HHS inspector general publishes final safe harbor regulations - Health and Human Services Office of the Inspector General details criminal and civil sanctions for certain tax shelter payment practices in Medicare/Medicaid - column

Physician Executive, Sept-Oct, 1991 by Carrie Valiant

Other Safe Harbors

As expected, three additional safe harbors address space and equipment leases and management and administrative services agreements in which payments are based on the fair market value of the services rendered and do not relate to the volume or value of referrals generated. Such arrangements must be for a term of at least one year, be set out in writing and signed, and specify the aggregate payment amount as well as the premises, equipment, or services covered. If the agreement does not contemplate full-time services, it must also specify the schedule of intervals, their precise length, and the exact charge of such intervals.

Safe Harbors to Come

According to the regulations, additional safe harbors are yet to come. An interim final rule on managed care activity is expected to be issued soon. Additionally, the Inspector General is considering additional safe harbors for certain physician recruitment activities, subsidized malpractice premiums, and othe activities. The regulations specify that the discussion regarding these potential safe harbor provisions should not be construed as legalizing the business arrangements at this time.

No Advisory Opinions

While the Inspector General apparently believes that the regulations provide a "bright-line" test for permitted conduct, many questions remain unanswered. Conspicuously absent from the regulations is any mechanism for obtaining advisory opinions or similar guidance regarding contemplated activities.

Thus, the final safe harbors do not provide the clarity that the health care industry has long awaited. With so many questions unanswered, the safe harbors may well create a chilling effect on legitimate business conduct, even though the preamble to the regulations clearly states that noncompliance with the proposed safe harbors does not necessarily mean that the conduct is illegal.

Carrie Valiant, Esq., is an attorney with the firm of Epstein Becker and Green, P.C., and is located in the firm's Washington, D.C., offices.