§ 1395nn. Limitation on certain physician referrals
(a)
Prohibition of certain referrals
(1)
In general
Except as provided in subsection (b) of this section, if a physician (or an immediate family member of such physician) has a financial relationship with an entity specified in paragraph (2), then—
(2)
Financial relationship specified
For purposes of this section, a financial relationship of a physician (or an immediate family member of such physician) with an entity specified in this paragraph is—
(A)
except as provided in subsections (c) and (d) of this section, an ownership or investment interest in the entity, or
(B)
except as provided in subsection (e) of this section, a compensation arrangement (as defined in subsection (h)(1) of this section) between the physician (or an immediate family member of such physician) and the entity.
An ownership or investment interest described in subparagraph (A) may be through equity, debt, or other means and includes an interest in an entity that holds an ownership or investment interest in any entity providing the designated health service.
(b)
General exceptions to both ownership and compensation arrangement prohibitions
Subsection (a)(1) of this section shall not apply in the following cases:
(2)
In-office ancillary services
In the case of services (other than durable medical equipment (excluding infusion pumps) and parenteral and enteral nutrients, equipment, and supplies)—
(A)
that are furnished—
(i)
personally by the referring physician, personally by a physician who is a member of the same group practice as the referring physician, or personally by individuals who are directly supervised by the physician or by another physician in the group practice, and
(ii)
(I)
in a building in which the referring physician (or another physician who is a member of the same group practice) furnishes physicians’ services unrelated to the furnishing of designated health services, or
(B)
that are billed by the physician performing or supervising the services, by a group practice of which such physician is a member under a billing number assigned to the group practice, or by an entity that is wholly owned by such physician or such group practice,
if the ownership or investment interest in such services meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
(3)
Prepaid plans
In the case of services furnished by an organization—
(A)
with a contract under section
1395mm of this title to an individual enrolled with the organization,
(B)
described in section
1395l
(a)(1)(A) of this title to an individual enrolled with the organization,
(C)
receiving payments on a prepaid basis, under a demonstration project under section
1395b–1
(a) of this title or under section 222(a) of the Social Security Amendments of 1972, to an individual enrolled with the organization,
(c)
General exception related only to ownership or investment prohibition for ownership in publicly traded securities and mutual funds
Ownership of the following shall not be considered to be an ownership or investment interest described in subsection (a)(2)(A) of this section:
(1)
Ownership of investment securities (including shares or bonds, debentures, notes, or other debt instruments) which may be purchased on terms generally available to the public and which are—
(A)
(d)
Additional exceptions related only to ownership or investment prohibition
The following, if not otherwise excepted under subsection (b) of this section, shall not be considered to be an ownership or investment interest described in subsection (a)(2)(A) of this section:
(1)
Hospitals in Puerto Rico
In the case of designated health services provided by a hospital located in Puerto Rico.
(2)
Rural providers
In the case of designated health services furnished in a rural area (as defined in section
1395ww
(d)(2)(D) of this title) by an entity, if—
(3)
Hospital ownership
In the case of designated health services provided by a hospital (other than a hospital described in paragraph (1)) if—
(e)
Exceptions relating to other compensation arrangements
The following shall not be considered to be a compensation arrangement described in subsection (a)(2)(B) of this section:
(1)
Rental of office space; rental of equipment
(A)
Office space
Payments made by a lessee to a lessor for the use of premises if—
(i)
the lease is set out in writing, signed by the parties, and specifies the premises covered by the lease,
(ii)
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, except that the lessee may make payments for the use of space consisting of common areas if such payments do not exceed the lessee’s pro rata share of expenses for such 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 such common areas,
(iv)
the rental charges over the term of the lease 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,
(B)
Equipment
Payments made by a lessee of equipment to the lessor of the equipment for the use of the equipment if—
(i)
the lease is set out in writing, signed by the parties, and specifies the equipment covered by the lease,
(ii)
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,
(iv)
the rental charges over the term of the lease 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,
(2)
Bona fide employment relationships
Any amount paid by an employer to a physician (or an immediate family member of such physician) who has a bona fide employment relationship with the employer for the provision of services if—
(C)
the remuneration is provided pursuant to an agreement which would be commercially reasonable even if no referrals were made to the employer, and
(D)
the employment meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
Subparagraph (B)(ii) shall not prohibit the payment of remuneration in the form of a productivity bonus based on services performed personally by the physician (or an immediate family member of such physician).
(3)
Personal service arrangements
(A)
In general
Remuneration from an entity under an arrangement (including remuneration for specific physicians’ services furnished to a nonprofit blood center) if—
(i)
the arrangement is set out in writing, signed by the parties, and specifies the services covered by the arrangement,
(ii)
the arrangement covers all of the services to be provided by the physician (or an immediate family member of such physician) to the entity,
(iii)
the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement,
(v)
the compensation to be paid over the term of the arrangement is set in advance, does not exceed fair market value, and except in the case of a physician incentive plan described in subparagraph (B), is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties,
(B)
Physician incentive plan exception
(i)
In general
In the case of a physician incentive plan (as defined in clause (ii)) between a physician and an entity, 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 provided with respect to a specific individual enrolled with the entity.
(II)
In the case of a plan that places a physician or a physician group at substantial financial risk as determined by the Secretary pursuant to section
1395mm
(i)(8)(A)(ii) of this title, the plan complies with any requirements the Secretary may impose pursuant to such section.
(ii)
“Physician incentive plan” defined
For purposes of this subparagraph, the term “physician incentive plan” means any compensation arrangement between an entity and a physician or physician group that may directly or indirectly have the effect of reducing or limiting services provided with respect to individuals enrolled with the entity.
(4)
Remuneration unrelated to the provision of designated health services
In the case of remuneration which is provided by a hospital to a physician if such remuneration does not relate to the provision of designated health services.
(5)
Physician recruitment
In the case of remuneration which is provided by a hospital to a physician to induce the physician to relocate to the geographic area served by the hospital in order to be a member of the medical staff of the hospital, if—
(6)
Isolated transactions
In the case of an isolated financial transaction, such as a one-time sale of property or practice, if—
(7)
Certain group practice arrangements with a hospital
(A)
2 In general
An arrangement between a hospital and a group under which designated health services are provided by the group but are billed by the hospital if—
(i)
with respect to services provided to an inpatient of the hospital, the arrangement is pursuant to the provision of inpatient hospital services under section
1395x
(b)(3) of this title,
(ii)
the arrangement began before December 19, 1989, and has continued in effect without interruption since such date,
(iii)
with respect to the designated health services covered under the arrangement, substantially all of such services furnished to patients of the hospital are furnished by the group under the arrangement,
(iv)
the arrangement is pursuant to an agreement that is set out in writing and that specifies the services to be provided by the parties and the compensation for services provided under the agreement,
(v)
the compensation paid over the term of the agreement is consistent with fair market value and the compensation per unit of services 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,
(f)
Reporting requirements
Each entity providing covered items or services for which payment may be made under this subchapter shall provide the Secretary with the information concerning the entity’s ownership, investment, and compensation arrangements, including—
(2)
the names and unique physician identification numbers of all physicians with an ownership or investment interest (as described in subsection (a)(2)(A) of this section), or with a compensation arrangement (as described in subsection (a)(2)(B) of this section), in the entity, or whose immediate relatives have such an ownership or investment interest or who have such a compensation relationship with the entity.
Such information shall be provided in such form, manner, and at such times as the Secretary shall specify. The requirement of this subsection shall not apply to designated health services provided outside the United States or to entities which the Secretary determines provides [3] services for which payment may be made under this subchapter very infrequently.
(g)
Sanctions
(1)
Denial of payment
No payment may be made under this subchapter for a designated health service which is provided in violation of subsection (a)(1) of this section.
(2)
Requiring refunds for certain claims
If a person collects any amounts that were billed in violation of subsection (a)(1) of this section, the person shall be liable to the individual for, and shall refund on a timely basis to the individual, any amounts so collected.
(3)
Civil money penalty and exclusion for improper claims
Any person that presents or causes to be presented a bill or a claim for a service that such person knows or should know is for a service for which payment may not be made under paragraph (1) or for which a refund has not been made under paragraph (2) shall be subject to a civil money penalty of not more than $15,000 for each such service. The provisions of section
1320a–7a of this title (other than the first sentence of subsection (a) and other than subsection (b)) shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section
1320a–7a
(a) of this title.
(4)
Civil money penalty and exclusion for circumvention schemes
Any physician or other entity that enters into an arrangement or scheme (such as a cross-referral arrangement) which the physician or entity knows or should know has a principal purpose of assuring referrals by the physician to a particular entity which, if the physician directly made referrals to such entity, would be in violation of this section, shall be subject to a civil money penalty of not more than $100,000 for each such arrangement or scheme. The provisions of section
1320a–7a of this title (other than the first sentence of subsection (a) and other than subsection (b)) shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section
1320a–7a
(a) of this title.
(5)
Failure to report information
Any person who is required, but fails, to meet a reporting requirement of subsection (f) of this section is subject to a civil money penalty of not more than $10,000 for each day for which reporting is required to have been made. The provisions of section
1320a–7a of this title (other than the first sentence of subsection (a) and other than subsection (b)) shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section
1320a–7a
(a) of this title.
(6)
Advisory opinions
(A)
In general
The Secretary shall issue written advisory opinions concerning whether a referral relating to designated health services (other than clinical laboratory services) is prohibited under this section. Each advisory opinion issued by the Secretary shall be binding as to the Secretary and the party or parties requesting the opinion.
(B)
Application of certain rules
The Secretary shall, to the extent practicable, apply the rules under subsections (b)(3) and (b)(4) of this section and take into account the regulations promulgated under subsection (b)(5) of section
1320a–7d of this title in the issuance of advisory opinions under this paragraph.
(h)
Definitions and special rules
For purposes of this section:
(1)
Compensation arrangement; remuneration
(A)
The term “compensation arrangement” means any arrangement involving any remuneration between a physician (or an immediate family member of such physician) and an entity other than an arrangement involving only remuneration described in subparagraph (C).
(B)
The term “remuneration” includes any remuneration, directly or indirectly, overtly or covertly, in cash or in kind.
(C)
Remuneration described in this subparagraph is any remuneration consisting of any of the following:
(i)
The forgiveness of amounts owed for inaccurate tests or procedures, mistakenly performed tests or procedures, or the correction of minor billing errors.
(ii)
The provision of items, devices, or supplies that are used solely to—
(iii)
A payment made by an insurer or a self-insured plan to a physician to satisfy a claim, submitted on a fee for service basis, for the furnishing of health services by that physician to an individual who is covered by a policy with the insurer or by the self-insured plan, if—
(I)
the health services are not furnished, and the payment is not made, pursuant to a contract or other arrangement between the insurer or the plan and the physician,
(II)
the payment is made to the physician on behalf of the covered individual and would otherwise be made directly to such individual,
(2)
Employee
An individual is considered to be “employed by” or an “employee” of an entity if the individual would be considered to be an employee of the entity under the usual common law rules applicable in determining the employer-employee relationship (as applied for purposes of section 3121(d)(2) of the Internal Revenue Code of 1986).
(3)
Fair market value
The term “fair market value” means the value in arms length transactions, consistent with the general market value, and, with respect to rentals or leases, the value of rental property for general commercial purposes (not taking into account its intended use) and, in the case of a lease of space, not adjusted to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee.
(4)
Group practice
(A)
Definition of group practice
The term “group practice” means a group of 2 or more physicians legally organized as a partnership, professional corporation, foundation, not-for-profit corporation, faculty practice plan, or similar association—
(i)
in which each physician who is a member of the group provides substantially the full range of services which the physician routinely provides, including medical care, consultation, diagnosis, or treatment, through the joint use of shared office space, facilities, equipment and personnel,
(ii)
for which substantially all of the services of the physicians who are members of the group are provided through the group and are billed under a billing number assigned to the group and amounts so received are treated as receipts of the group,
(iii)
in which the overhead expenses of and the income from the practice are distributed in accordance with methods previously determined,
(iv)
except as provided in subparagraph (B)(i), in which no physician who is a member of the group directly or indirectly receives compensation based on the volume or value of referrals by the physician,
(B)
Special rules
(i)
Profits and productivity bonuses
A physician in a group practice may be paid a share of overall profits of the group, or a productivity bonus based on services personally performed or services incident to such personally performed services, so long as the share or bonus is not determined in any manner which is directly related to the volume or value of referrals by such physician.
(ii)
Faculty practice plans
In the case of a faculty practice plan associated with a hospital, institution of higher education, or medical school with an approved medical residency training program in which physician members may provide a variety of different specialty services and provide professional services both within and outside the group, as well as perform other tasks such as research, subparagraph (A) shall be applied only with respect to the services provided within the faculty practice plan.
(5)
Referral; referring physician
(A)
Physicians’ services
Except as provided in subparagraph (C), in the case of an item or service for which payment may be made under part B of this subchapter, the request by a physician for the item or service, including the request by a physician for a consultation with another physician (and any test or procedure ordered by, or to be performed by (or under the supervision of) that other physician), constitutes a “referral” by a “referring physician”.
(B)
Other items
Except as provided in subparagraph (C), the request or establishment of a plan of care by a physician which includes the provision of the designated health service constitutes a “referral” by a “referring physician”.
(C)
Clarification respecting certain services integral to a consultation by certain specialists
A request by a pathologist for clinical diagnostic laboratory tests and pathological examination services, a request by a radiologist for diagnostic radiology services, and a request by a radiation oncologist for radiation therapy, if such services are furnished by (or under the supervision of) such pathologist, radiologist, or radiation oncologist pursuant to a consultation requested by another physician does not constitute a “referral” by a “referring physician”.
(6)
Designated health services
The term “designated health services” means any of the following items or services:
(7)
Specialty hospital
(A)
In general
(B)
Exception
For purposes of this section, the term “specialty hospital” does not include any hospital—
(ii)
for which the number of physician investors at any time on or after such date is no greater than the number of such investors as of such date;
(iii)
for which the type of categories described in subparagraph (A) at any time on or after such date is no different than the type of such categories as of such date;
[1] See References in Text note below.
[2] So in original. No subpar. (B) has been enacted.
[3] So in original. Probably should be “provide”.