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Anti-Kickback Safe Harbor

Returns on investments in small entities, provided:

  1. no more than 40% of all investment interests in the entity are held by referring investors (note that “referring investors” can include not only physician investors, but also investors who furnish items or services to the entity (e.g., DME suppliers));

  2. terms on which investment interests are offered to referring investors are no different from the terms on which investment interests are offered to passive investors;

  3. terms on which investment interests are offered to referring investors are not related to expected referrals;

  4. no requirement to make referrals as a condition for remaining as an investor;

  5. entity and referring investors cannot favor passive investors over non-investors in promoting and/or furnishing the entity’s items or services;

  6. no more than 40% of the entity’s gross revenues relating to health care come from business referred by investors (note that revenues the entity derives from items or services furnished by investors to the entity (e.g., management services) are not counted toward the 40% limitation);

  7. entity and its investors (and persons acting on their behalf) cannot finance (or guarantee financing of) any purchase of the entity’s securities by a person who could make or influence referrals; and

  8. returns are directly proportional to capital investment (including the fair market value of any pre-operational services rendered) of investors.

Note that joint ventures located in rural or urban areas designated “Medically Underserved Areas” (“MUAs”) and serving primarily “Medically Underserved Populations” (“MUPs”) are permitted to have a higher percentage of referring investor ownership—50% instead of 40%--and can derive an unlimited amount of revenues from referring investors.

1. Investment Interests in Small Entities [e.g., joint venture and limited and general partnership interests

Sources: 42 C.F.R. §  1001.952(a)(2) and 42 C.F.R. § 1001.952(a)(3)

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