On July 1, 2005 the OIG issued a proposed rule that would establish regulatory standards for a safe harbor under the federal antikickback statute that would protect certain remuneration provided by an individual or an entity to certain health centers funded under section 330 of the Public Health Service Act when the safe harbor conditions are satisfied. 70 Fed. Reg. 38,081 (July 1, 2005).

In particular, section 431 of the MMA amended the antikickback statute to create a new safe harbor for certain agreements involving health centers. Specifically, section 431(a) of the MMA excludes from the reach of the antikickback statute any remuneration between: (i) a health center described under section 1905(l)(2)(B)(i) or section 1905(l)(2)(B)(ii) of the Social Security Act (the Act); and (ii) an individual or entity providing goods, items, services, donations, loans, or a combination of the same to the health center pursuant to a contract, lease, grant, loan, or other such 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. As summarized below, the OIG has promulgated regulatory standards relating to such new safe harbor as directed under section 431(b) of the MMA. In establishing such standards, the OIG focused on the following factors, as directed by Congress:

Whether the arrangement results in savings of federal grant funds or increased revenue to the health center;

Whether the arrangement restricts or limits patient freedom of choice;

Whether the arrangement protects the independent medical judgment of health care professionals regarding medically appropriate treatment for patients; and

Whether the arrangements would pose a risk of fraud or abuse to any federal health care programs or their beneficiaries.

As discussed below, the proposed regulatory standards establish 11 conditions for safe harbor protection. Such conditions are based on the statutory elements of the safe harbor and other standards and criteria identified by the OIG as "consistent with the intent of Congress" in enacting the health center safe harbor.

Statutory Elements
Protected Health Centers
As an initial matter, protection under the health center safe harbor is limited to 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. Such health centers are two of the four types of "Federally Qualified Health Centers" (FQHC), as Congress excluded the remaining two types of FQHCs that do not actually receive section 330 grant funding and are not similarly subject to the government oversight inherent in the grant approval process.

Protected Remuneration
Section 431(a)(3) of the 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. Other forms of remuneration fall outside of the safe harbor. With respect to such remuneration, the OIG has highlighted 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. Likewise, safe harbor protection only applies to certain remuneration provided to the health center itself, and individuals affiliated with the health center are not within the scope of the safe harbor.

Documentation Requirements
The proposed documentation conditions are generally consistent with other safe harbor provisions. In particular, the agreement must be: (i) in writing; (ii) signed by the parties; and (iii) cover all goods, items, services, donations, and loans provided by the individual or entity to the health center in order to qualify for safe harbor protection. Likewise, the written agreement must set forth the amount of goods, items, services, donations, or loans to be provided to the health center (such amount may not be conditioned on the volume or value of federal health care program business generated between the parties).

Benefit to Medically Underserved Population
In order for a health center to qualify for safe harbor protection, 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 health center provides to a medically underserved population. For purposes of this proposed regulation, 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 as defined under 42 U.S.C. 254(b)(3)(A) and the corresponding regulations set forth at 42 C.F.R. 51c.102(e). Specifically, the health center would have to (i) 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; (ii) document the basis for such reasonable expectation prior to entering into the arrangement; and (iii) at reasonable intervals, but at least annually, re-evaluate the arrangement to ensure that the arrangement is expected to continue to satisfy such standards (and document the re-evaluation contemporaneously).

Additional Regulatory Standards
Freedom of Choice and Independent Medical Judgment
Section 431(b) of the MMA directs the OIG to consider the impact of a health center's arrangement on patient freedom of choice and the independent medical judgment of health care professionals. To that end, the OIG has established four standards related to the same. First, a 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. 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. Third, the protected arrangement cannot be exclusive. 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 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. Finally, health centers must provide effective notification to patients of their freedom to choose any willing provider or supplier. It follows, the health center must disclose the existence and nature of an 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.

Standards to Prevent Abuse of Federal Health Care Programs and Protect Patients
In order to safeguard against abuse of the federal health care programs, the OIG has proposed the following two standards that a health center must satisfy to qualify for protection under the safe harbor:

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);

The agreement must comply with all relevant requirements of the health center's section 330 grant funding.

Although the deadline for comments regarding the proposed regulatory safeguards for the health center safe harbor was August 1, 2005, to date, a final rule has not been published.