[Federal Register: December 4, 2001 (Volume 66, Number 233)]

[Rules and Regulations]               

[Page 62979-62991]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr04de01-22]                         

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Part 1001

RIN 0991-AB05

Medicare and State Health Care Programs: Fraud and Abuse; 

Ambulance Replenishing Safe Harbor Under the Anti-Kickback Statute

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Final rule.

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SUMMARY: This final rule sets forth a safe harbor, as authorized under 

section 14 of the Medicare and Medicaid Patient and Program Protection 

Act of 1987, to protect certain arrangements involving hospitals or 

other receiving facilities that replenish drugs and medical supplies 

used by ambulance providers (or first responders) when transporting 

patients to the hospitals or receiving facilities.

EFFECTIVE DATE: These regulations are effective on January 3, 2002.

FOR FURTHER INFORMATION CONTACT: Vicki L. Robinson, Senior Counsel, 

Office of Counsel to the Inspector General, (202) 619-0335.

SUPPLEMENTARY INFORMATION:

Overview--Establishing a New Safe Harbor for Ambulance Restocking 

Arrangements

    This final regulation establishes safe harbor protection for 

ambulance restocking arrangements.\1\ Ambulance restocking is the 

practice, commonplace in many parts of the country, of hospitals or 

other receiving facilities restocking ambulance providers \2\ with 

drugs or supplies used during the transport of a patient to the 

hospital or receiving facility. (For simplicity, we sometimes use the 

shorthand ``hospital'' or ``receiving hospital'' in this preamble; such 

terminology is intended to include other types of receiving facilities, 

such as urgent care or community health care clinics that provide 

emergency care services). Restocking enables the ambulance to depart 

the hospital ready for the next emergency call, fully stocked with 

current medications, sanitary linens, and a full complement of 

appropriate medications and supplies, and helps ensure that supplies, 

such as intravenous tubing and catheters, are compatible with equipment 

used in local emergency rooms so as to expedite the transfer of 

critically ill or injured patients to emergency room systems. Bona fide 

restocking arrangements serve a significant public interest and are 

consistent with Federal policy established over the past 25 years.\3\

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    \1\ Because these arrangements are commonly known as 

``restocking,'' we use that term in this preamble. As further 

discussed below, the regulations use the word ``replenish'' to make 

clear that the safe harbor only applies to the gifting or transfer 

of drugs and supplies that replace comparable drugs and supplies 

administered by the ambulance provider (or first responder) to a 

patient before the patient is delivered to the receiving facility. 

The rule is not applicable to any arrangements for the general 

stocking of the inventories of ambulance providers. Depending on the 

circumstances, such arrangements may fit into other safe harbors, 

such as the group purchasing organization safe harbor at 

Sec. 1001.952(j) or the discount safe harbor at Sec. 1001.952(h) of 

this part.

    \2\ In this preamble and regulations text, unless otherwise 

specified, the term ``ambulance provider'' compasses both 

independent ambulance suppliers and hospital-based providers, 

including ``under arrangements'' providers.

    \3\ See, e.g., Emergency Medical Services Systems Act of 1973, 

Public Law 93-154 (providing Federal funding for the development of 

regional Emergency Medical Services (EMS) systems at the State, 

regional, and local levels, and defining ``emergency medical 

services system'' as ``a system which provides for the arrangement 

of personnel, facilities and equipment for the effective and 

coordinated delivery in an appropriate geographical area of health 

care services under emergency conditions * * * and which is 

administered by a public or nonprofit private entity which has the 

authority and the resources to provide effective administration of 

the system.''); Highway Safety Act of 1966, Public Law 89-594 

(establishing an EMS program in the Department of Transportation); 

Emergency Medical Services for Children Program, under the Public 

Health Act, Public Law 98-555 (providing funds for enhancing 

pediatric EMS); and Trauma Care Systems Planning and Development Act 

of 1990, Public Law 101-590.

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    Set forth below is a brief background discussion addressing the 

anti-kickback statute and the proposed safe harbor for ambulance 

restocking; a summary of the provisions being adopted into the final 

regulations; and a review of the public

comments received and our responses to those concerns.

I. Background

A. Ambulance Restocking and the Anti-Kickback Statute

    Section 1128B(b) of the Social Security Act (the Act) (42 U.S.C. 

1320a-7b(b)) provides criminal penalties for individuals or entities 

that knowingly and willfully offer, pay, solicit or receive 

remuneration (i.e., anything of value, in cash or in kind) in order to 

induce the referral of business reimbursable by a Federal health care 

program. Violations of the statute may also result in civil money 

penalties under section 1128A(a)(7) of the Act or program exclusion 

under section 1128(a)(7) of the Act. The statute has been in existence 

since 1977 and applies broadly to all kinds of health care providers 

and suppliers. Payments tied to referrals corrupt the health care 

system, increasing the risks of overutilization of items and services, 

increased costs to the Federal health care programs, inappropriate 

steering of patients, and unfair competition. Ambulance restocking 

arrangements technically implicate the anti-kickback statute because 

the receiving hospital gives something of value (e.g., drugs or medical 

supplies) to a potential source of Federal health care program 

business, i.e., ambulance providers who deliver patients.

    Notwithstanding the potential for a violation, the OIG believes 

that the vast majority of ambulance restocking arrangements are lawful 

under the anti-kickback statute. We fully recognize the importance of 

ambulances being restocked and ready for emergency use at all times. 

Properly structured restocking arrangements contribute to this laudable 

goal without significant risk of fraud or abuse.

B. OIG Advisory Opinions

    The OIG was first asked to address an ambulance restocking 

arrangement in 1997 when two hospitals submitted a request for an 

advisory opinion under section 1128D of the Act. As required by the 

statute, the OIG responded to the request, even though the subject 

matter was not of significant concern to the OIG. As with all 

determinations under the anti-kickback statute, our review turned on 

the specific facts and circumstances of the arrangement as presented by 

the requesting hospitals. The request presented an unusual set of facts 

under which an unscrupulous party could potentially use an ambulance 

restocking arrangement for an unlawful purpose, namely the steering of 

patients to a particular hospital in exchange for remuneration. The OIG 

opined that the facts of the particular arrangement--as presented by 

the hospitals--would be likely to involve prohibited remuneration.\4\ 

By law, the opinion applied only to the hospitals that requested it.

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    \4\ OIG Advisory Opinion 97-6 (October 8, 1997).

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    Subsequently, the OIG issued several favorable advisory opinions 

approving restocking arrangements that it believed to be much more 

representative of typical restocking arrangements.\5\ Most recently, in 

December 2000, the OIG issued a favorable advisory opinion approving a 

hospital's proposal to restock only volunteer ambulance companies that 

do not charge anyone for their services.

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    \5\ OIG Advisory Opinion 98-7 (June 11, 1998); OIG Advisory 

Opinion 98-13 (September 30, 1998); OIG Advisory Opinion 98-14 

(October 28, 1998); and OIG Advisory Opinion 00-09 (December 8, 

2000).

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C. The Proposed Safe Harbor

    On May 22, 2000, we published a notice of proposed rulemaking to 

promulgate safe harbor regulations for ambulance restocking 

arrangements (65 FR 32060). In the notice of proposed rulemaking, we 

proposed protecting two categories of ambulance restocking 

arrangements: (1) Arrangements under which the ambulance provider pays 

a receiving facility fair market value for restocked drugs or supplies; 

and (2) arrangements under which the ambulance service provider 

receives contemporaneous restocking of drugs or medical supplies used 

during emergency transport of a patient to the receiving facility, even 

if the restocking is without charge or at reduced prices. The proposed 

rule was designed to protect restocking for emergency transports only.

    Proposed Sec. 1001.952(v)(2), the fair market value category, was 

designed to protect restocking arrangements where an ambulance provider 

pays the receiving facility fair market value, based on an arms-length 

transaction, for restocked drugs or supplies (including linens) used in 

connection with the transport of an emergency patient. Under the 

proposal, payment need not be made at the same time as the restocking, 

provided commercially reasonable and appropriate payment arrangements 

are made in advance.

    Proposed Sec. 1001.952(v)(3) was designed to protect remuneration 

in the form of restocking of drugs or medical supplies (including 

linens) used during an emergency transport of a patient to the 

receiving facility, even if the restocking is for free or reduced 

prices. Under the proposed rule, the restocking arrangements would have 

to be implemented on a community-wide basis with some involvement of an 

oversight entity. The proposed safe harbor would not protect unilateral 

referral arrangements that were not open to all hospitals and ambulance 

companies in the service area.

    Most commenters supported a new safe harbor, but many objected to 

certain aspects of the proposed rule. Some found the rule too narrow or 

burdensome, while others found the provisions of the proposed 

regulations ambiguous or impracticable. Of particular concern to many 

commenters were the proposed safe harbor conditions relating to 

monitoring by an oversight entity, written memorialization of the 

arrangement, and billing for restocked drugs and supplies. We have 

eliminated or substantially revised these conditions, as described in 

greater detail in section II. below.

II. Summary of the Final Rule

    As with the proposed rule, the goal of this final rule is safe 

harbor protection for the vast majority of ambulance restocking 

arrangements that further the important mission of insuring that pre-

hospital emergency medical services (EMS) are timely, effective and 

efficient.

A. Major Changes

    We have modified the proposed rule in a number of areas in response 

to public comments. Among the substantial changes and clarifications 

being made in the final regulations are:

     Eliminating the oversight entity condition in favor of a 

public operation and disclosure condition;

     Clarifying that no complicated written contracts or 

agreements are required and providing a short sample disclosure notice;

     Conforming the billing conditions to existing Federal 

health care program payment and coverage rules and regulations;

     Expanding the safe harbor to include restocking for non-

emergency runs so long as the ambulance is also used for emergency 

runs;

     Allowing hospitals to limit the scope of protected 

restocking to all non-profit ambulance providers or all ambulance 

providers that do not charge for their services;

     Simplifying the documentation conditions so that only one 

party to the restocking arrangement is required to document the 

restocking;

     Adding specific safe harbor protection for Government-

mandated ambulance restocking; and

     Including restocking of drugs or supplies initially 

administered to the patient by a first responder at the scene of the 

illness or injury.

B. Final Safe Harbor Conditions

    The final safe harbor regulations establish broad protection for 

most existing ambulance restocking arrangements, while precluding 

protection for any abusive arrangements that use targeted or selective 

restocking for the purpose of inducing or rewarding referrals. The 

final regulations address three categories of restocking: (1) General 

restocking (whether for free or for a charge), (2) fair market value 

restocking, and (3) Government-mandated restocking. Parties need only 

satisfy the conditions applicable to any one of these categories. 

Parties who are unsure whether their restocking is at fair market value 

or is mandated by a Government authority may look to the general 

restocking category.

    The final regulations provide that ``remuneration'' under the anti-

kickback statute does not include any gift or transfer of drugs or 

medical supplies (including linens) by a hospital or other receiving 

facility to an ambulance provider for the purpose of replenishing 

comparable drugs or medical supplies (including linens) used by the 

ambulance provider (or a first responder) in connection with the 

transport of a patient by ambulance to the hospital or receiving 

facility if all applicable safe harbor conditions are satisfied.

    The regulations are divided into two parts. First, there are four 

conditions, codified at Sec. 1001.952(v)(2), that apply to all three of 

the restocking categories being protected by the safe harbor. Second, 

there are specific conditions codified at Sec. 1001.952(v)(3) for each 

of the three categories being set forth (general restocking, fair 

market value restocking, and Government mandated restocking). To 

qualify for safe harbor protection, a restocking arrangement must meet 

all of the conditions in the first part and all of the conditions 

relevant to one category in the second part.

1. Conditions Applicable to All Safe Harbor Restocking Arrangements

    The four conditions applicable to all safe harbor restocking 

arrangements are:

    (a) Appropriate billing of Federal health care programs. The final 

rule conditions safe harbor protection on Federal health care program 

billing for restocked drugs and medical supplies that is consistent 

with all applicable program payment and coverage rules and regulations. 

The ambulance provider and the hospital may not both bill for the same 

restocked drug or supply. For purposes of this safe harbor, billing 

includes submitting claims for bad debt. Compliance with the 

requirement that billing be appropriate will be determined separately 

for receiving facilities and ambulance providers. For example, if a 

hospital improperly bills for restocked supplies, the ambulance 

provider who received the supplies may still be protected, so long as 

the provider has not done anything to impede the hospital's compliance 

with the billing rules.

    (b) Documentation requirements. We have simplified the 

documentation requirements. Under the final rule, either the hospital 

or the ambulance provider may generate the necessary documentation, so 

long as the other party receives and maintains a copy of it for 5 

years. This 5-year period is consistent with the recordkeeping 

requirements of the Centers for Medicare and Medicaid Services' (CMS) 

\6\ hospital conditions of participation. The pre-hospital care report 

typically prepared by the ambulance service provider (sometimes called 

the trip sheet, patient care report or patient encounter report) will 

be sufficient to satisfy this requirement if (i) the report identifies 

the drugs and supplies used on the patient and subsequently restocked 

and (ii) a copy of the report is filed with the receiving facility 

within a reasonable amount of time. For arrangements that include 

restocking of linens, an exchange of linens will be presumed to occur 

with each run, absent documentation to the contrary. The pre-hospital 

care report or other documentation may be prepared and filed with the 

other party in hard copy or electronically.

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    \6\ Until June 2001, CMS was known as the Health Care Financing 

Administration.

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    (c) No ties to referrals. In the light of the easing of the billing 

conditions, we are adding a safeguard similar to one found in other 

safe harbors that prohibits any restocking arrangement that is 

conditioned on, or otherwise takes into account, the volume or value of 

any referrals or other business generated between the parties for which 

payment may be made in whole or in part by a Federal health care 

program (other than the delivery to the receiving facility of the 

particular patient for whom the drugs and medical supplies are 

restocked).

    (d) Compliance with all other applicable laws. We have retained the 

proposed condition that the receiving facility and the ambulance 

provider must comply with all Federal, State and local laws regulating 

ambulance services, including, but not limited to, emergency services, 

and the provision of drugs and medical supplies, including, but not 

limited to, laws relating to the handling of controlled substances.

2. Safe Harbor Conditions Applicable to the Specific Categories of Safe 

Harbor Protection

    The safe harbor conditions applicable to the three specific 

categories of safe harbor protection are summarized as follows:

    (a) General restocking. This safe harbor for general restocking is 

available for free restocking arrangements, as well as arrangements 

under which the ambulance provider pays some amount for the restocked 

drugs and supplies (whether or not the amount is fair market value). 

(Any payment for drugs must comply with applicable Federal, State and 

local laws.) Two specific conditions apply to the general restocking 

category. First, the receiving facility must restock medical supplies 

or drugs on an equal basis for ambulance providers in one or more of 

three categories: (i) All ambulance providers; (ii) all non-profit and 

governmental providers; or (iii) all non-charging providers (typically 

volunteers and municipal providers). A receiving facility can offer 

restocking to more than one category, and can offer a different 

restocking program to each category that it restocks, so long as the 

restocking is uniform within each category. The final regulations make 

clear that safe harbor protection does not require each hospital and 

receiving facility in the service area to offer restocking, nor all 

ambulance providers to accept it.

    Second, the restocking must be conducted publicly. As detailed in 

the regulations text, a restocking arrangement will be considered to be 

conducted publicly if: (i) The arrangement is memorialized in a 

conspicuously posted writing that outlines the terms of the restocking 

program and copies are available publicly (a sample disclosure form is 

included in the regulations); or (ii) The restocking program operates 

in accordance with a plan or protocol of general application 

promulgated by an EMS council or comparable organization. For purposes 

of safe harbor compliance, the writing need not disclose confidential 

proprietary or financial information.

    (b) Fair market value restocking. This category protects restocking 

arrangements where an ambulance provider pays the receiving facility 

fair

market value, based on an arms-length transaction, for restocked 

medical supplies (including linens). For consistency with the 

Prescription Drug Marketing Act,\7\ and some State laws, the final 

regulations do not include the resale of drugs in this category. 

(Restocking of drugs may be covered under other safe harbor 

categories.) This safe harbor category has two conditions: (i) The 

restocking must be at fair market value, and (ii) payment arrangements 

must be commercially reasonable and made in advance. For reasons 

discussed in greater detail in the responses to comments in section 

III. of this preamble, we are not including any special accommodation 

related to the Non-Profit Institutions Act, 15 U.S.C. 13(c), exception 

to the Robinson-Patman Act.\8\

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    \7\ Public Law 100-293, April 22, 1998, 102 Stat. 95.

    \8\ 15 U.S.C. 13(a)-(f).

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    (c) Government-mandated restocking. This final safe harbor protects 

restocking of drugs and supplies undertaken in accordance with a State 

or local statute, ordinance, regulations or binding protocol that 

requires hospitals or receiving facilities in the area subject to such 

requirement to restock ambulances that deliver patients to the hospital 

with drugs or medical supplies that are used during the transport of 

that patient.

C. Safe Harbor Compliance Is Voluntary

    As with all safe harbors, compliance with these new safe harbors is 

voluntary. While the vast majority of ambulance restocking arrangements 

should fit in this new safe harbor, failure to fit does not mean that 

an arrangement is illegal under the anti-kickback statute. Rather, it 

simply means that the legality of the arrangement must be evaluated on 

a case-by-case basis. If no purpose of the arrangement is to induce or 

reward the generation of Federal health care program business, there 

would be no violation of the statute. The obligation of parties to 

comply with the anti-kickback statute pre-dates this safe harbor 

rulemaking, and arrangements that were lawful before the rulemaking 

will continue to be lawful, whether or not they meet the safe harbor 

requirements. The safe harbor does not require the restructuring of any 

arrangements, although parties may choose to restructure to take 

advantage of the safe harbor protection. Parties who are unsure whether 

their existing or proposed arrangements fit in a safe harbor or would 

be subject to OIG sanctions may apply for an advisory opinion under 

section 1128D of the Act. The procedures for applying for an advisory 

opinion are set forth at 42 CFR part 1008 and on the OIG Web site at 

http://www.dhhs.gov/progorg/oig/advopn/index.htm.

III. Public Comments and Responses

    In response to our proposed rulemaking, the OIG received a total of 

46 timely-filed comments from a cross-section of ambulance providers, 

hospitals, local and regional emergency medical boards, professional 

associations and other interested parties. Set forth below is a summary 

of the issues raised by the commenters and our responses to those 

specific concerns.

A. General Comments

    The vast majority of the public comments supported promulgation of 

a safe harbor for ambulance restocking, although many commenters took 

issue with one or more specific aspects of the proposal.

    Comment: Several commenters believed that the OIG advisory opinions 

on ambulance restocking under the anti-kickback statute, especially the 

first one issued in 1997, have had a chilling effect on ambulance 

restocking arrangements.

    Response: While this comment reflects a common perception in the 

industry, we have learned that a major source of the reluctance of many 

hospitals to enter into, or continue, restocking programs is financial. 

In other words, their willingness to participate in restocking 

arrangements is directly related to their ability to be reimbursed by 

Medicare or other insurers for costly supplies and drugs provided 

without charge to local ambulance services. Many of these drugs and 

supplies are increasingly becoming the standard of care for pre-

hospital services. In many cases, financially strapped hospitals are 

unwilling to continue to subsidize the emergency medical system in the 

absence of definitive assurance that they will be adequately reimbursed 

for drugs and supplies used during ambulance transports. Some hospitals 

have used the unfavorable 1997 advisory opinion as a pretext for 

justifying decisions to terminate, or decline to participate in, 

restocking arrangements in order to blunt negative publicity and 

adverse local community reaction.

    Comment: A number of commenters misread the proposed regulations as 

an effort by the OIG to dictate Medicare payment policy.

    Response: The OIG does not set Medicare payment and coverage 

policy. As stated in the proposed rule, we express no view in these 

regulations as to the appropriate Federal health care program payment 

or coverage policy for drugs and supplies used during ambulance 

transports. Those determinations are properly made by the relevant 

Federal program. In crafting safeguards to include in safe harbor 

regulations, we considered the ways in which a particular payment 

policy or practice may affect the risk of patient or program abuse.

    Comment: An ambulance provider with a limited budget, and in an 

area with a low call volume, explained that it could not maintain an 

Advanced Life Support level of service, because it was unable to 

restock drugs from a local hospital. According to the commenter, their 

costs of purchasing expensive drugs in small quantities makes such 

drugs prohibitively expensive. In addition, the commenter observed that 

many small providers do not have the facilities to maintain proper 

environmental conditions for larger supplies of these types of drugs.

    Response: Nothing in these regulations prohibits hospitals from 

restocking ambulances with drugs or prohibits ambulance providers from 

taking advantage of (i) volume discounts obtained by hospitals (to the 

extent otherwise permitted under Federal, State and local law) or (ii) 

any hospital facility for storing such drugs.

    Comment: Several commenters indicated that in some parts of the 

country, local and State governments have imposed mandatory 

requirements relating to the restocking of ambulances that deliver 

patients to hospitals. These commenters requested an additional 

category of safe harbor protection to address arrangements controlled 

by State or local government requirements.

    Response: Nothing in the safe harbor regulations precludes State 

and local governments from regulating ambulance restocking. If the 

State or local law or regulation is duly promulgated, and the 

restocking arrangement is conducted in accordance with its mandate, the 

OIG sees little risk under the anti-kickback statute, which requires a 

showing of unlawful intent. Accordingly, we are including an additional 

safe harbor category for Government-mandated restocking, and have 

adapted language suggested by a major trade association. We note that 

nothing in State or local government laws or regulations mandating 

ambulance restocking affects the reimbursement rules under Medicare or 

other Federal health care programs.

    Comment: Some commenters questioned whether ambulance

restocking arrangements raise kickback concerns at all. Specifically, 

with respect to patient steering risks, one commenter explained that 

conscious patients select their own destination, and unconscious or 

unstable patients are taken to the nearest facility. Other commenters 

expressed the view that instances of fraud in ambulance restocking 

arrangements would be isolated.

    Response: We agree that fraud and abuse are likely to be uncommon 

in bona fide ambulance restocking arrangements. Nonetheless, in 

crafting safe harbors, we must be mindful not only of the benefits of 

the practices we seek to protect, but also the potential abuses. With 

ambulance restocking, the risks are low but not absent.

    Comment: Several commenters requested clarification of the term 

``emergency patient'' as used in the proposed safe harbor. These 

commenters inquired whether this term referred to the patient's actual 

condition or to the manner by which the ambulance is summoned. One 

commenter suggested that an emergency patient be defined as a patient 

delivered to a bona fide emergency department for medical or traumatic 

care.

    Response: Because we are expanding the safe harbor to cover non-

emergency transports, we do not believe any regulatory definition of 

the term ``emergency patient `` is required. However, we are adding a 

definition of ``emergency ambulance service'' for purposes of 

identifying those ambulances and ambulance providers that provide 

emergency transports and are thus eligible for safe harbor-protected 

restocking. For purposes of these final regulations, we are defining an 

``emergency ambulance service'' as one that results from a call through 

9-1-1 or other emergency access number or a call from another acute 

care facility unable to provide the higher level care required by the 

patient and available at the receiving facility.

    Comment: Paragraph (v)(1) of the proposed regulations indicated 

that remuneration ``* * * does not include any gift or transfer of 

drugs or medical supplies (including linens) * * *'' A commenter found 

the use of the word ``gift'' in this phrase confusing, since the safe 

harbor protects what is essentially an equal or equivalent exchange 

(i.e., what was used is restocked) and not the gifting of additional 

goods.

    Response: The commenter is correct that the safe harbor is not 

designed to protect remuneration in the form of additional goods or 

services beyond the restocking of drugs or medical supplies (including 

linens) used on particular patients transported to the receiving 

facility. It does, however, protect restocking in the form of a gift, 

i.e., restocking bestowed voluntarily and without compensation.

    Comment: A large self-insured manufacturing company that maintains 

its own private ambulance service to transport ill or injured employees 

to its preferred provider hospitals expressed concern about the impact 

of the proposed rule on its restocking arrangement. According to the 

commenter, the company negotiates preferred provider plans with 

hospitals in accordance with which the hospitals restock the ambulances 

at the hospitals' expense. No employees transported by the company's 

ambulance service are covered by Medicare or Medicaid, but the company 

is concerned that the safe harbor would affect restocking practices at 

the hospital.

    Response: Because the company's ambulance service transports only 

private pay patients, nothing in this rule will directly affect the 

commenter's restocking arrangements. Short of making clear in this 

preamble discussion that the arrangement described in the comment need 

not be modified to comply with these rules, we know of no way of 

preventing the collateral impact anticipated by the company in 

particular cases.

B. General Restocking

1. Non-Emergency Transports

    Comment: A number of commenters urged the OIG to expand the 

proposed safe harbor to cover the restocking of drugs and medical 

supplies for non-emergency transports. Given that ambulances that 

provide non-emergency transports are frequently on call for 

emergencies, commenters noted that it would be contrary to the public 

health and safety goals of restocking to bar restocking of an ambulance 

that arrives at a hospital with a non-emergency patient. One commenter 

recommended that we expand the safe harbor to apply to all patients 

brought to the hospital or, in the alternative, to all patients brought 

to the emergency room.

    Response: In general, the scope of replenishing needed after a non-

emergency transport is likely to be minimal, since relatively few drugs 

or supplies are typically administered to non-emergency patients during 

a transport. Nevertheless, to further the goal of protecting restocking 

arrangements that ensure that ambulances are stocked and ready to 

respond to emergencies at all times, we are expanding the safe harbor 

to cover the restocking of drugs and supplies used on both emergency 

and non-emergency transports, provided that the ambulance that is 

restocked is used with some degree of regularity to respond to 

emergency calls (i.e., calls from 9-1-1 or another emergency access 

number). We do not intend to protect restocking of ambulances that are 

not used with some degree of regularity for emergencies. The fact that 

such restocking is outside the scope of this rulemaking does not mean 

that such restocking is illegal. Whether arrangements for restocking of 

non-emergency ambulances violate the anti-kickback statute must be 

determined on a case-by-case basis. Parties to such arrangements may 

request an OIG advisory opinion.

    In order to create a bright line rule that is simple to apply, this 

expansion requires a measure for determining when an ambulance is used 

for emergency calls with sufficient regularity to qualify for 

replenishing under the safe harbor. The new regulations provide that an 

ambulance will satisfy this standard if the ambulance is used to 

respond to emergencies an average of three times per week measured over 

any reasonable time period. This test does not mean that the ambulance 

must actually make three emergency runs every week. Rather, over a 

reasonable period of time, the ambulance must be used an average of 

three times per week. Thus, for example, if an ambulance is used 12 

times during a month, the test will be met. Similarly, the test will be 

met if the ambulance is used for emergency runs 156 times in a year, 

even if there are some weeks in which the ambulance receives no 

emergency calls. In essence, the three runs test is designed to 

differentiate between ambulances that are reasonably likely to be 

called out for an emergency transport, and thus have a compelling need 

to be restocked by a receiving facility after a non-emergency run, and 

those that are not.

    Restocking arrangements for ambulances or ambulance providers that 

only provide routine, non-emergency services, or that do not meet the 

three runs test described above, must be evaluated under the anti-

kickback statute on a case-by-case basis. Finally, nothing in these 

regulations will require restocking of non-emergency transports or the 

expansion of existing restocking programs to cover non-emergency 

transports.

2. Uniform Restocking

    Comment: The proposed rule conditioned safe harbor protection on a 

receiving hospital's provision of restocked drugs and supplies on an

equal basis to all ambulance providers that deliver patients to the 

hospital. This condition was intended to insure that the safe harbor 

did not protect selective or targeted arrangements that are not bona 

fide restocking for the purpose of enhancing the delivery of EMS. 

Commenters argued that the safe harbor should protect receiving 

facilities that opt to restock only certain categories of ambulance 

providers. For example, some wanted to restock only volunteer ambulance 

providers or only ambulance providers that do not charge patients or 

insurers. Tax-exempt hospitals commented that requiring them to restock 

for-profit ambulance providers could jeopardize their tax-exempt 

status. Other commenters wanted to offer different restocking programs 

to different types of ambulance providers, such as offering full 

restocking to non-charging volunteer companies and more limited 

restocking to companies that charge for services.

    Response: Having reviewed the comments, we have concluded that an 

appropriate safe harbor can be structured that would afford hospitals 

greater flexibility in crafting restocking programs, while preserving 

the principle that protected restocking programs should not be 

unilateral arrangements for the benefit of selected providers. (Of 

course, unilateral arrangements in remote service areas where there is 

only one receiving facility or one ambulance service provider are 

protected if they meet all the safe harbor conditions.) The final 

regulations protect restocking of: (i) All ambulance providers; (ii) 

all non-profit and governmental ambulance providers; or (iii) all 

ambulance providers that do not charge patients or insurers (typically 

volunteers and municipal providers). A hospital can offer restocking to 

more than one category and can offer a different restocking program to 

each category that it restocks, so long as the restocking is uniform 

within each category (i.e., non-charging providers may be offered a 

larger scope of restocked items than charging providers). Limiting the 

scope of free restocking to providers within these categories 

represents a reasonable distinction that will ensure that arrangements 

qualifying for safe harbor protection will not be related to the volume 

or value of referrals or other business generated for the hospitals. 

This modification accommodates hospitals' legitimate interests in 

containing the cost of their restocking programs. (The issue of the 

effect, if any, of a restocking arrangement on a hospital's tax exempt 

status would be a matter for the Internal Revenue Service.)

    Comment: A commenter expressed concern that the ``all ambulances'' 

condition in the proposed rule would not permit facilities to restock 

only small, low volume volunteer companies without charge or at below 

cost. The commenter explained that, in their region, hospitals could 

not afford to restock large, high volume commercial ambulance companies 

for free.

    Response: We have revised the safe harbor to permit hospitals to 

restock volunteer companies only. To qualify for safe harbor 

protection, the hospital must restock all volunteer companies 

uniformly. The safe harbor does not protect differential restocking 

based on the volume of transports, although offering free or discounted 

restocking only to low volume companies would not necessarily violate 

the anti-kickback statute.

    Comment: Several commenters requested clarification as to whether 

all ambulance providers and receiving facilities in a service area 

would be required to participate in a restocking arrangement in order 

for the arrangement to qualify for safe harbor protection.

    Response: All ambulance providers in a service area are not 

required to participate in order for an arrangement to fit in the safe 

harbor. Under the proposed rule, we did not intend to require all 

ambulance providers and receiving facilities in a service area actually 

to participate in a restocking arrangement in order for the arrangement 

to qualify for safe harbor protection. We did intend to require that a 

protected restocking arrangement be open to the voluntary participation 

of all ambulance providers and receiving facilities in a service area. 

The final regulations--including the new public operation and 

disclosure condition--generally reflect this intent. We have made 

exceptions for arrangements that limit the scope of restocking to the 

particular subcategories of ambulance providers described in the 

preceding response or that limit the scope to emergency transports. 

These limitations are a reasonable means of constraining the costs of 

restocking and are not related to the actual or potential volume or 

value of referrals or other business generated between the parties that 

is payable by a Federal health care program.

3. Billing

    Comment: Some commenters objected to the proposed billing 

conditions. While designed to limit safe harbor protection to those 

arrangements that posed no risk of double payments or ``double 

dipping,'' the conditions were misconstrued by many commenters as 

prohibiting legitimate billing practices under Medicare payment rules, 

or as barring all billing by both the hospitals and the ambulance 

providers for the restocked drugs and supplies. Some commenters 

wondered why a safe harbor under the anti-kickback statute would need 

to take into account the question of billing at all. Commenters 

recommended that the conditions on billing in the proposed safe harbor 

be removed or altered to provide only that any billing for restocked 

items must be consistent with applicable Federal reimbursement 

provisions.

    A commenter explained that ambulance providers in its State are not 

allowed to purchase or bill for drugs. The drugs used in the field are 

purchased and owned by the hospitals and restocked locally through a 

system of State-approved protocols. The commenter believed the 

following language would better accomplish the safe harbor objectives, 

while still allowing one party to bill for drugs: ``Under no 

circumstances may the ambulance provider and the receiving facility 

both bill for the actual drug or supply. Restocked drugs or supplies 

may only be billed to any Federal health care program by either the 

ambulance provider or the receiving facility.'' Several other 

commenters suggested similar language.

    Response: We agree with the commenters that a safe harbor 

regulation is not a tool for setting program payment and coverage 

policy and doing so was not our intent. The billing conditions we 

proposed were designed to ensure that the safe harbor would not protect 

arrangements that could result in Medicare paying twice for the same 

drugs and supplies (i.e., situations in which both the ambulance 

company and the hospital bill for the same drug or supply), or in the 

ambulance services provider receiving a double benefit by billing 

Medicare for drugs and supplies for which it obtained free replacements 

(double-dipping). In both circumstances, ambulance restocking 

arrangements have the potential to increase costs to Medicare and other 

Federal health care programs. In the interest of simplification, we are 

adopting the commenters' suggestion and modifying the billing 

conditions to require that any billing of the Federal health care 

programs comport with applicable payment and coverage rules and 

regulations. Under applicable Medicare rules, a particular drug or 

supply administered to a patient in a pre-hospital setting will be 

covered

under either the ambulance or the outpatient hospital benefit, 

depending on the circumstances (e.g., whether the ambulance transport 

is provided ``under arrangements'' with the hospital); thus, the 

ambulance provider and the hospital may not both bill for the same drug 

or supply.\9\

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    \9\ Nothing in this preamble or these safe harbor regulations 

should be construed as approving or establishing any particular 

billing or payment practice. Questions regarding Medicare billing 

should be addressed to CMS or the appropriate fiscal intermediary or 

carrier. Questions regarding Medicaid billing should be addressed to 

the State Medicaid agency. Questions regarding billing in other 

Federal health care programs should be addressed to the relevant 

agency.

---------------------------------------------------------------------------

    Comment: Commenters raised a number of issues related to 

reimbursement for restocked drugs or supplies in particular 

circumstances. For example, a commenter explained that several 

volunteer rescue squads in its region do not bill any Federal health 

care programs. The commenter believes the proposed rule, as written, 

did not consider how a hospital would be reimbursed for drugs and 

supplies used by a volunteer service when an emergency patient is not 

admitted to the hospital. Some commenters questioned how ambulance 

providers would be reimbursed for new lifesaving drugs that could not 

have been included in the base rate payable to ambulance providers 

because the drugs did not exist, or were not used in a pre-hospital 

setting, when the base rates were set. Several commenters asked that we 

create a separate safe harbor to cover restocking arrangements that 

deal with specific drugs or devices that are administered at the order 

of a physician at the receiving hospital or centralized medical 

control. A commenter observed that unless private ambulance companies 

recover costs for expensive new medications, they will likely cease 

providing emergency services, thus shifting the entire responsibility 

onto the local governments to provide emergency medical care.

    Response: The question of reimbursement in the circumstances 

described by the commenters is outside the scope of the OIG's 

regulatory authority and should be directed to CMS or the relevant 

fiscal intermediary or carrier. We included a condition in the proposed 

safe harbor that would have denied safe harbor protection for 

arrangements under which ambulance providers billed separately (i.e., 

in addition to the base rate payment) for restocked drugs and supplies. 

The condition would not have barred the restocking of any particular 

drugs or supplies. However, we have removed the former billing 

condition and replaced it in the final regulations with one that 

requires appropriate billing of the Federal health care programs, as 

determined by CMS or other relevant payment agency. Restocking of 

lifesaving drugs will be protected so long as the safe harbor 

conditions are met. None of the safe harbor conditions strikes us as 

imposing any particular burden on restocking of lifesaving drugs. Given 

this, we see no need for the additional safe harbor suggested by the 

commenters.

    Comment: Several commenters observed that hospitals are unwilling 

to absorb the cost of emergency medications and supplies provided for 

free or below fair market values.

    Response: Nothing in these regulations requires hospitals to 

provide ambulances with free or below cost medications or supplies for 

emergency services. Our interest in developing the safe harbor 

provisions is in insuring that the anti-kickback statute does not chill 

bona fide hospital restocking arrangements by hospitals that wish to 

provide them. To the extent that reimbursement policies may adversely 

impact the delivery of EMS, those concerns should be addressed to CMS.

    Comment: A commenter asked about the intended impact of these safe 

harbor regulations on current and future arrangements involving 

hospitals that have negotiated prospective payment arrangements that 

may incorporate medication charges or EMS providers that have 

negotiated fee structures that bundle such charges in one overall set 

of base-rate and mileage charges. The commenter pointed out that CMS's 

negotiated rulemaking process for EMS rate setting may alter these 

arrangements as new rates, including bundled charges, are phased in.

    Response: These rules should have no impact on the arrangements 

described by the commenter. Nothing in these rules alters or changes 

any billing practice or arrangement.

4. Documentation

    Comment: Several commenters raised concerns about the documentation 

requirement in the proposed safe harbor. Commenters believed that 

requiring both the hospital and the ambulance provider to document the 

restocking was unnecessary and duplicative. The commenters generally 

suggested that existing patient care reports (sometimes known as trip 

sheets or patient encounter reports) already maintained for other 

purposes, such as ensuring continuity of care and billing, should be 

sufficient. Commenters explained that in a busy emergency room, it 

would be difficult to maintain multiple logs for multiple ambulance 

providers for both supplies and medications. Several commenters noted 

that maintaining a record of every restocked item in a large urban EMS 

system with a large volume of patients would create large amounts of 

paperwork, consume limited resources, and slow down the response time 

of ambulances. Alternatively, some commenters suggested that parties 

could agree that either the hospital or the ambulance provider, but not 

both, should bear the responsibility for record keeping.

    Response: We have modified the documentation requirement to permit 

either party to maintain records of the restocked drugs and medical 

supplies, so long as the other party receives and maintains a copy of 

the records. (In the alternative, both the hospital and the ambulance 

provider can maintain separate records of the restocking, in which case 

they need not file copies of their respective documentation with the 

other party.) Patient care reports, trip sheets, patient encounter 

reports, and the like (collectively being referred to as pre-hospital 

care reports in the final regulations) are sufficient to meet this 

requirement if they document the restocked drugs and medical supplies 

and are filed with the receiving facility within a reasonable time, in 

hard copy or electronically. It is our understanding that the 

preparation of a pre-hospital care report is the standard of care for 

transferring a patient to a receiving facility and is required by law 

in many States. However, parties may decide individually or between 

themselves to document the restocking using other kinds of paper or 

electronic records. In the case of first responder restocking, we are 

requiring that the restocked drugs and medical supplies be documented 

in the pre-hospital care report prepared by the transporting ambulance 

provider or in records maintained by the hospital and shared with the 

transporting provider.

    Comment: One commenter favored the proposed documentation 

requirement in most situations, but suggested that this requirement 

might be rethought for linen exchanges and other routinely used items. 

In the commenter's view, the requirement that hospitals and ambulance 

providers keep records pertaining to routine items, like linens, is 

unduly burdensome. The commenter argued that there is little risk to 

the programs from a one-for-one exchange of soiled linen for clean 

linen, and that these exchanges are so prevalent throughout the 

industry that record keeping would be required on

virtually every transport for many ambulance providers.

    Response: We agree that providers need not document the exchange of 

linens. If they are part of a restocking arrangement, linens will be 

presumed to have been exchanged on a one-for-one basis. The commenter 

did not identify, and it would not be feasible to enumerate in these 

regulations, other supplies that may be so routinely used as to warrant 

a comparable presumption. We think parties will be able to devise 

simple means of documenting such routine restocking.

    Comment: One commenter requested guidance on the length of time 

providers need to maintain records of restocked drugs and supplies.

    Response: As indicated above, we have simplified the documentation 

requirements. Under the final regulations, either the hospital or the 

ambulance provider may generate the necessary documentation, so long as 

the other party receives and maintains a copy of it for 5 years, a 

period consistent with the CMS's hospital conditions of participation 

recordkeeping requirements.

5. Writing Requirement

    Comment: Some commenters objected to the proposed condition 

requiring the restocking arrangement to be memorialized in writing. The 

proposed rule required that the ambulance restocking arrangement be 

memorialized in writing, either (i) in a plan or protocol of general 

application or (ii) in a written contract between the parties. Some 

commenters misread this condition as requiring providers to enter into 

written contracts or agreements. In addition, we have heard, 

anecdotally, that some industry consultants and counselors have been 

advising ambulance providers and hospitals that the proposed rule 

required the creation of lengthy and detailed contracts.

    Response: As is typical of most safe harbor regulations, the 

proposed rule required that the protected ambulance restocking 

arrangement be memorialized in writing. Under the proposal, the writing 

could be either a plan or protocol of general application or a written 

contract or agreement between the parties. Under the final rule, no 

particular form of writing is mandated. Indeed, the writing can take 

the form of a simple disclosure statement. A sample disclosure 

statement is being included as an appendix to part 1001, subpart C of 

the regulations. This sample is intended for guidance purposes only. 

Parties are free to use other formats or to substitute written 

contracts or protocols. No public disclosure of confidential 

proprietary or financial information is required.

    We believe that virtually all existing restocking arrangements are 

already being conducted in accordance with some form of written 

description of the arrangement. So long as the written description is 

conspicuously posted and publicly available and describes (i) The 

category, or categories, of ambulance provider that qualifies for 

restocking; (ii) the drugs or medical supplies included in the 

restocking program for each category; and (iii) the procedures for 

documenting the restocking, no new paperwork is required to qualify for 

safe harbor protection.

6. Publicly-Conducted restocking

    Comment: Many commenters objected to the ``oversight entity'' 

condition included in the proposed rule. Among other things, commenters 

argued that mandating a regional oversight body would unduly burden 

local communities by requiring the creation of a significant 

infrastructure and layers of bureaucracy. Some commenters expressed 

concern that the proposed rule was unclear as to the scope of the 

oversight entities' responsibilities and that such a requirement could 

lead to logistical problems for entities that would have to develop, 

review and monitor contracts for all regional providers. In some 

places, this would entail oversight of more than 80 receiving 

facilities. A hospital association expressed concern that the term 

``oversight'' could imply a regulatory, rather than strictly an 

oversight, role. Some commenters thought the proposed rule tasked 

oversight entities with responsibility for monitoring contractual 

arrangements over which they might have little control. Some commenters 

noted that coordinated EMS councils do not exist in all parts of the 

country, and, where they do operate, it would often not be realistic to 

expect them to oversee the restocking programs of many different 

hospitals and ambulance providers. Other commenters found the language 

regarding the composition of the oversight entity confusing and 

questioned whether particular parties, such as labor unions, could be 

participants in the oversight entities.

    Response: We originally proposed protecting ambulance restocking 

arrangements that were part of a comprehensive and coordinated EMS 

delivery system to ensure that the safe harbor would protect bona fide 

restocking arrangements and not selective arrangements used to attract 

or reward referrals. To effectuate this requirement, we proposed that 

restocking arrangements be implemented with the participation of, and 

monitored by, a regional EMS council or comparable entity.

    While we had intended the oversight entity condition to be broad 

and flexible in accordance with local conditions, encompassing a broad 

array of entities of various composition that were representative of 

their service areas, the comments made clear that many in the industry 

found the requirement burdensome. Accordingly, we have eliminated the 

oversight entity condition, and in its place we have substituted three 

flexible safe harbor conditions that we believe will provide 

sufficiently comparable protection from a safe harbor perspective. 

These include conditions that: (i) Require a publicly conducted 

restocking arrangement, (ii) require uniformity in the restocking 

arrangement, and (iii) prohibit restocking that takes into account the 

volume or value of referrals (other than the referral of the particular 

patient to whom the restocked drugs and medical supplies were 

furnished). These new requirements should effectively exclude 

improperly selective or preferential arrangements from safe harbor 

protection, while protecting those arrangements that are truly intended 

to promote the safe, efficient and effective delivery of pre-hospital 

EMS.

    Comment: One commenter noted that requiring restocking arrangements 

to be part of a comprehensive regional EMS delivery plan was an 

important way to guarantee compliance on the part of providers.

    Response: Participation in a comprehensive regional EMS delivery 

system is an effective means of ensuring that ambulance restocking 

arrangements further the public interest in timely, effective and 

efficient EMS and are not improperly targeted at high referrers. Under 

the final rule, restocking arrangements that are conducted in 

accordance with a protocol or plan established by an EMS council or 

comparable body will satisfy the public operation and disclosure 

requirements of the safe harbor and will likely satisfy the other safe 

harbor requirements as well.

    Comment: One commenter suggested that, as an alternative to the 

oversight entity condition, the OIG require hospitals (i) to have 

written policies, approved by the governing board, stating that their 

restocking program is open to all emergency ambulance providers; and 

(ii) to develop an internal system to confirm and verify this 

arrangement.

    Response: We have essentially adopted this commenter's views in the

final rule, although hospitals may limit the scope of their restocking 

programs to certain subcategories of ambulance providers. We are not 

requiring governing board approval or the development of internal 

compliance systems as part of this safe harbor regulation, but note 

that such practices may be prudent as part of the hospital's overall 

anti-fraud and abuse compliance program and necessary to ensure proper 

billing of the Federal health care programs.

    Comment: One commenter urged that the proposed safe harbor 

conditions, especially the oversight entity condition, be eased for 

restocking arrangements in rural or isolated areas since ambulance 

providers in these areas have, in effect, no choice of where to deliver 

a patient.

    Response: We believe the final rule, as modified, accommodates the 

special circumstances of rural and isolated areas. As stated above, we 

are no longer requiring establishment of an oversight entity. We 

believe the remaining safe harbor conditions are reasonable and impose 

few, if any, additional burdens on providers.

7. First responders

    Comment: A commenter requested safe harbor protection for 

restocking for first responders. The commenter described the following 

situation:

    A search and rescue company delivers a patient to an ambulance 

that transports the patient to the hospital. The search and rescue 

company is restocked for supplies used on the patient by the 

ambulance transport provider, which, in turn, is restocked by the 

hospital. The hospital charges the patient for the restocked 

supplies.

    Response: The final regulations protect hospital restocking of 

first responders as described by the commenter, provided the safe 

harbor conditions are satisfied. Specifically, the safe harbor 

accommodates those arrangements in which a 9-1-1 (or comparable 

emergency access number) first responder--including, but not limited 

to, a fire department, paramedic service or search and rescue squad--

administers drugs or supplies to the patient, but does not transport 

the patient to the receiving facility. In these circumstances, the 

transporting ambulance provider may restock the first responder and 

then, in turn, be restocked by the hospital. Any billing by the 

hospital, the ambulance provider, or the first responder would be 

subject to the applicable Federal health care program payment and 

coverage rules and regulations. This safe harbor only addresses 

restocking by hospitals. Restocking of first responders by ambulance 

transport providers (independent of any hospital restocking) was 

outside the scope of the proposed rulemaking and is not addressed in 

these final regulations. Such arrangements must be analyzed on a case-

by-case basis for compliance with the anti-kickback statute. Parties 

may seek an OIG advisory opinion about such arrangements.\10\

---------------------------------------------------------------------------

    \10\ The procedures for applying for an advisory opinion are set 

forth at 42 CFR part 1008 and on the OIG Web site at http://
 

www.dhhs.gov/progorg/oig/advopn/index.htm.

---------------------------------------------------------------------------

C. Fair Market Value Restocking

    Comment: Several commenters raised concerns about the fair market 

value safe harbor's application to the transfer of drugs. As these 

commenters explained, many hospitals participating in EMS systems 

historically have ``owned'' the medication and supplies used by the 

ambulances on emergency transports without passing title to the 

ambulance provider. In many cases, the drugs are controlled substances 

under State laws and cannot be the property of a fire department or 

ambulance company. The commenters asserted that if title does not pass 

to the ambulance provider, then the hospital does not provide anything 

of value when it replaces the drugs on the ambulance. In addition, 

several commenters questioned how prescription drugs could be sold to 

ambulance providers by hospitals. One commenter stated that the 

Prescription Drug Marketing Act of 1987 (21 U.S.C. 353(c)) specifically 

forbids hospitals from re-selling prescription drugs, except under 

narrow circumstances.

    Response: We agree that the fair market value safe harbor category 

should be restricted to the resale of supplies and non-prescription 

drugs (which are included as ``supplies'' under Medicare's ambulance 

payment system). Nothing in these regulations should be construed as 

permitting any action in contravention of applicable Federal, State, or 

local laws governing the purchase and administration of controlled 

substances and prescription medications. Whether the transfer of drugs 

that cannot be owned by an ambulance provider, and that remain the 

property of the hospital when placed on an ambulance in accordance with 

State or local law, is remuneration to the ambulance provider that 

administers the drugs in the field turns, in the first instance, on 

whether the drugs are covered under Medicare's ambulance benefit or 

under the outpatient hospital benefit in the particular circumstances. 

As noted above, questions regarding appropriate coverage and payment 

under Medicare should be directed to CMS.

    Comment: A commenter expressed concern that the fair market value 

safe harbor would make it impossible for a hospital to provide the 

goods on a pro bono basis to a small volunteer ambulance service. The 

commenter believed the proposed safe harbor required facilities either 

to charge volunteer companies the same rates they charge commercial or 

municipal services or to charge no one.

    Response: The commenter misread the proposed safe harbor. Nothing 

in these regulations precludes bona fide charitable contributions by 

hospitals to volunteer ambulance services. The fair market value safe 

harbor at Sec. 1001.952(v)(3)(ii) does not require that a receiving 

facility charge all ambulance providers the same prices. Rather, the 

safe harbor protects those arrangements that are at fair market value. 

Arrangements that are not at fair market value, such as free or deeply 

discounted restocking to volunteer companies or others, may be 

protected instead under the general restocking safe harbor at 

Sec. 1001.952(v)(3)(i).

    Comment: One commenter was concerned that market power disparity 

among receiving facilities could affect the fair market value prices 

ambulance companies pay, in turn creating an incentive for ambulance 

providers to take patients to larger hospital systems in a position to 

negotiate volume discounts for their drugs and supplies and pass those 

discounts on to ambulance companies. The commenter suggested that the 

OIG add provisions to guard against this risk.

    Response: In applying the fair market value condition, fair market 

value should be measured in terms of prices the ambulance provider 

would pay for like supplies if it purchased them in an arms-length 

transaction from a seller (other than a receiving facility) for whom 

the ambulance provider is not a potential referral source. In many 

situations, fair market value will be a range of prices, not a single 

price. (Restocking at prices that are below fair market value is not 

protected by this safe harbor category, although the restocking may be 

protected by one of the other restocking safe harbor categories.) We 

recognize that there may be a potential inducement when the fair market 

value charged is at the low end of the range of fair market value 

prices. However, nothing in the anti-kickback statute prohibits 

legitimate price competition.

    Comment: Some commenters questioned the reference in the

proposed fair market value safe harbor to the Non-Profit Institutions 

Act (NPIA), 15 U.S.C. 13(c). The proposed safe harbor would have 

protected certain sales of supplies at cost by non-profit hospitals to 

non-profit ambulance providers if the sales were designed to take 

advantage of the NPIA exception to the Robinson-Patman Act.\11\ One 

commenter indicated that the proposed language did not appear to 

address the situation of a non-profit hospital reselling supplies to a 

``for profit'' ambulance provider. Another commenter asserted that 

absent definitive guidance from the Federal Trade Commission (FTC) that 

reselling supplies to an ambulance provider would fit within 15 U.S.C. 

13(c), hospitals would be wary about complying with the safe harbor 

condition.

---------------------------------------------------------------------------

    \11\ 15 U.S.C. 13(a)-(f).

---------------------------------------------------------------------------

    Response: We have reconsidered the need for the language 

referencing the NPIA in the fair market value safe harbor. Given the 

substantial easing of the conditions applicable to the general 

restocking safe harbor category, we believe that the final regulations 

provide adequate and easily achievable protection for all legitimate 

restocking, whether at fair market value prices, below fair market 

value prices or without charge. To the extent it may be unclear whether 

a particular resale of supplies is at fair market value, we do not 

believe it will pose any undue burden on non-profit hospitals to seek 

shelter under the general restocking safe harbor category, which offers 

protection to restocking without regard to what price, if any, the 

hospital charges for the restocked drugs or supplies. The question 

whether particular restocking arrangements undertaken by non-profit 

hospitals run afoul of the Robinson-Patman Act or qualify for the NPIA 

exception is an FTC concern outside the scope of our regulatory 

authority.

IV. Meeting the Criteria for Establishing New Safe Harbors

    Section 205 of the Health Insurance Portability and Accountability 

Act, Public Law 104-191, established certain criteria that the 

Secretary may consider when modifying or establishing safe harbors to 

the anti-kickback statute. We have considered the criteria establishing 

in our notice of intent to develop regulations (61 FR 69061; December 

31, 1996) in developing this final rule, and we believe, for the 

reasons described above, that these final safe harbor regulations for 

certain ambulance restocking arrangements is likely to: (1) Increase, 

or have no effect on, access for needy patients to health care 

services; (2) increase the quality of health care services for needy 

patients; (3) have little, or no effect on, the cost of Federal health 

care programs; (4) have little, or no effect on, competition; and (5) 

increase, or have no effect on, the quantity of services provided in 

underserved areas. We further believe that this safe harbor contains 

safeguards that limit the potential for overutilization and assure that 

patients retain their freedom of choice of service providers.

V. Regulatory Impact Statement

    We have examined the impacts of this rule as required by Executive 

Order 12866, the Unfunded Mandates Act of 1995, and the Regulatory 

Flexibility Act (RFA) (Public Law 96-354). Executive Order 12866 

directs agencies to assess all costs and benefits of available 

regulatory alternatives and, when regulation is necessary, to select 

regulatory approaches that maximize net benefits (including potential 

economic, environmental, public health and safety effects, distributive 

impacts and equity). A regulatory impact analysis (RIA) must be 

prepared for major rules with economically significant effects ($100 

million or more in any given year). Since this regulation will not have 

a significant effect on program expenditures and as there is no 

additional substantive costs to implement the resulting provision, we 

do not consider this to be a major rule. The provisions in this rule 

are designed to permit individuals and entities to engage freely in 

competitive business practices and arrangements; health care providers 

and others may voluntarily seek to comply with these safe harbor 

provisions so that they have the assurance that their that business 

practices are not subject to any enforcement actions under the anti-

kickback statute.

    Additionally, in accordance with the Unfunded Mandates Reform Act 

of 1995, we believe that there are no significant costs associated with 

these safe harbor guidelines that would impose any mandates on State, 

local or tribal governments, or the private sector that will result in 

an expenditure of $110 million or more, adjusted for inflation, in any 

given year. Further, in reviewing this rule under the threshold 

criteria of Executive Order 13132, Federalism, we have determined that 

this rule will not significantly affect the rights, roles and 

responsibilities of States, and that a full analysis under these Acts 

are not necessary.

    Further, in accordance with the Regulatory Flexibility Act (RFA) of 

1980, and SBREFA of 1996, which amended the RFA, we are required to 

determine if this rule will have a significant economic effect on a 

substantial number of small entities and, if so, to identify regulatory 

options that could lessen the impact. For purposes of the RFA, small 

entities include small businesses, nonprofit organizations, and 

Government agencies. Most hospitals (and most other providers) are 

small entities, either by nonprofit status or by having revenues of $5 

million to $25 million or less annually. For purposes of the RFA, most 

ambulance companies are considered to be small entities. Individuals 

and States are not included in the definition of a small entity. In 

addition, section 1102(b) of the Social Security Act requires us to 

prepare a regulatory impact analysis if a rule may have a significant 

impact on the operations of a substantial number of small rural 

providers. This analysis must conform to the provisions of section 603 

of the RFA.

    While these safe harbor provisions may have an impact on small 

entities and rural providers, we believe that the aggregate economic 

impact of this rulemaking will be minimal, since it is the nature of 

the conduct and not the size of the entity that will result in a 

violation of the anti-kickback statute. Since the vast majority of 

individuals and entities potentially affected by these regulations do 

not engage in prohibited arrangements, schemes or practices in 

violation of the law, we are not preparing analyses for either the RFA 

or section 1102(b) of the Act because we have determined, and we 

certify, that this rule does not have a significant impact on a 

substantial number of small entities, or a significant impact on the 

operations of a substantial number of small rural providers.

    The Office of Management and Budget has reviewed this rule in 

accordance with Executive Order 12866.

Paperwork Reduction Act

    In accordance with section 3506(c)(2)(A) of the Paperwork Reduction 

Act (PRA) of 1995, we are required to solicit public comments, and 

receive final OMB approval, on any information collection requirements 

set forth in rulemaking. While compliance with the provisions in this 

safe harbor rule would be voluntary, Secs. 1001.952(v)(2) and (v)(3) 

include information collection activities that would require approval 

by OMB. As such, we are required to solicit public comments under 

section 3506(c)(2)(A) of the PRA on these information collection 

activities.

    Title: Ambulance Replenishing Safe Harbor Under the Anti-Kickback 

Statute.

    Summary of the collection of information: While complying with safe 

harbor provisions under the anti-kickback statute is voluntary, to 

qualify an ambulance restocking arrangement for safe harbor protection, 

parties must satisfy the following recordkeeping and disclosure 

requirements set forth in the regulations:

     The ambulance provider or the receiving facility must 

maintain for five years records documenting the replenished drugs and 

medical supplies, provide copies of such records to the other party 

within a reasonable period of time (unless the other party is 

separately maintaining records), and make the records available to the 

Secretary promptly upon request. These records may be in the form of 

pre-hospital patient care reports already in use for other purposes. 

See Sec. 1001.952(v)(2)(ii)(A).

     Except for government-mandated or fair market value 

restocking, protected restocking arrangements must be conducted in an 

open and public manner. This condition may be achieved by posting a 

written disclosure notice at the receiving facility (with copies 

available to the public upon request) or by operating in accordance 

with a plan or protocol of general application promulgated by an EMS 

Council or comparable entity (with copies available to the public upon 

request). See Sec. 1001.952(v)(3)(i)(B).

    We have attempted to reduce any paperwork burden associated with 

compliance with these safe harbor regulations by permitting parties to 

utilize documentation produced or developed for other business purposes 

wherever possible, and we believe that most, if not all, of these 

recordkeeping requirements will be satisfied using such documentation. 

With respect to keeping and maintaining documentation of the 

restocking, most pre-hospital care reports (sometimes known as trip 

sheets or patient encounter reports) already maintained for other 

purposes, such as ensuring continuity of care and billing, will 

suffice. It is our understanding that the preparation of a pre-hospital 

care reports is the standard of care for transferring a patient to a 

receiving facility and is required by law in many States. However, 

parties may decide individually or between themselves to document 

restocking using other kinds of paper or electronic records. The five 

year record retention period is consistent with CMS's hospital 

conditions of participation.

    With respect to the disclosure requirement, a written disclosure 

notice can take any reasonable form, and we anticipate that most 

parties engaged in ambulance restocking arrangements will have pre-

existing materials that can be used for this purpose. For those who 

need or choose to produce a written disclosure notice, we have provided 

a short, sample disclosure form in these regulations. EMS Council plans 

and protocols are likely to be existing documents used to promote 

comprehensive and coordinated emergency medical services in local 

communities. These regulations do not require any drafting of new plans 

or protocols. Nothing in these regulations requires parties to draft or 

enter into contracts or written agreements. We expect that these 

regulations will result in few public requests for copies of disclosure 

notices or plans or protocols.

    Brief description of the need for, and proposed use of, the 

information. The documentation and disclosure requirements set forth in 

these safe harbor regulations are necessary (i) to ensure that 

protected ambulance restocking arrangements pose a minimal risk of 

fraud or abuse and (ii) to enable parties to demonstrate--and the 

Government to verify where necessary--whether all safe harbor 

conditions are met.

    Description of likely respondents and proposed frequency of 

response to the information collection request. The respondents for the 

collection of information described in these regulations are hospitals, 

other receiving facilities, and ambulance providers that participate in 

ambulance restocking arrangements and that want safe harbor protection 

under the anti-kickback statute. We believe that a significant number 

of hospitals, receiving facilities, and ambulance providers are engaged 

in, or desire to engage in, ambulance restocking arrangements and that 

many will want safe harbor protection. We do not anticipate any 

response that exceeds routine business practice.

    Estimated burden that shall result from the collection of 

information. We are assigning only one burden hour to this collection, 

because we believe that compliance can be achieved with existing 

documents produced in the course of routine business practice.

    In accordance with the PRA requirements, we are inviting comments 

on (1) whether the collection of information is necessary for the 

proper performance of the functions of the agency, including whether 

the information will have practical utility; (2) the accuracy of the 

estimate of the burden of the collection of information; (3) ways to 

enhance the quality, utility and clarity of the information collected; 

and (4) ways to minimize the burden of the collection of information on 

parties, including through the use of automated collection techniques 

or other forms of information technology. As part of the OMB approval 

for the collection of information contained in this rule, we are 

soliciting public comments, thereby initiating the normal PRA 

clearance.

    Comments on these information collection activities should be sent 

to the following address within 60 days following the Federal Register 

publication of this final rule:

    OIG Desk Officer, Office of Management and Budget, Room 10235, New 

Executive Office Building, 725 17th Street NW., Washington, DC 20053, 

FAX: (202) 395-6974.

List of Subjects in 42 CFR Part 1001

    Administrative practice and procedure, Fraud, Grant programs--

health, Health facilities, Health professions, Maternal and child 

health, Medicaid, Medicare.

    Accordingly, 42 CFR part 1001 is amended as set forth below:

PART 1001--[AMENDED]

    1. The authority citation for part 1001 continues to read as 

follows:

    Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(h), 

1395u(j), 1395u(k), 1395y(d), 1395y(e), 1395cc(b)(2)(D), (E) and 

(F), and 1395hh; and sec. 2455, Pub. L. 103-355, 108 Stat. 3327 (31 

U.S.C. 6101 note).

    2. Section 1001.952 is amended by republishing the text and by 

adding a new paragraph (v) to read as follows:

Sec. 1001.952  Exceptions.

    The following payment practices shall not be treated as a criminal 

offense under section 1128B of the Act and shall not serve as the basis 

for an exclusion:

* * * * *

    (v) Ambulance replenishing. (1) As used in section 1128B of the 

Act, ``remuneration'' does not include any gift or transfer of drugs or 

medical supplies (including linens) by a hospital or other receiving 

facility to an ambulance provider for the purpose of replenishing 

comparable drugs or medical supplies (including linens) used by the 

ambulance provider (or a first responder) in connection with the 

transport of a patient by ambulance to the hospital or other receiving 

facility if all of the standards in paragraph (v)(2) of this section 

are satisfied and all of the applicable standards in either paragraph 

(v)(3)(i), (v)(3)(ii) or (v)(3)(iii) of this section are satisfied. 

However, to qualify

under paragraph (v), the ambulance that is replenished must be used to 

provide emergency ambulance services an average of three times per 

week, as measured over a reasonable period of time. Drugs and medical 

supplies (including linens) initially used by a first responder and 

replenished at the scene of the illness or injury by the ambulance 

provider that transports the patient to the hospital or other receiving 

facility will be deemed to have been used by the ambulance provider.

    (2) To qualify under paragraph (v) of this section, the ambulance 

replenishing arrangement must satisfy all of the following four 

conditions--

    (i)(A) Under no circumstances may the ambulance provider (or first 

responder) and the receiving facility both bill for the same 

replenished drug or supply. Replenished drugs or supplies may only be 

billed (including claiming bad debt) to a Federal health care program 

by either the ambulance provider (or first responder) or the receiving 

facility.

    (B) All billing or claims submission by the receiving facility, 

ambulance provider or first responder for replenished drugs and medical 

supplies used in connection with the transport of a Federal health care 

program beneficiary must comply with all applicable Federal health care 

program payment and coverage rules and regulations.

    (C) Compliance with paragraph (v)(2)(i)(B) of this section will be 

determined separately for the receiving facility and the ambulance 

provider (and first responder, if any), so long as the receiving 

facility, ambulance provider (or first responder) refrains from doing 

anything that would impede the other party or parties from meeting 

their obligations under paragraph (v)(2)(i)(B).

    (ii) (A) The receiving facility or ambulance provider, or both, 

must

    (1) Maintain records of the replenished drugs and medical supplies 

and the patient transport to which the replenished drugs and medical 

supplies related;

    (2) Provide a copy of such records to the other party within a 

reasonable time (unless the other party is separately maintaining 

records of the replenished drugs and medical supplies); and

    (3) Make those records available to the Secretary promptly upon 

request.

    (B) A pre-hospital care report (including, but not limited to, a 

trip sheet, patient care report or patient encounter report) prepared 

by the ambulance provider and filed with the receiving facility will 

meet the requirements of paragraph (v)(2)(ii)(A) of this section, 

provided that it documents the specific type and amount of medical 

supplies and drugs used on the patient and subsequently replenished.

    (C) For purposes of paragraph (v)(2)(ii) of this section, 

documentation may be maintained and, if required, filed with the other 

party in hard copy or electronically. If a replenishing arrangement 

includes linens, documentation need not be maintained for their 

exchange. If documentation is not maintained for the exchange of 

linens, the receiving facility will be presumed to have provided an 

exchange of comparable clean linens for soiled linens for each 

ambulance transport of a patient to the receiving facility. Records 

required under paragraph (v)(2)(ii)(A) of this section must be 

maintained for 5 years.

    (iii) The replenishing arrangement must not take into account the 

volume or value of any referrals or business otherwise generated 

between the parties for which payment may be made in whole or in part 

under any Federal health care program (other than the referral of the 

particular patient to whom the replenished drugs and medical supplies 

were furnished).

    (iv) The receiving facility and the ambulance provider otherwise 

comply with all Federal, State, and local laws regulating ambulance 

services, including, but not limited to, emergency services, and the 

provision of drugs and medical supplies, including, but not limited to, 

laws relating to the handling of controlled substances.

    (3) To qualify under paragraph (v) of this section, the arrangement 

must satisfy all of the standards in one of the following three 

categories:

    (i) General replenishing. (A) The receiving facility must replenish 

medical supplies or drugs on an equal basis for all ambulance providers 

that bring patients to the receiving facility in any one of the 

categories described in paragraph (v)(3)(i)(A)(1), (2), or (3) of this 

section. A receiving facility may offer replenishing to one or more of 

the categories and may offer different replenishing arrangements to 

different categories, so long as the replenishing is conducted 

uniformly within each category. For example, a receiving facility may 

offer to replenish a broader array of drugs or supplies for ambulance 

providers that do no not charge for their services than for ambulance 

providers that charge for their services. Within each category, the 

receiving facility may limit its replenishing arrangements to the 

replenishing of emergency ambulance transports only. A receiving 

facility may offer replenishing to one or more of the categories--

    (1) All ambulance providers that do not bill any patient or insurer 

(including Federal health care programs) for ambulance services, 

regardless of the payor or the patient's ability to pay (i.e., 

ambulance providers, such as volunteer companies, that provide 

ambulance services without charge to any person or entity);

    (2) All not-for-profit and State or local government ambulance 

service providers (including, but not limited to, municipal and 

volunteer ambulance services providers); or

    (3) All ambulance service providers.

    (B)(1) The replenishing arrangement must be conducted in an open 

and public manner. A replenishing arrangement will be considered to be 

conducted in an open and public manner if one of the following two 

conditions are satisfied:

    (i) A written disclosure of the replenishing program is posted 

conspicuously in the receiving facility's emergency room or other 

location where the ambulance providers deliver patients and copies are 

made available upon request to ambulance providers, Government 

representatives, and members of the public (subject to reasonable 

photocopying charges). The written disclosure can take any reasonable 

form and should include the category of ambulance service providers 

that qualifies for replenishment; the drugs or medical supplies 

included in the replenishment program; and the procedures for 

documenting the replenishment. A sample disclosure form is included in 

Appendix A to subpart C of this part for illustrative purposes only. No 

written contracts between the parties are required for purposes of 

paragraph (v)(3)(i)(B)(1)(i) of this section; or

    (ii) The replenishment arrangement operates in accordance with a 

plan or protocol of general application promulgated by an Emergency 

Medical Services (EMS) Council or comparable entity, agency or 

organization, provided a copy of the plan or protocol is available upon 

request to ambulance providers, Government representatives and members 

of the public (subject to reasonable photocopying charges). While 

parties are encouraged to participate in collaborative, comprehensive, 

community-wide EMS systems to improve the delivery of EMS in their 

local communities, nothing in this paragraph shall be construed as 

requiring the involvement of such organizations or the development or 

implementation of ambulance

replenishment plans or protocols by such organizations.

    (2) Nothing in this paragraph (v)(3)(i) shall be construed as 

requiring disclosure of confidential proprietary or financial 

information related to the replenishing arrangement (including, but not 

limited to, information about cost, pricing or the volume of 

replenished drugs or supplies) to ambulance providers or members of the 

general public.

    (ii) Fair market value replenishing. (A) Except as otherwise 

provided in paragraph (v)(3)(ii)(B) of this section, the ambulance 

provider must pay the receiving facility fair market value, based on an 

arms-length transaction, for replenished medical supplies; and

    (B) If payment is not made at the same time as the replenishing of 

the medical supplies, the receiving facility and the ambulance provider 

must make commercially reasonable payment arrangements in advance.

    (iii) Government mandated replenishing. The replenishing 

arrangement is undertaken in accordance with a State or local statute, 

ordinance, regulation or binding protocol that requires hospitals or 

receiving facilities in the area subject to such requirement to 

replenish ambulances that deliver patients to the hospital with drugs 

or medical supplies (including linens) that are used during the 

transport of that patient.

    (4) For purposes of paragraph (v) of this section--

    (i) A receiving facility is a hospital or other facility that 

provides emergency medical services.

    (ii) An ambulance provider is a provider or supplier of ambulance 

transport services that provides emergency ambulance services. The term 

does not include a provider of ambulance transport services that 

provides only non-emergency transport services.

    (iii) A first responder includes, but is not limited to, a fire 

department, paramedic service or search and rescue squad that responds 

to an emergency call (through 9-1-1 or other emergency access number) 

and treats the patient, but does not transport the patient to the 

hospital or other receiving facility. 47

    (iv) An emergency ambulance service is a transport by ambulance 

initiated as a result of a call through 9-1-1 or other emergency access 

number or a call from another acute care facility unable to provide the 

higher level care required by the patient and available at the 

receiving facility.

    (v) Medical supplies includes linens, unless otherwise provided.

    3. A new appendix A is added to subpart C to read as follows:

Appendix A to Subpart C of Part 1001

    The following is a sample written disclosure for purposes of 

satisfying the requirements of Sec. 1001.952(v)(3)(i)(B)(1)(i) of 

this part. This form is for illustrative purposes only; parties may, 

but are not required to, adapt this sample written disclosure form.

Notice of Ambulance Restocking Program

    Hospital X offers the following ambulance restocking program:

    1. We will restock all ambulance providers (other than ambulance 

providers that do not provide emergency services) that bring 

patients to Hospital X [or to a subpart of Hospital X, such as the 

emergency room] in the following category or categories: [insert 

description of category of ambulances to be restocked, i.e., all 

ambulance providers, all ambulance providers that do not charge 

patients or insurers for their services, or all nonprofit and 

Government ambulance providers]. [Optional: We only offer restocking 

of emergency transports.]

    2. The restocking will include the following drugs and medical 

supplies, and linens, used for patient prior to delivery of the 

patient to Hospital X: [insert description of drugs and medical 

supplies, and linens to be restocked].

    3. The ambulance providers [will/will not] be required to pay 

for the restocked drugs and medical supplies, and linens.

    4. The restocked drugs and medical supplies, and linens, must be 

documented as follows: [insert description consistent with the 

documentation requirements described in Sec. 1001.952(v). By way of 

example only, documentation may be by a patient care report filed 

with the receiving facility within 24 hours of delivery of the 

patient that records the name of the patient, the date of the 

transport, and the relevant drugs and medical supplies.]

    5. This restocking program does not apply to the restocking of 

ambulances that only provide non-emergency services or to the 

general stocking of an ambulance provider's inventory.

    6. To ensure that Hospital X does not bill any Federal health 

care program for restocked drugs or supplies for which a 

participating ambulance provider bills or is eligible to bill, all 

participating ambulance providers must notify Hospital X if they 

intend to submit claims for restocked drugs or supplies to any 

Federal health care program. Participating ambulance providers must 

agree to work with Hospital X to ensure that only one party bills 

for a particular restocked drug or supply.

    7. All participants in this ambulance restocking arrangement 

that bill Federal health care programs for restocked drugs or 

supplies must comply with all applicable Federal program billing and 

claims filing rules and regulations.

    8. For further information about our restocking program or to 

obtain a copy of this notice, please contact [name] at [telephone 

number].

Dated:-----------------------------------------------------------------

/s/--------------------------------------------------------------------

Appropriate officer or official

    Dated: July 12, 2001.

Michael F. Mangano,

Acting Inspector General.

    Approved:

Tommy G. Thompson,

Secretary.

[FR Doc. 01-29875 Filed 12-3-01; 8:45 am]

BILLING CODE 4150-04-P