(c) General exception related only to ownership or investment prohibition for ownership in publicly traded securities and mutual fundsOwnership of the following shall not be considered to be an ownership or investment interest described in subsection (a)(2)(A):(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)(i) securities listed on the New York Stock Exchange, the American Stock Exchange, or any regional exchange in which quotations are published on a daily basis, or foreign securities listed on a recognized foreign, national, or regional exchange in which quotations are published on a daily basis, or
(ii) traded under an automated interdealer quotation system operated by the National Association of Securities Dealers, and
(B) in a corporation that had, at the end of the corporation’s most recent fiscal year, or on average during the previous 3 fiscal years, stockholder equity exceeding $75,000,000.
(2) Ownership of shares in a regulated investment company as defined in section 851(a) of the Internal Revenue Code of 1986, if such company had, at the end of the company’s most recent fiscal year, or on average during the previous 3 fiscal years, total assets exceeding $75,000,000.
(e) Exceptions relating to other compensation arrangementsThe following shall not be considered to be a compensation arrangement described in subsection (a)(2)(B):(1) Rental of office space; rental of equipment(A) Office spacePayments 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,
(iii) the lease provides for a term of rental or lease for at least 1 year,
(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,
(v) the lease would be commercially reasonable even if no referrals were made between the parties, and
(vi) the lease meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
(B) EquipmentPayments 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,
(iii) the lease provides for a term of rental or lease of at least 1 year,
(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,
(v) the lease would be commercially reasonable even if no referrals were made between the parties, and
(vi) the lease meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
(C) Holdover lease arrangementsIn the case of a holdover lease arrangement for the lease of office space or equipment, which immediately follows a lease arrangement described in subparagraph (A) for the use of such office space or subparagraph (B) for the use of such equipment and that expired after a term of at least 1 year, payments made by the lessee to the lessor pursuant to such holdover lease arrangement, if—(i) the lease arrangement met the conditions of subparagraph (A) for the lease of office space or subparagraph (B) for the use of equipment when the arrangement expired;
(ii) the holdover lease arrangement is on the same terms and conditions as the immediately preceding arrangement; and
(iii) the holdover arrangement continues to satisfy the conditions of subparagraph (A) for the lease of office space or subparagraph (B) for the use of equipment.
(2) Bona fide employment relationshipsAny 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—(A) the employment is for identifiable services,
(B) the amount of the remuneration under the employment—(i) is consistent with the fair market value of the services, and
(ii) is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician,
(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 generalRemuneration 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,
(iv) the term of the arrangement is for at least 1 year,
(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,
(vi) the services to be performed under the arrangement do not involve the counseling or promotion or a business arrangement or other activity that violates any State or Federal law, and
(vii) the arrangement meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
(B) Physician incentive plan exception(i) In generalIn 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.(III) Upon request by the Secretary, the entity provides the Secretary with access to descriptive information regarding the plan, in order to permit the Secretary to determine whether the plan is in compliance with the requirements of this clause.
(ii) “Physician incentive plan” definedFor 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.
(C) Holdover personal service arrangementIn the case of a holdover personal service arrangement, which immediately follows an arrangement described in subparagraph (A) that expired after a term of at least 1 year, remuneration from an entity pursuant to such holdover personal service arrangement, if—(i) the personal service arrangement met the conditions of subparagraph (A) when the arrangement expired;
(ii) the holdover personal service arrangement is on the same terms and conditions as the immediately preceding arrangement; and
(iii) the holdover arrangement continues to satisfy the conditions of subparagraph (A).
(4) Remuneration unrelated to the provision of designated health servicesIn 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 recruitmentIn 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—(A) the physician is not required to refer patients to the hospital,
(B)
(C) the arrangement meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
(6) Isolated transactionsIn the case of an isolated financial transaction, such as a one-time sale of property or practice, if—(A) the requirements described in subparagraphs (B) and (C) of paragraph (2) are met with respect to the entity in the same manner as they apply to an employer, and
(B) the transaction meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
(7) Certain group practice arrangements with a hospital(A)22 So in original. No subpar. (B) has been enacted.
In generalAn 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,
(vi) the compensation is provided pursuant to an agreement which would be commercially reasonable even if no referrals were made to the entity, and
(vii) the arrangement between the parties meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
(8) Payments by a physician for items and servicesPayments made by a physician—(A) to a laboratory in exchange for the provision of clinical laboratory services, or
(B) to an entity as compensation for other items or services if the items or services are furnished at a price that is consistent with fair market value.
(9) Physician wellness programsA bona fide mental health or behavioral health improvement or maintenance program offered to a physician by an entity, if—(A) such program—(i) consists of counseling, mental health services, a suicide prevention program, or a substance use disorder prevention and treatment program;
(ii) is made available to a physician for the primary purpose of preventing suicide, improving mental health and resiliency, or providing training in appropriate strategies to promote the mental health and resiliency of such physician;
(iii) is set out in a written policy, approved in advance of the operation of the program by the governing body of the entity providing such program (and which shall be updated accordingly in advance to substantial changes to the operation of such program), that includes—(I) a description of the span and duration of the program;(II) a description of the evidence-based support for the design of the program;(III) the estimated cost of the program;(IV) the personnel (including the qualifications of such personnel) conducting the program; and(V) the method by which such entity will evaluate the use and success of the program;
(iv) is offered by an entity described in subparagraph (B) with a formal medical staff to all physicians who practice in the geographic area served by such entity, including physicians who hold bona fide appointments to the medical staff of such entity or otherwise have clinical privileges at such entity;
(v) is offered to all such physicians on the same terms and conditions and without regard to the volume or value of referrals or other business generated by a physician for such entity;
(vi) is evidence-based and conducted by a qualified health professional; and
(vii) meets such other requirements the Secretary may impose by regulation as needed to protect against program or patient abuse;
(B) such entity is—(i) a hospital;
(ii) an ambulatory surgical center;
(iii) a community health center;
(iv) a rural emergency hospital;
(v) a rural health clinic;
(vi) a skilled nursing facility; or
(vii) a similar entity, as determined by the Secretary; and
(C) neither the provision of such program, nor the value of such program, are contingent upon the number or value of referrals made by a physician to such entity or the amount or value of other business generated by such physician for the entity.
(h) Definitions and special rulesFor 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—(I) collect, transport, process, or store specimens for the entity providing the item, device, or supply, or(II) order or communicate the results of tests or procedures for such entity.
(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,(III) the amount of the payment is set in advance, does not exceed fair market value, and is not determined in a manner that takes into account directly or indirectly the volume or value of any referrals, and(IV) the payment meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
(D)Written requirement clarified.—In the case of any requirement pursuant to this section for a compensation arrangement to be in writing, such requirement shall be satisfied by such means as determined by the Secretary, including by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties involved.
(E)Special rule for signature requirements.—In the case of any requirement pursuant to this section for a compensation arrangement to be in writing and signed by the parties, such signature requirement shall be met if—(i) not later than 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant, the parties obtain the required signatures; and
(ii) the compensation arrangement otherwise complies with all criteria of the applicable exception.
(2) EmployeeAn 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 valueThe 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 practiceThe 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,
(v) in which members of the group personally conduct no less than 75 percent of the physician-patient encounters of the group practice, and
(vi) which meets such other standards as the Secretary may impose by regulation.
(B) Special rules(i) Profits and productivity bonusesA 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 plansIn 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’ servicesExcept as provided in subparagraph (C), in the case of an item or service for which payment may be made under part B, 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 itemsExcept 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 specialistsA 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 servicesThe term “designated health services” means any of the following items or services:(A) Clinical laboratory services.
(B) Physical therapy services.
(C) Occupational therapy services.
(D) Radiology services, including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services.
(E) Radiation therapy services and supplies.
(F) Durable medical equipment and supplies.
(G) Parenteral and enteral nutrients, equipment, and supplies.
(H) Prosthetics, orthotics, and prosthetic devices and supplies.
(I) Home health services.
(J) Outpatient prescription drugs.
(K) Inpatient and outpatient hospital services.
(L) Outpatient speech-language pathology services.
(7) Specialty hospital(A) In generalFor purposes of this section, except as provided in subparagraph (B), the term “specialty hospital” means a subsection (d) hospital (as defined in section 1395ww(d)(1)(B) of this title) that is primarily or exclusively engaged in the care and treatment of one of the following categories:(i) Patients with a cardiac condition.
(ii) Patients with an orthopedic condition.
(iii) Patients receiving a surgical procedure.
(iv) Any other specialized category of services that the Secretary designates as inconsistent with the purpose of permitting physician ownership and investment interests in a hospital under this section.
(B) ExceptionFor purposes of this section, the term “specialty hospital” does not include any hospital—(i) determined by the Secretary—(I) to be in operation before November 18, 2003; or(II) under development as of such date;
(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;
(iv) for which any increase in the number of beds occurs only in the facilities on the main campus of the hospital and does not exceed 50 percent of the number of beds in the hospital as of November 18, 2003, or 5 beds, whichever is greater; and
(v) that meets such other requirements as the Secretary may specify.
(Aug. 14, 1935, ch. 531, title XVIII, § 1877, as added Pub. L. 101–239, title VI, § 6204(a), Dec. 19, 1989, 103 Stat. 2236; amended Pub. L. 101–508, title IV, § 4207(e)(1)–(3), (k)(2), formerly § 4027(e)(1)–(3), (k)(2), Nov. 5, 1990, 104 Stat. 1388–121, 1388–122, 1388–124, renumbered Pub. L. 103–432, title I, § 160(d)(4), Oct. 31, 1994, 108 Stat. 4444; Pub. L. 103–66, title XIII, § 13562(a), Aug. 10, 1993, 107 Stat. 596; Pub. L. 103–432, title I, § 152(a), (b), Oct. 31, 1994, 108 Stat. 4436; Pub. L. 105–33, title IV, § 4314, Aug. 5, 1997, 111 Stat. 389; Pub. L. 106–113, div. B, § 1000(a)(6) [title V, § 524(a)], Nov. 29, 1999, 113 Stat. 1536, 1501A–387; Pub. L. 108–173, title I, § 101(e)(8)(B), title V, § 507(a), Dec. 8, 2003, 117 Stat. 2152, 2295; Pub. L. 110–275, title I, § 143(b)(9), July 15, 2008, 122 Stat. 2543; Pub. L. 111–148, title VI, §§ 6001(a), 6003(a), title X, § 10601(a), Mar. 23, 2010, 124 Stat. 684, 697, 1005; Pub. L. 111–152, title I, § 1106, Mar. 30, 2010, 124 Stat. 1049; Pub. L. 115–123, div. E, title IV, § 50404, Feb. 9, 2018, 132 Stat. 218; Pub. L. 117–328, div. FF, title IV, § 4126(a), Dec. 29, 2022, 136 Stat. 5913.)