent with fair market value, and not determined in a manner that takes into account the volume or value of referrals or other business generated by the referring physician. (4) The arrangement would be commercially reasonable (taking into account the nature and scope of the transaction) and furthers the legitimate business purposes of the parties. (5) It does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. (6) The services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a State or Federal law. (m) Medical staff incidental benefits. Compensation in the form of items or services (not including cash or cash equivalents) from a hospital to a member of its medical staff when the item or service is used on the hospital's campus, if all of the following conditions are met: (1) The compensation is provided to all members of the medical staff practicing in the same specialty (but not necessarily accepted by every member to whom it is offered) without regard to the volume or value of referrals or other business generated between the parties. (2) Except with respect to identification of medical staff on a hospital Web site or in hospital advertising, the compensation is provided only during periods when the medical staff members are making rounds or are engaged in other services or activities that benefit the hospital or its patients. (3) The compensation is provided by the hospital and used by the medical staff members only on the hospital's campus. Compensation, including, but not limited to, Internet access, pagers, or two-way radios, used away from the campus only to access hospital medical records or information or to access patients or personnel who are on the hospital campus, as well as the identification of the medical staff on a hospital Web site or in hospital advertising, will meet the “on campus” requirement of this paragraph (m). (4) The compensation is reasonably related to the provision of, or designed to facilitate directly or indirectly the delivery of, medical services at the hospital. (5) The compensation is of low value (that is, less than $25) with respect to each occurrence of the benefit (for example, each meal given to a physician while he or she is serving patients who are hospitalized must be of low value). The $25 limit in this paragraph (m)(5) will be adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index-Urban All Items (CPI-U) for the 12–month period ending the preceding September 30. CMS intends to display as soon as possible after September 30 each year both the increase in the CPI-U for the 12–month period and the new limits on the physician self-referral Web site: http://cms.hhs.gov/medlearn/refphys.asp. (6) The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties. (7) The compensation arrangement does not violate the anti-kickback statute, (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. (8) Other facilities and health care clinics (including, but not limited to, federally qualified health centers) that have bona fide medical staffs may provide compensation under this paragraph (m) on the same terms and conditions applied to hospitals under this paragraph (m). (n) Risk-sharing arrangements. Compensation pursuant to a risk-sharing arrangement (including, but not limited to, withholds, bonuses, and risk pools) between a managed care organization or an independent physicians' association and a physician (either directly or indirectly through a subcontractor) for services provided to enrollees of a health plan, provided that the arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. For purposes of this paragraph (n), “health plan” and “enrollees” have the meanings ascribed to those terms in §1001.952(l) of this title. (o) Compliance training. Compliance training provided by an entity to a physician (or to the physician's immediate family member or office staff) who practices in the entity's local community or service area, provided the training is held in the local community or service area. For purposes of this paragraph (o), “compliance training” means training regarding the basic elements of a compliance program (for example, establishing policies and procedures, training of staff, internal monitoring, reporting); specific training regarding the requirements of Federal and State health care programs (for example, billing, coding, reasonable and necessary services, documentation, unlawful referral arrangements); or training regarding other Federal, State, or local laws, regulations, or rules governing the conduct of the party for whom the training is provided (but not including continuing medical education). (p) Indirect compensation arrangements. Indirect compensation arrangements, as defined in §411.354(c)(2), if all of the following conditions are satisfied: (1) The compensation received by the referring physician (or immediate family member) described in §411.354(c)(2)(ii) is fair market value for services and items actually provided and not determined in any manner that takes into account the value or volume of referrals or other business generated by the referring physician for the entity furnishing DHS. (2) The compensation arrangement described in §411.354(c)(2)(ii) is set out in writing, signed by the parties, and specifies the services covered by the arrangement, except in the case of a bona fide employment relationship between an employer and an employee, in which case the arrangement need not be set out in a written contract, but must be for identifiable services and be commercially reasonable even if no referrals are made to the employer. (3) The compensation arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. (q) Referral services. Remuneration that meets all of the conditions set forth in §1001.952(f) of this title. (r) Obstetrical malpractice insurance subsidies. Remuneration to the referring physician that meets all of the conditions set forth in §1001.952(o) of this title. (s) Professional courtesy. Professional courtesy (as defined in §411.351) offered by an entity to a physician or a physician's immediate family member or office staff if all of the following conditions are met: (1) The professional courtesy is offered to all physicians on the entity's bona fide medical staff or in the entity's local community or service area without regard to the volume or value of referrals or other business generated between the parties; (2) The health care items and services provided are of a type routinely provided by the entity; (3) The entity's professional courtesy policy is set out in writing and approved in advance by the entity's governing body; (4) The professional courtesy is not offered to a physician (or immediate family member) who is a Federal health care program beneficiary, unless there has been a good faith showing of financial need; (5) If the professional courtesy involves any whole or partial reduction of any coinsurance obligation, the insurer is informed in writing of the reduction; and (6) The arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. (t) Retention payments in underserved areas. (1) Remuneration provided by a hospital or federally qualified health center directly to a physician on the hospital's or federally qualified health center's medical staff to retain the physician's medical practice in the geographic area served by the hospital or federally qualified health center (as defined in paragraph (e)(2) of this section), if all of the following conditions are met: (i) Paragraphs 411.357(e)(1)(i) through 411.357(e)(1)(iv) are satisfied; (ii) The geographic area served by the hospital or federally qualified health center is a HPSA (regardless of the physician's specialty) or is an area with demonstrated need for the physician as determined by the Secretary in an advisory opinion issued according to section 1877(g)(6) of the Act; (iii) The physician has a bona fide firm, written recruitment offer from a hospital or federally qualified health center that is not related to the hospital or the federally qualified health center making the payment, and the offer specifies the remuneration being offered and would require the physician to move the location of his or her practice at least 25 miles and outside of the geographic area served by the hospital or federally qualified health center making the retention payment; (iv) The retention payment is limited to the lower of— (A) The amount obtained by subtracting (1) the physician's current income from physician and related services from (2) the income the physician would receive from comparable physician and related services in the bona fide recruitment offer, provided that the respective incomes are determined using a reasonable and consistent methodology, and that they are calculated uniformly over no more than a 24-month period; or (B) The reasonable costs the hospital or federally qualified health center would otherwise have to expend to recruit a new physician to the geographic area served by the hospital or federally qualified health center in order to join the medical staff of the hospital or federally qualified health center to replace the retained physician; (v) Any retention payment is subject to the same obligations and restrictions, if any, on repayment or forgiveness of indebtedness as the bona fide recruitment offer; (vi) The hospital or federally qualified health center does not enter into a retention arrangement with a particular referring physician more frequently than once every 5 years and the amount and terms of the retention payment are not altered during the term of the arrangement in any manner that takes into account the volume or value of referrals or other business generated by the physician; (vii) The arrangement otherwise complies with all of the conditions of this section; and (viii) The arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. (2) The Secretary may waive the relocation requirement of paragraph (t)(1) of this section for payments made to physicians practicing in a HPSA or an area with demonstrated need for the physician through an advisory opinion issued according to section 1877(g)(6) of the Act, if the retention payment arrangement otherwise complies with all of the conditions of this paragraph. (u) Community-wide health information systems. Items or services of information technology provided by an entity to a physician that allow access to, and sharing of, electronic health care records and any complementary drug information systems, general health information, medical alerts, and related information for patients served by community providers and practitioners, in order to enhance the community's overall health, provided that— (1) The items or services are available as necessary to enable the physician to participate in a community-wide health information system, are principally used by the physician as part of the community-wide health information system, and are not provided to the physician in any manner that takes into account the volume or value of referrals or other business generated by the physician; (2) The community-wide health information systems are available to all providers, practitioners, and residents of the community who desire to participate; and (3) The arrangement does not violate the anti-kickback statute, (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission.
Title 42: Public Health
PART 411—EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE PAYMENT
Subpart J—Financial Relationships Between Physicians and Entities Furnishing Designated Health Services
§ 411.357 Exceptions to the referral prohibition related to compensation arrangements.