3. Equipment Rental

A.  Similar to the six standards for Anti-Kickback, and more flexible beginning Jan. 1, 2016:

  1. The lease arrangement is set out in writing (does not have to be a formal agreement), is signed by the parties, and specifies the equipment it covers.

  2. The equipment leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement 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) (but see separate exception for timeshare arrangements in Item 17 below).

  3. The duration of the lease arrangement is at least 1 year (arrangement that in fact lasts for 1 year satisfies this requirement).

  4. The rental charges over the term of the lease arrangement are set in advance, are consistent with fair market value, and are not determined:

(i) In a manner that takes into account the volume or value of any referrals or other business generated between the parties; or

(ii) Using a formula based on:

(A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed on or business generated through the use of the equipment; or

(B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.

  5.  The lease arrangement would be commercially reasonable even if no referrals were made between the parties.

  6.  If the lease arrangement expires after a term of at least 1 year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies this exception if the following conditions are met:

(i) The lease arrangement met the five conditions above when the arrangement expired;

(ii) The holdover lease arrangement is on the same terms and conditions as the immediately preceding lease arrangement; and

(iii) The holdover lease arrangement continues to satisfy the five conditions above.

Stark General Exception

Sources: 42 C.F.R. § 411.357(b)