45110 Federal Register / Vol. 71, No. 152 / Tuesday, August 8, 2006 / Rules and Regulations 

1 56 FR 35952 (July 29, 1991); 61 FR 2122 

(January 25, 1996); 64 FR 63518 (November 19, 

1999); 64 FR 63504 (November 19, 1999); and 66 

FR 62979 (December 4, 2001). 

2See H.R. Rep. No. 108–391 at 495 (2003) (Conf. 

Rep.). 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of Inspector General 

42 CFR Part 1001 

RIN 0991–AB39 

Medicare and State Health Care 

Programs: Fraud and Abuse; Safe 

Harbors for Certain Electronic 

Prescribing and Electronic Health 

Records Arrangements Under the AntiKickback Statute 

AGENCY: Office of Inspector General 

(OIG), HHS. 

ACTION: Final rule. 

SUMMARY: As required by the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA), 

Public Law 108–173, this final rule 

establishes a new safe harbor under the 

Federal anti-kickback statute for certain 

arrangements involving the provision of 

electronic prescribing technology. 

Specifically, the safe harbor would 

protect certain arrangements involving 

hospitals, group practices, and 

prescription drug plan (PDP) sponsors 

and Medicare Advantage (MA) 

organizations that provide to specified 

recipients certain nonmonetary 

remuneration in the form of hardware, 

software, or information technology and 

training services necessary and used 

solely to receive and transmit electronic 

prescription information. In addition, in 

accordance with section 1128B(b)(3)(E) 

of the Social Security Act (the Act), this 

final rule creates a separate new safe 

harbor for certain arrangements 

involving the provision of nonmonetary 

remuneration in the form of electronic 

health records software or information 

technology and training services 

necessary and used predominantly to 

create, maintain, transmit, or receive 

electronic health records. 

DATES: Effective Date: These regulations 

are effective October 10, 2006. 

FOR FURTHER INFORMATION CONTACT: 

Catherine Martin, Office of Counsel to 

the Inspector General, (202) 619–0335. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Overview—Establishing New Safe 

Harbors for Arrangements Involving 

Electronic Prescribing and Electronic 

Health Records Technology 

This final rule establishes safe harbor 

protection for certain arrangements 

involving the donation of electronic 

prescribing and electronic health 

records technology. Section I contains a 

brief background discussion addressing 

the anti-kickback statute and safe 

harbors; a summary of the relevant 

MMA provisions; a summary of the 

proposed safe harbors; and a summary 

of the final safe harbors. Section II 

contains a summary of the public 

comments and our responses. 

A. The Anti-Kickback Statute and Safe 

Harbors 

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

1320a–7b(b), the ‘‘anti-kickback 

statute’’) provides criminal penalties for 

individuals or entities that knowingly 

and willfully offer, pay, solicit, or 

receive remuneration in order to induce 

or reward the referral of business 

reimbursable under any of the Federal 

health care programs, as defined in 

section 1128B(f) of the Act. The offense 

is classified as a felony and is 

punishable by fines of up to $25,000 

and imprisonment for up to five years. 

Violations of the anti-kickback statute 

may also result in the imposition of civil 

money penalties (CMPs) under section 

1128A(a)(7) of the Act (42 U.S.C. 1320a7a(a)(7)), program exclusion under 

section 1128(b)(7) of the Act (42 U.S.C. 

1320a–7(b)(7)), and liability under the 

False Claims Act, (31 U.S.C. 3729–33). 

The types of remuneration prohibited 

specifically include, without limitation, 

kickbacks, bribes, and rebates, whether 

made directly or indirectly, overtly or 

covertly, in cash or in kind. Prohibited 

conduct includes not only the payment 

of remuneration intended to induce or 

reward referrals of patients, but also the 

payment of remuneration intended to 

induce or reward the purchasing, 

leasing, or ordering of, or arranging for 

or recommending the purchasing, 

leasing, or ordering of, any good, 

facility, service, or item reimbursable by 

any Federal health care program. 

Because of the broad reach of the 

statute, concern was expressed that 

some relatively innocuous commercial 

arrangements were covered by the 

statute and, therefore, potentially 

subject to criminal prosecution. In 

response, Congress enacted section 14 of 

the Medicare and Medicaid Patient and 

Program Protection Act of 1987, Public 

Law 100–93 (section 1128B(b)(3)(E) of 

the Act), which specifically required the 

development and promulgation of 

regulations, the so-called ‘‘safe harbor’’ 

provisions, which would specify 

various payment and business practices 

that would not be treated as criminal 

offenses under the anti-kickback statute, 

even though they may potentially be 

capable of inducing referrals of business 

under the Federal health care programs. 

Since July 29, 1991, we have published 

in the Federal Register a series of final 

regulations establishing ‘‘safe harbors’’ 

in various areas.1 These OIG safe harbor 

provisions have been developed ‘‘to 

limit the reach of the statute somewhat 

by permitting certain non-abusive 

arrangements, while encouraging 

beneficial or innocuous arrangements.’’ 

(56 FR 35952, 35958; July 21, 1991). 

Health care providers and others may 

voluntarily seek to comply with safe 

harbors so that they have the assurance 

that their business practices will not be 

subject to liability under the antikickback statute, the CMP provision for 

anti-kickback violations, or the program 

exclusion authority related to kickbacks. 

In giving the Department of Health and 

Human Services the authority to protect 

certain arrangements and payment 

practices from penalties under the antikickback statute, Congress intended the 

safe harbor regulations to be evolving 

rules that would be updated 

periodically to reflect changing business 

practices and technologies in the health 

care industry. 

B. Section 101 of MMA 

Section 101 of the MMA added a new 

section 1860D to the Act, establishing a 

Part D prescription drug benefit in the 

Medicare program. As part of the new 

statutory provision, Congress, through 

section 1860D–4(e) of the Act, directed 

the Secretary to create standards for 

electronic prescribing in connection 

with the new prescription drug benefit, 

with the objective of improving patient 

safety, quality of care, and efficiency in 

the delivery of care.2 Section 1860D– 

4(e)(6) of the Act directs the Secretary, 

in consultation with the Attorney 

General, to create a safe harbor to the 

anti-kickback statute that would protect 

certain arrangements involving the 

provision of nonmonetary remuneration 

(consisting of items and services in the 

form of hardware, software, or 

information technology and training 

services) that is necessary and used 

solely to receive and transmit electronic 

prescription information in accordance 

with electronic prescribing standards 

promulgated by the Secretary under 

section 1860D–4(e)(4) of the Act. 

Specifically, the safe harbor would set 

forth conditions under which the 

provision of such technology by 

hospitals, group practices, and PDP 

sponsors and MA organizations to 

certain prescribing health care 

professionals, pharmacies, and 

pharmacists would be protected. 


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We do not believe Congress, in 

enacting section 1860D–4(e)(6) of the 

Act, intended to suggest that a new safe 

harbor is needed for all or even most 

arrangements involving the provision of 

electronic prescribing items and 

services. In general, fair market value 

arrangements that are arm’s-length and 

do not take into account in any manner 

the volume or value of Federal health 

care program business, or arrangements 

that do not have as one purpose the 

generation of business payable by a 

Federal health care program, should not 

raise concerns under the anti-kickback 

statute. In addition, many arrangements 

can be structured to fit in existing safe 

harbors, including the safe harbors for 

discounts (42 CFR 1001.952(h)) and for 

remuneration offered to employees (42 

CFR 1001.952(i)). Finally, parties may 

use the OIG advisory opinion process 

(42 CFR part 1008; http://oig.hhs.gov/ 

fraud/advisoryopinions.html) to 

determine whether their particular 

arrangements would be subject to OIG 

sanctions. 

In addition to the new safe harbor 

under the anti-kickback statute, section 

1860D–4(e)(6) of the Act directs the 

Secretary to create a corresponding 

exception to section 1877 of the Act, 

commonly known as the physician selfreferral law. That exception is being 

promulgated through a separate 

rulemaking by the Centers for Medicare 

& Medicaid Services (CMS), the agency 

that administers the physician selfreferral law. We have endeavored to 

ensure as much consistency as possible 

between our final safe harbor and the 

corresponding final physician selfreferral exception, given the differences 

in the respective underlying statutes. 

One significant difference in the 

statutory schemes is that fitting in an 

exception under section 1877 is 

mandatory, whereas complying with a 

safe harbor under the anti-kickback 

statute is voluntary. In other words, 

arrangements that do not comply with 

the electronic prescribing safe harbor at 

42 CFR 1001.952(x) will not necessarily 

be illegal under the anti-kickback 

statute. Rather, they will be subject to 

the customary case-by-case review 

under the statute to determine the 

parties’ intent. (The same holds true for 

electronic health records technology 

arrangements that do not fit in the new 

safe harbor at 42 CFR 1001.952(y).) 

Another difference is that section 1877 

applies only to referrals from 

physicians, while the anti-kickback 

statute applies more broadly. 

C. Summary of the Proposed 

Rulemaking 

On October 11, 2005, we published a 

notice of proposed rulemaking to 

promulgate three safe harbors under the 

anti-kickback statute (70 FR 59015; 

October 11, 2005). The first proposed 

safe harbor addressed arrangements 

involving electronic prescribing 

technology, as required by section 101 

of the MMA. Many industry and 

government stakeholders had expressed 

concerns that the MMA provision was 

not sufficiently useful or practical, and 

would not adequately advance the goal 

of achieving improved health care 

quality and efficiency through 

widespread adoption of interoperable 

electronic health records systems. 

Accordingly, we proposed two 

additional safe harbors to address 

donations of certain electronic health 

records software and directly related 

training services, using our authority at 

section 1128B(b)(3)(E) of the Act. One 

proposed safe harbor would have 

protected certain arrangements 

involving nonmonetary remuneration in 

the form of interoperable electronic 

health records software certified in 

accordance with criteria adopted by the 

Secretary (and directly related training 

services). The second proposed safe 

harbor would have protected certain 

arrangements involving donations of 

electronic health records software before 

adoption of certification criteria. 

D. Summary of the Final Rulemaking 

In this final rulemaking, we are 

adding two new safe harbors to the 

existing regulations at 42 CFR 1001.952: 

One protecting certain arrangements 

involving electronic prescribing 

technology (new 42 CFR 1001.952(x)) 

and one protecting certain arrangements 

involving interoperable electronic 

health records software or information 

technology and training services (new 

42 CFR 1001.952(y)). (For purposes of 

this rulemaking referred to, respectively, 

as the ‘‘electronic prescribing safe 

harbor’’ and the ‘‘electronic health 

records safe harbor.’’) For the reasons 

explained below in Section II, we are 

abandoning the proposal to have 

separate pre- and post-interoperability 

safe harbors for electronic health 

records arrangements. 

OIG has a longstanding concern about 

the provision of free or reduced price 

goods or services to an existing or 

potential referral source. There is a 

substantial risk that free or reduced 

price goods or services may be used as 

a vehicle to disguise or confer an 

unlawful payment for referrals of 

Federal health care program business. 

Financial incentives offered, paid, 

solicited, or received to induce or in 

exchange for generating Federal health 

care business increase the risks of, 

among other problems: (i) 

Overutilization of health care items or 

services; (ii) increased Federal program 

costs; (iii) corruption of medical 

decision making; and (iv) unfair 

competition. Thus, consistent with the 

structure and purpose of the antikickback statute and the regulatory 

authority at section 1128B(b)(3)(E) of the 

Act, we believe any safe harbor for 

electronic health records arrangements 

should protect beneficial arrangements 

that would eliminate perceived barriers 

to the adoption of electronic health 

records without creating undue risk that 

the arrangements might be used to 

induce or reward the generation of 

Federal health care program business. 

For the convenience of the public, we 

are providing the following chart that 

lays out schematically the overall 

structure and approach of the final safe 

harbors, details of which are provided 

below in sections II. B. and II. C. 

Readers are cautioned that the final safe 

harbors contain additional conditions 

and information not summarized here. 

MMA-mandated electronic prescribing safe 

harbor 

Electronic health records arrangements safe 

harbor 

Authority for Final Safe Harbor .......................... Section 101 of the Medicare Prescription 

Drug, Improvement, and Modernization Act 

of 2003.

Section 1128B(b)(3)(E) of the Social Security 

Act. 


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MMA-mandated electronic prescribing safe 

harbor 

Electronic health records arrangements safe 

harbor 

Covered Technology .......................................... Items and services that are necessary and 

used solely to transmit and receive electronic prescription information.

Includes hardware, software, internet 

connectivity, and training and support services.

Software necessary and used predominantly 

to create, maintain, transmit, or receive 

electronic health records. Software must include an electronic prescribing component. 

(Software packages may also include functions related to patient administration, for 

example, scheduling, billing, and clinical 

support.) Information technology and training services, which could include, for example, internet connectivity and help desk support services. 

Does not include hardware. 

Standards with Which Donated Technology 

Must Comply.

Final standards for electronic prescribing as 

adopted by the Secretary.

Electronic health records software that is 

interoperable. Certified software may be 

deemed interoperable under certain circumstances. Electronic prescribing capability must comply with final standards for 

electronic prescribing adopted by the Secretary. 

Donors and Recipients ...................................... As required by statute, protected donors and 

recipients are hospitals to members of their 

medical staffs, group practices to physician 

members, PDP sponsors and MA organizations to network pharmacists and pharmacies, and to prescribing health care professionals.

Protected donors are (i) individuals and entities that provide covered services and submit claims or requests for payment, either 

directly or through reassignment, to any 

Federal health care program and (ii) health 

plans. Protected recipients are individuals 

and entities engaged in the delivery of 

health care. 

Selection of Recipients ...................................... Donors may not select recipients using any 

method that takes into account the volume 

or value of referrals from the recipient or 

other business generated between the parties.

Donors may not select recipients using any 

method that takes into account directly the 

volume or value of referrals from the recipient or other business generated between 

the parties. 

Value of Protected Technology ......................... No limit on the value of donations of electronic prescribing technology.Recipients must pay 15% of the donor’s cost 

for the donated technology. 

The donor (or any affiliate) must not finance 

the recipient’s payment or loan funds to the 

recipient for use by the recipient to pay for 

the technology. 

Expiration of the Safe Harbor ............................ None ................................................................. Safe harbor sunsets on December 31, 2013. 

II. Summary of Public Comments and 

OIG Responses 

OIG received a total of 71 timely filed 

comments from entities and individuals. 

The majority of the comments came 

from hospitals and health systems, trade 

associations, and vendors. OIG also 

received comments from information 

technology organizations, health plans, 

nonprofit organizations, pharmaceutical 

manufacturers, pharmacies, and 

physician organizations. In addition, 

OIG participated in an Open Door 

Forum organized by CMS on November 

9, 2005, at which various stakeholders 

addressed a wide array of issues. 

Overall, the commenters welcomed 

the establishment of safe harbors for 

electronic prescribing and electronic 

health records technology arrangements. 

However, we received many specific 

comments about various aspects of the 

proposed rules. We have divided the 

summaries of the public comments and 

our responses into four parts: (1) 

General comments for all of the 

proposed safe harbors; (2) comments 

specific to the electronic prescribing 

safe harbor; (3) comments specific to the 

electronic health records safe harbor; 

and (4) comments specific to 

community-wide health information 

systems. 

A. General Comments 

Comment: Most commenters 

supported the promulgation of safe 

harbors for electronic prescribing and 

electronic health records arrangements. 

Commenters observed that both 

Congress and the Administration have 

recognized the compelling need for 

rapid and widespread adoption of 

electronic prescribing and electronic 

health records technology. Several 

commenters urged that fraud and abuse 

concerns not impede the adoption of 

health information technology. In this 

regard, some commenters suggested that 

the final regulations should better 

balance the goal of preventing fraud and 

abuse in the short-term with the goal of 

creating incentives for health 

information technology arrangements 

that result in greater fraud reduction, 

increased quality and efficiency, and 

better patient care. One commenter 

asserted that investments in health 

information technology and the desire 

to provide an incentive to participate in 

health information technology systems 

do not raise typical fraud and abuse 

concerns present with other financial 

arrangements. However, another 

commenter noted that the proposed rule 

generally struck an appropriate balance 

between the needs of physicians who 

may require assistance to develop health 

information technology systems and the 

underlying purposes of the Federal 

fraud and abuse laws. 

Response: We disagree with the 

commenter that suggested that financial 

arrangements involving incentives in 

the form of health information 

technology do not pose the same fraud 

and abuse concerns as other financial 

arrangements between parties in a 

potential referral relationship. Indeed, 

our enforcement experience 

demonstrates that improper 

remuneration for Federal health care 

program business may take many forms, 


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including free computers, facsimile 

machines, software, and other goods 

and services. However, we recognize 

that certain transfers of health 

information technology between parties 

with actual or potential referral 

relationships may further the important 

national policy of promoting 

widespread adoption of health 

information technology to improve 

patient safety, quality of care, and 

efficiency in the delivery of health care. 

We believe the final rule strikes the 

appropriate balance between promoting 

the adoption of health information 

technology and protecting against fraud 

and abuse. 

Comment: Several commenters urged 

that Congress and the Administration 

need to do more to offer meaningful 

financial incentives for practitioners to 

accept the increased cost and workflow 

burdens associated with the 

implementation of health information 

technology, for example, by providing 

modest add-on payments to physicians 

who employ health information 

technology as part of overall quality 

improvement measures. Some 

commenters observed that the proposed 

regulations would remove a minor 

impediment to the adoption of health 

information technology, but that the 

Department must play a larger role in 

providing capital for the technologies 

that assist physicians in providing 

quality care and avoiding medical 

errors. 

Response: These comments address 

matters outside the scope of this 

rulemaking. The Administration 

supports the adoption of health 

information technology as a normal cost 

of doing business. The 2007 Budget 

states that ‘‘[t]he Administration 

supports the adoption of health 

information technology (IT) as a normal 

cost of doing business to ensure patients 

receive high quality care.’’

Comment: Some commenters 

complained that the proposed safe 

harbors were too narrow and vague. 

These commenters urged that the final 

safe harbors should be easy to 

understand, interpret, and enforce so 

that donors and recipients can readily 

distinguish permissible activities from 

those that violate the statute. Some 

commenters believed that the proposed 

rules were too complex and might have 

the unintended effect of discouraging 

participation in health information 

technology arrangements. 

Response: As described elsewhere in 

this preamble, we have adopted a 

number of modifications and changes 

that address the commenters’ concerns. 

While the final safe harbor at 

§ 1001.952(x) addresses only electronic 

prescribing arrangements, the final safe 

harbor at § 1001.952(y) protects a broad 

scope of arrangements involving 

electronic health records technology. 

We have made a number of changes that 

clarify and simplify the final rules. We 

have endeavored to create bright line 

provisions to the extent possible. We 

reiterate that compliance with a safe 

harbor does not necessarily distinguish 

between lawful and unlawful activities 

under the Federal anti-kickback statute. 

Compliance with a safe harbor is 

voluntary; arrangements that do not 

comply are not per se illegal. As we 

explained in the preamble to the 1991 

final safe harbors regulations: 

* * * If a person participates in an 

arrangement that fully complies with a given 

[safe harbor] provision, he or she will be 

assured of not being prosecuted criminally or 

civilly for the arrangement that is the subject 

of that provision * * * This [safe harbor] 

regulation does not expand the scope of 

activities that the statute prohibits. The 

statute itself describes the scope of illegal 

activities. The legality of a particular 

business arrangement must be determined by 

comparing the particular facts to the 

proscriptions of the statute. 

The failure to comply with a safe harbor 

can mean one of three things. First * * * it 

may mean that the arrangement does not fall 

within the ambit of the statute. In other 

words, the arrangement is not intended to 

induce the referral of business reimbursable 

under Medicare or Medicaid; so there is no 

reason to comply with the safe harbor 

standards, and no risk of prosecution. 

Second, at the other end of the spectrum, 

the arrangement could be a clear statutory 

violation and also not qualify for safe harbor 

protection. In that case, assuming the 

arrangement is obviously abusive, 

prosecution would be very likely. 

Third, the arrangement may violate the 

statute in a less serious manner, although not 

be in compliance with a safe harbor 

provision. Here, there is no way to predict 

the degree of risk. Rather, the degree of risk 

depends on an evaluation of the many factors 

which are part of the decision-making 

process regarding case selection for 

investigation and prosecution * * *. (56 FR 

35952, 35954; July 29, 1991). 

We do not believe Congress, in 

enacting section 1860D–4(e)(6) of the 

Act, intended to suggest that a new safe 

harbor is needed for all or even most 

arrangements involving the provision of 

electronic prescribing items and 

services. Nor do we believe a safe harbor 

is needed for all electronic health 

records arrangements. In general, fair 

market value arrangements that are 

arm’s-length and do not take into 

account in any manner the volume or 

value of Federal health care program 

business, or arrangements that do not 

have as one purpose the generation of 

business payable by a Federal health 

care program, should not raise concerns 

under the anti-kickback statute. In 

addition, many arrangements can be 

structured to fit in existing safe harbors. 

Comment: Some commenters 

observed that in describing the 

nonmonetary remuneration that would 

be included in the proposed safe 

harbors, the proposed safe harbors did 

not reflect the many existing 

combinations and varieties of electronic 

prescribing, electronic health records, 

and similar technology. 

Response: As discussed more fully 

below, we believe that the final safe 

harbors are sufficiently broad to 

accommodate the most essential current 

and evolving electronic prescribing and 

electronic health records technology. 

We started this rulemaking process by 

looking to the guidance from the 

Congress in section 101 of the MMA 

with respect to electronic prescribing 

technology. Using our regulatory 

authority, we have added a separate safe 

harbor for arrangements involving 

electronic health records software or 

information technology and training 

services. We believe that we have 

appropriately balanced the goal of 

promoting widespread adoption of 

health information technology against 

the significant fraud and abuse concerns 

that stem from the provision of free or 

reduced cost goods or services to actual 

or potential referral sources. 

Comment: A commenter suggested 

that the final regulations should include 

provisions that allow CMS to evaluate 

and ensure that the regulatory 

requirements, once enacted, have not 

negatively impacted key stakeholders or 

business segments within the healthcare 

industry. 

Response: It would be inappropriate 

for a safe harbor under the anti-kickback 

statute to include a provision for 

ongoing CMS evaluation. Like all 

regulatory safe harbors, OIG may in 

future rulemaking propose 

modifications or clarifications to the 

safe harbor conditions, as appropriate. 

OIG annually solicits suggestions from 

the industry for new and modified safe 

harbors in accordance with section 205 

of the Health Insurance Portability and 

Accountability Act of 1996. 

Comment: We solicited comments on 

whether and, if so, how, to take into 

account recipient access to publicly 

available software at free or reduced 

prices. One commenter urged that the 

availability of free public software 

should not impact the design of the final 

safe harbors. In addition, the commenter 

urged that physicians and hospitals be 

granted substantial latitude in selecting 

interoperable technology that best meets 

their needs. 


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Response: Upon further 

consideration, we have concluded that 

it is not necessary to take the 

availability of publicly available 

software into account in developing the 

final safe harbors. Hospitals, physicians, 

and other donors and recipients will 

have great latitude in selecting 

technology that will qualify for safe 

harbor protection. Nothing in this rule 

limits the choice of health information 

technology, although certain transfers of 

technology, such as non-interoperable 

electronic health records software (as 

discussed below), would not qualify for 

safe harbor protection, because it would 

not meet all safe harbor conditions. As 

noted elsewhere, arrangements that fall 

outside a safe harbor must be evaluated 

under the anti-kickback statute on a 

case-by-case basis. 

Comment: Some commenters 

suggested that the safe harbors under 

the anti-kickback statute should mirror 

the exceptions under the physician selfreferral law in all respects in order to 

promote the rapid and widespread 

adoption of electronic prescribing and 

electronic health records technology. A 

few commenters suggested that we not 

adopt anti-kickback statute safe harbors 

or that any safe harbors should be 

stricter than any corresponding 

exceptions to the physician self-referral 

law. 

Response: We believe consistency 

between these safe harbors and the 

corresponding exceptions under the 

physician self-referral law is preferable. 

We have attempted to ensure as much 

consistency between the two sets of 

regulations as possible given the 

underlying differences in the two 

statutory schemes. 

Comment: Some commenters wanted 

the final safe harbors to preempt any 

State laws or regulations that conflict 

with the requirements of the safe 

harbors. 

Response: The MMA specifically 

dictated that the Part D electronic 

prescribing standards would preempt 

any State law or regulation that (1) is 

contrary to the adopted final Part D 

electronic prescribing standards or that 

restricts the Department’s ability to 

carry out Part D of Title XVIII and (2) 

pertains to the electronic transmission 

of medication history and information 

on eligibility, benefits, and prescriptions 

with respect to covered Part D drugs 

under Part D. However, no similar 

mandate was provided with respect to 

the anti-kickback safe harbor for the 

donation of electronic prescribing 

technology. Moreover, the legal 

authority for the electronic health 

records safe harbor in this rule is 

derived from section 1128B(b)(3)(E) of 

the Act, which similarly does not 

provide authority to preempt State antikickback laws. 

Comment: Some commenters inquired 

whether the electronic information that 

is transmitted via electronic prescribing 

or electronic health records systems 

would be considered remuneration for 

purposes of the anti-kickback statute. 

Response: Whether a particular item 

or service constitutes remuneration for 

purposes of the anti-kickback statute 

depends on the particular facts and 

circumstances. Typically, information 

about a particular patient’s health 

status, medical condition, or treatment 

exchanged between or among the 

patient’s health care providers and 

suppliers for the purpose of diagnosing 

or treating the patient would not 

constitute remuneration to the recipient 

of the information. In this regard, the 

electronic exchange of patient health 

care information is comparable to the 

exchange of such information by mail, 

courier, or telephone conversation. 

Thus, when related to the care of 

individual patients, information such as 

test results, diagnosis codes, 

descriptions of symptoms, medical 

history, and prescription information 

are part of the delivery of the health care 

services and would not have 

independent value to the recipient. 

However, in other situations, 

information may be a commodity with 

value that could be conferred to induce 

or reward referrals. For example, data 

related to research or marketing 

purposes, or information otherwise 

obtained through a subscription or for a 

fee, could constitute remuneration for 

purposes of the anti-kickback statute. 

B. Electronic Prescribing Safe Harbor 

Required Under Section 101 of the MMA 

(42 CFR 1001.952(x)) 

Summary of the Proposed Rule 

On October 11, 2005, as mandated in 

the MMA, we proposed adding a new 

paragraph (x) to the existing safe harbor 

regulations at 42 CFR 1001.952 for 

certain electronic prescribing 

arrangements. Specifically, we 

proposed: 

• Protecting certain arrangements 

involving the provision of nonmonetary 

remuneration—in the form of hardware, 

software, or information technology or 

training services—necessary and used 

solely to receive and transmit electronic 

drug prescription information. We 

construed this language broadly to 

include internet connectivity services 

(of all types, including broadband or 

wireless), and upgrades of equipment 

and software that significantly enhanced 

functionality. 

• Requiring that the donated 

technology must be part of, or used to 

access, a prescription drug program that 

meets applicable standards under 

Medicare Part D. 

• Protecting technology provided by a 

hospital to its medical staff; by a 

medical group practice to its members; 

and by a PDP sponsor or MA 

organization to prescribing health care 

professionals, as well as to pharmacies 

and pharmacists in the plan’s network, 

so long as all of the safe harbor 

conditions were satisfied. 

• Prohibiting a recipient from making 

donation of technology a condition of 

doing business with a donor. 

• Requiring that protected 

arrangements be fully and completely 

documented. 

• Excluding donations of technology 

that replicate technology the recipient 

already possesses. To ensure 

compliance with this provision, we 

proposed requiring recipients to certify 

that they did not already possess 

equivalent technology. Moreover, we 

proposed that donors would not be 

protected if they knew or should have 

known that the recipients already 

possessed equivalent technology. 

• Requiring that neither a recipient’s 

eligibility for donated technology, nor 

the amount or nature of the technology, 

could be determined in any manner that 

directly or indirectly takes into account 

the volume or value of referrals or other 

business generated between the parties. 

• Requiring that the parties not take 

any action to impede the compatibility 

or interoperability of the technology. 

• Requiring that the donor not restrict 

the ability of the recipient to use the 

technology for any patient, regardless of 

payor. 

• Limiting the value of donated 

technology that could be protected by 

the safe harbor. 

• In deference to the limitations 

imposed by the ‘‘used solely’’ standard 

set forth in the MMA, promulgating a 

separate safe harbor for multi-functional 

items and services used for electronic 

prescribing (e.g., connectivity services 

and multi-use hand held devices or 

computers). 

Summary of the Final Rule 

The final safe harbor at 42 CFR 

1001.952(x) adopts the proposed safe 

harbor, with the following key 

clarifications: 

• The final rule protects technology 

necessary and used solely to receive and 

transmit any prescription information, 

whether related to drugs or to other 

items or services normally ordered by 

prescription (e.g., laboratory tests and 

durable medical equipment orders). 


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3See, e.g., 56 FR 35952, 35978 (July 29, 1991) 

(noting that a computer that has independent value 

to a physician may constitute an illegal 

inducement). 

• Donations may be in an unlimited 

amount. 

• We have abandoned our proposal to 

require that recipients provide a written 

certification that the donated technology 

is not technically or functionally 

equivalent to the technology the 

recipient already possessed or had 

obtained. We have added language that 

permits arrangements to be 

memorialized through cross-referencing 

incorporation of prior agreements 

between the parties. 

• We are not finalizing a separate safe 

harbor for multi-functional electronic 

prescribing technology. 

General Comments 

Comment: Many commenters stated 

that the proposed electronic prescribing 

safe harbor was too narrow to be useful 

and should be merged into an electronic 

health records safe harbor, noting that 

physicians would likely resist adopting 

stand-alone electronic prescribing 

systems. One commenter observed that 

the proposed rule was generally in 

accordance with congressional intent 

underlying section 101 of the MMA. 

Response: We agree that the proposed 

safe harbor was consistent with 

congressional intent. As we are not free 

to ignore a congressional mandate, we 

must promulgate the electronic 

prescribing safe harbor described in 

section 101 of the MMA. However, we 

are also promulgating a separate safe 

harbor for electronic health records 

arrangements that also incorporate an 

electronic prescribing component. This 

new safe harbor should address the 

commenters’ concerns. 

1. Protected Nonmonetary 

Remuneration 

a. Necessary and Used Solely 

In the proposed rule, we proposed 

protecting items and services that are 

necessary and used solely to transmit 

and receive electronic prescription drug 

information. We stated that the safe 

harbor would not protect arrangements 

in which donors provided items or 

services that were technically or 

functionally equivalent to items that the 

recipient already possessed or services 

that the recipient had already obtained. 

We proposed requiring the recipient to 

certify that the items and services 

provided were not technically or 

functionally equivalent to those that the 

recipient already possessed or had 

already obtained. We also proposed that 

arrangements would not be protected if 

the donor knowingly provided 

technology that duplicated the 

recipient’s existing technology. We 

indicated that upgrades of equipment or 

software that significantly enhanced the 

functionality of the item or service 

would be considered ‘‘necessary’’ for 

purposes of the safe harbor. 

Because the term ‘‘necessary’’

appeared in our proposed rulemaking in 

the discussions of all three proposed 

safe harbors, many commenters chose to 

address this requirement primarily in 

the context of the proposed safe harbors 

for electronic health records 

arrangements. Thus, there is a detailed 

discussion of our interpretation of the 

term ‘‘necessary’’ in section II.C.1.b of 

this preamble, which addresses the new 

electronic health records safe harbor. 

We intend to interpret the term 

‘‘necessary’’ uniformly for both new safe 

harbors. We are addressing here only 

those comments received on the 

proposed electronic prescribing safe 

harbor requirement that transferred 

technology be ‘‘necessary and used 

solely’’ to receive and transmit 

electronic prescription information. 

Comment: One commenter observed 

that the ‘‘necessary and used solely’’

requirement ensures that items and 

services will be used to encourage 

electronic prescribing activities. This 

commenter suggested including an 

additional requirement that the items or 

services be clearly intended to promote 

interoperability of health information 

and the improvement of quality in a 

clinical setting. 

Response: We agree that it was the 

intent of Congress to encourage 

electronic prescribing activities, in part, 

through the development of a safe 

harbor for transfers of certain items and 

services necessary and used solely for 

electronic prescribing transactions. 

However, the intent-based additional 

standard suggested by the commenter, 

while reflecting laudable goals, is not 

sufficiently ‘‘bright line’’ for purposes of 

this safe harbor. We have included a 

requirement at § 1001.952(x)(2) 

intended to ensure that protected 

technology meets Part D electronic 

prescribing standards applicable at the 

time of the donation, including any 

standards relating to interoperability. 

Comment: Some commenters 

expressed concern that OIG has taken an 

unnecessarily narrow interpretation of 

the statutory language ‘‘necessary and 

used solely to receive and transmit 

electronic prescription information in 

accordance with the standards 

promulgated under this subsection 

[section 101 of the MMA] * * *.’’ One 

commenter explained its view that the 

phrase ‘‘necessary and used solely’’

should be read so that the word 

‘‘necessary’’ modifies the phrase ‘‘to 

receive and transmit electronic 

prescription information’’ and the 

phrase ‘‘used solely’’ modifies the 

phrase ‘‘in accordance with the 

standards promulgated under this 

subsection.’’ In other words, in this 

commenter’s view the protected 

hardware, software and services must be 

‘‘necessary’’ to perform electronic 

prescribing transactions ‘‘solely’’ in 

accordance with CMS established data 

interchange standards. This commenter 

explained that this interpretation would 

be consistent with the purpose of the 

safe harbor and the practical realities of 

computers and electronic transactions. 

Response: We appreciate the 

comment; however, we do not believe 

the commenter’s proposed 

interpretation is the best or most logical 

reading of the statutory language. We 

believe the better and less strained 

reading is that Congress intended for all 

donated technology to be necessary for 

the receipt and transmission of 

electronic prescription information and 

to be used solely for that purpose. The 

requirement that the items and services 

be ‘‘necessary and used solely’’ for 

transmitting and receiving electronic 

prescribing information helps minimize 

the potential for abuse. Limiting the safe 

harbor to necessary items and services 

helps ensure the safe harbor does not 

become a means of conveying valuable 

items and services that do not further 

the underlying policy goals and that 

might, in reality, constitute disguised 

referral payments. 

As we noted in the preamble to the 

proposed rulemaking, we believe 

Congress included the ‘‘used solely’’

requirement to safeguard against 

abusive arrangements in which the 

donated technology might constitute a 

payment for referrals because it might 

have additional value attributable to 

uses other than electronic prescribing. 

See 70 FR at 59018. For example, a 

computer that a physician can use to 

conduct office or personal business 

might have value to the physician apart 

from its electronic prescribing purpose; 

if this value is transferred to the 

physician in connection with referrals, 

the statute would be implicated.3

Accordingly, consistent with section 

101 of the MMA, the final safe harbor 

requires that the protected items and 

services be ‘‘necessary and used solely’’

to transmit or receive electronic 

prescribing information. 

We note that software that bundles 

general office management, billing, 

scheduling, electronic health records, or 

other functions with the electronic 


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prescribing features would not meet the 

‘‘used solely’’ requirement and would 

not be protected by the final electronic 

prescribing safe harbor. In some cases, 

the provision of such bundled software 

may be eligible for protection under the 

new safe harbor for electronic health 

records arrangements at § 1001.952(y). 

Comment: A commenter suggested 

that multi-functional technology be 

considered ‘‘necessary’’ so long as it 

includes all components required for a 

physician to prescribe electronically, 

even if the technology has other 

functions (e.g., a handheld device that 

can be used for more than electronic 

prescribing). 

Response: The commenter’s 

suggestion, as we understand it, is not 

consistent with the MMA statutory 

language. 

Comment: Many commenters 

requested that we eliminate the 

proposed requirement that recipients 

provide written certification that the 

donated technology is not technically or 

functionally equivalent to technology 

the recipient already possesses, 

expressing concern about the possible 

difficulty of making this determination, 

the lack of technical expertise on the 

part of some recipients, and the 

increased cost that could arise by having 

an outside expert provide a 

determination of technical or functional 

equivalence. One commenter supported 

OIG’s interpretation of the term 

‘‘necessary’’ as permitting upgrades of 

equipment or software that significantly 

enhance the functionality of an item or 

service. Another commenter suggested 

that we should not require that the 

upgrades ‘‘significantly’’ enhance the 

functionality of the item or service. 

Rather, the commenter believed that we 

should allow the marketplace to 

determine whether an upgrade 

constitutes a beneficial improvement. 

Response: For the reasons noted in 

detail below in section II.C.1.b.i, with 

respect to the electronic health records 

safe harbor, we are not adopting the 

proposed requirement that recipients 

provide written certification that the 

donated technology is not technically or 

functionally equivalent to technology 

the recipient already possesses. 

However, while we are eliminating the 

certification requirement, we do not 

believe items and services are 

‘‘necessary’’ for electronic prescribing if 

the recipient already possesses 

equivalent items or services. The 

provision of equivalent items and 

services poses a heightened risk of 

abuse, since such arrangements 

potentially confer independent value on 

the recipient (i.e., the value of the 

existing items and services that might be 

put to other uses) unrelated to the need 

for electronic prescribing technology. 

Thus, if a donor knows that the 

recipient already possesses the 

equivalent items or services, or acts in 

deliberate ignorance or reckless 

disregard of that fact, the donor will not 

be protected by the safe harbor. Thus, 

prudent donors may want to make 

reasonable inquires of potential 

recipients and document the 

communications. We do not believe this 

requirement necessitates the hiring of 

technical experts by either the donor or 

the recipient. Further, with respect to 

upgrades of equipment or software, we 

agree with the commenter that 

distinguishing ‘‘significant’’

enhancements from other beneficial 

improvements introduces unnecessary 

complexity. Under the final safe harbor, 

any upgrade that is necessary and used 

solely to transmit and receive electronic 

prescribing information will be 

protected (so long as all other safe 

harbor conditions are satisfied). 

Comment: Many commenters noted 

that it would be impractical to require 

physicians to acquire or use software 

and hardware solely for electronic 

prescribing. Several commenters noted 

that, in most cases, single-use 

technology is of limited value to a 

physician, and could result in 

inefficiencies. Another commenter 

expressed concern that the ‘‘used 

solely’’ standard would preclude the use 

of robust electronic clinical support 

tools, such as tools to identify drug-todrug interactions, or to conduct drug-tolaboratory or prescription data analysis. 

This commenter urged that any 

exceptions from the fraud and abuse 

laws for health information technology 

arrangements promote access to all 

information needed by physicians to 

evaluate alternative drug therapies, 

identify potential drug-to-drug 

interactions, and to improve safety, 

quality, and efficiency of patient care. 

Response: The ‘‘used solely’’

condition derives directly from the 

MMA language. We believe that many of 

the arrangements of interest to the 

commenters are best addressed by the 

electronic health records safe harbor, 

which is not restricted to technology 

used solely for electronic prescribing. 

The MMA-mandated electronic 

prescribing safe harbor is reasonably 

interpreted to encompass electronic 

tools that provide information necessary 

to formulate, transmit, or receive a 

medically appropriate prescription for a 

patient. These would include electronic 

clinical support tools identifying 

alternative drug therapies, drug-to-drug 

interactions, or a payor’s formulary 

information. The nature of the 

‘‘prescription data analysis’’ tools 

referenced by the commenter is not 

clear. We believe the appropriate 

inquiry would be whether the tool is 

used to formulate and transmit or 

receive a medically appropriate 

prescription for a patient. To the extent 

the data analysis tool (or any other 

electronic item or service) is used to 

transmit or receive data unrelated to a 

medically appropriate prescription for a 

patient (e.g., data collected for 

marketing purposes), the tool would not 

be necessary for electronic prescribing 

and would not come within the safe 

harbor. 

b. Covered Technology 

In our proposed rule, we proposed 

protecting hardware, software, or 

information technology and training 

services that met the various safe harbor 

conditions. We interpreted our 

proposed language to include 

broadband or wireless internet 

connectivity, training, information 

technology support services, and other 

items and services used in connection 

with the transmission or receipt of 

electronic prescribing information. 

Comment: Various commenters 

suggested that the scope of covered 

technology should be expanded to 

include: Billing, scheduling, and other 

administrative functions; 

implementation and maintenance of the 

system; ‘‘upgrades;’’ and licenses, rights 

of use, or intellectual property. 

Commenters also urged that any safe 

harbor cover educational sessions and 

consulting assistance related to the 

electronic prescribing technology. 

Commenters generally agreed that the 

provision of equipment for personal, 

non-medical purposes should not be 

protected. One commenter suggested 

that it would not be possible to develop 

a comprehensive list of protected 

technology transfers that would 

sufficiently reflect all possible 

electronic prescribing items and 

services. The commenter recommended 

that OIG periodically review the scope 

of protected items and services, and 

expand it as needed. 

Response: We agree that it would be 

difficult to provide a comprehensive list 

of specific items and services covered 

by the safe harbor. While a specific list 

would provide a ‘‘bright line’’ rule, in 

this case it would also impede the 

ability of the safe harbor to 

accommodate novel or rapidly evolving 

technologies in the marketplace. For 

these reasons, we are not promulgating 

a specific list of protected items and 

services. 

Consistent with the MMA mandate, 

covered items and services under 


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§ 1001.952(x) include ‘‘hardware, 

software, and information technology 

and training services’’ that are necessary 

and used solely for electronic 

prescribing and that meet all other safe 

harbor conditions. We believe that 

licenses, rights of use, intellectual 

property, upgrades, and educational and 

support services (including, for 

example, help desk and maintenance 

services) are items and services that can 

potentially fit in the safe harbor, if all 

safe harbor conditions are met. Billing, 

scheduling, administrative, and other 

general office software cannot. 

Operating software that is necessary for 

the hardware to operate can qualify for 

safe harbor protection because it is 

integral to the hardware. Moreover, 

operating software is distinct from other 

software applications that are not 

necessary to transmit or receive 

electronic prescribing information. 

Patches designed to link the donor’s 

existing electronic prescribing system to 

the recipient’s existing electronic 

prescribing system can qualify for 

protection. The provision of technology 

for personal, non-medical purposes is 

not protected, nor is the provision of 

office staff. 

Comment: We solicited comments on 

whether the safe harbor should protect 

electronic prescribing technology that is 

used for the transmission of prescription 

information for items and services that 

are not drugs (e.g., durable medical 

equipment or laboratory tests). Several 

commenters suggested that the safe 

harbor should support the use of 

electronic prescribing technology for all 

the functions currently accomplished 

through written prescriptions, in order 

to encourage provider utilization of 

electronic prescribing technology to 

increase safety, cost-effectiveness, and 

efficiency. The commenters suggested 

including electronic prescribing 

technology used for prescribing medical 

supplies and durable medical 

equipment, physical therapy, dialysis 

testing, laboratory tests, and other nondrug prescriptions. A commenter from 

the clinical laboratory industry 

supported a broad reach, but only if 

clinical laboratories were included as 

permissible donors under the safe 

harbor. 

Response: We agree generally with the 

first set of commenters. We have 

reviewed further the language in section 

101 of the MMA. The MMA-mandated 

safe harbor language requires that the 

donated technology be capable of 

receiving and transmitting ‘‘electronic 

prescription information’’ in accordance 

with the electronic prescribing 

standards promulgated for purposes of 

the MMA electronic prescription drug 

programs. We believe that the specific 

term ‘‘electronic prescription 

information’’ as commonly used and as 

used in the MMA-mandated safe harbor 

provision retains a broad meaning, to 

include information about prescriptions 

for any items or services that would 

normally be accomplished with a 

written prescription. In contrast, the 

information to be transmitted under an 

electronic prescription drug program 

established under the MMA is clearly 

limited to drug information for Part D 

eligible individuals. Moreover, we do 

not think that the statutory language is 

intended to be construed to prohibit the 

use of the donated technology for the 

transmission and receipt of orders or 

prescriptions for other items and 

services or to require the use of separate 

systems depending on the item or 

service to be prescribed or ordered. We 

believe this approach is consistent with 

the objectives of the electronic 

prescribing standards and the patient 

safety, quality, and efficiency goals 

underlying the mandated exception. 

Accordingly, we are defining 

‘‘prescription information’’ for purposes 

of the safe harbor to mean information 

about prescriptions for drugs or any 

other item or service normally 

accomplished through a written 

prescription. 

With respect to the clinical laboratory 

commenter, consistent with the MMA 

language, we are not including clinical 

laboratories as permissible donors under 

the safe harbor. However, we have 

expanded the new safe harbor for 

electronic health records arrangements 

to include clinical laboratories. 

2. Final Standards for Electronic 

Prescribing 

The MMA required that donated 

electronic prescribing technology 

comply with the final standards for 

electronic prescribing as adopted by the 

Secretary. The first set of these 

standards (the ‘‘foundation standards’’) 

was finalized by the Department on 

November 7, 2005. See 70 FR 67568. We 

received no comments on this issue. 

The final safe harbor at § 1001.952(x)(2) 

requires that the donated technology 

comply with the applicable standards 

for electronic prescribing as adopted by 

the Secretary. 

3. Donors and Recipients Protected by 

the Safe Harbor 

We proposed protecting the same 

categories of donors and recipients 

listed in section 101 of the MMA. 

Because most commenters commented 

on this issue jointly with the proposed 

electronic health records arrangements 

safe harbors, we have included a 

detailed description of these comments 

in our discussion of the electronic 

health records safe harbor below at 

section II.C.3. of this preamble. 

Comment: We received numerous 

comments requesting that we expand 

the list of protected donors and 

recipients to include a variety of 

providers, practitioners, suppliers, and 

their affiliates. 

Response: We are finalizing the safe 

harbor consistent with the MMA 

mandated donors and recipients. We are 

not persuaded that additional donors or 

recipients are necessary to achieve the 

purpose of this safe harbor for electronic 

prescribing. The enumerated categories 

of donors and recipients reflect 

individuals and entities centrally 

involved in the ordering, processing, 

filing, or reimbursing of prescriptions. 

Accordingly, protected donors and 

recipients under § 1001.953(x) are: 

hospitals to members of their medical 

staffs; group practices to their physician 

members; and PDP sponsors and MA 

organizations to network pharmacists 

and pharmacies, and to prescribing 

health care professionals. For the 

reasons set forth in the preamble to the 

proposed rulemaking, and in the 

absence of any comments to the 

contrary, we are adopting our proposed 

definitions of group practice, member of 

the group practice, prescribing health 

care professional, PDP sponsor and MA 

organization. Group practice shall have 

the meaning set forth at § 411.352; 

member of the group practice shall 

mean all persons covered by the 

definition of ‘‘member of the group or 

member of a group practice’’ at 

§ 411.351, as well as other prescribing 

health care professionals who are 

owners or employees of the group 

practice; prescribing health care 

professional shall mean a physician or 

other health care professional licensed 

to prescribe drugs in the State in which 

the drugs are dispensed; PDP sponsor or 

MA organization shall have the 

meanings set forth at §§ 423.4 and 422.2, 

respectively. 

We have revisited the issue of 

protected donors and recipients in the 

context of the electronic health records 

arrangements safe harbor at 

§ 1001.952(y), as discussed in the 

preamble below at section II.C.3. 

4. Additional Conditions on the 

Provision of Qualifying Electronic 

Prescribing Technology 

Promoting Compatibility and 

Interoperability 

Most commenters addressed the issue 

of the compatibility and interoperability 

of the donated technology with respect 


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to all three proposed safe harbors. We 

have included a discussion of these 

comments in the section of this 

preamble addressing the electronic 

health records safe harbor at 

§ 1001.952(y). For the reasons set forth 

there, we have adopted, with clarifying 

modifications, our proposed restriction 

on disabling the compatibility and 

interoperability of donated technology 

under the electronic prescribing safe 

harbor at § 1001.952(x)(3). For clarity, 

we have included in § 1001.952(x) the 

same definition of ‘‘electronic health 

record’’ found in § 1001.952(y). 

Limit on Value of Technology 

In our proposed rule, we solicited 

public comments on various means by 

which we might limit the value of 

protected technology under the 

electronic prescribing safe harbor. We 

indicated that we were considering a 

limit on the value of protected 

technology as a further safeguard against 

fraud and abuse, since, in our 

experience, the risk of fraud and abuse 

generally (although not always) 

increases with the value of the 

remuneration offered. We received a 

large number of comments on this topic, 

the majority of which opposed any limit 

on the value of donated technology. 

Because these commenters typically 

commented jointly on this issue for all 

three proposed safe harbors (and each 

commenter typically had the same 

concerns under all three proposed safe 

harbors), an extensive description of 

these comments is found in section 

II.C.6. of this preamble. Having 

considered the comments, we are 

persuaded not to limit the value of the 

donated technology under the new safe 

harbor for electronic prescribing 

arrangements at § 1001.952(x). We 

believe the final conditions of the safe 

harbor, including the ‘‘necessary and 

used solely’’ requirement, should be 

sufficient to minimize the potential for 

abuse. Although we are not limiting the 

value of donated technology, it is not 

our expectation that donors will 

necessarily want or be in a position to 

donate unlimited amounts of electronic 

prescribing technology. 

Selection of Recipients of Donated 

Technology 

We proposed additional conditions in 

proposed §§ 1001.952(x)(5) and (x)(6) 

related to how donors select recipients 

of the electronic prescribing technology. 

These proposed conditions were 

designed to minimize the risk that 

donors would select recipients for the 

improper purpose of inducing or 

rewarding the generation of Federal 

health care program business. Proposed 

§ 1001.952(x)(5) would require that the 

recipients (including their groups, 

employees, or staff) refrain from making 

the donation of qualifying electronic 

prescribing technology a condition of 

doing business with the donor. 

Proposed § 1001.952(x)(6) would 

preclude safe harbor protection if the 

eligibility of a recipient to receive items 

and services from a donor, or the 

amount or nature of the items or 

services received, is determined in any 

manner that takes into account the 

volume or value of the recipient’s 

referrals or other business generated 

between the parties. We observed that 

this requirement would not preclude 

selecting a recipient based upon the 

total number of prescriptions written by 

the recipient, but would preclude 

selecting the recipient based upon the 

number or value of prescriptions written 

by the recipient that are dispensed or 

paid by the donor (as well as on any 

other criteria based on any other 

business generated between the parties). 

(70 FR at 59021). 

Comment: Commenters requested that 

we confirm that donors can select 

recipients of electronic prescribing 

technology based upon the total number 

of prescriptions written by the recipient, 

but cannot select them based upon the 

number or value of prescriptions written 

by the recipient that are dispensed or 

paid by the donor (or on any other 

criteria based on any other business 

generated between the parties). A 

commenter supported excluding from 

safe harbor protection donations that 

take into account directly the volume or 

value of referrals or other business 

generated between the parties. This 

commenter expressed concern that 

donors would employ such selection 

criteria to disadvantage small practices 

and practices in rural or underserved 

areas. To counter this potential 

disadvantage, the commenter suggested 

that the final rule include incentives to 

promote donations to small practices, 

especially in rural and underserved 

areas. Other commenters suggested that 

donors, such as PDP sponsors, MA 

organizations, and pharmacy benefits 

managers, should be permitted to 

consider the volume and value of 

prescriptions written by the recipient, 

particularly for a donor’s patient or plan 

population. 

Response: To safeguard against the 

use of donated technology to disguise 

referral payments, we are adopting our 

proposal that neither the eligibility of a 

recipient to receive items and services, 

nor the amount or nature of the items 

or services received, may be determined 

in a manner that takes into account, 

directly or indirectly, the volume or 

value of the recipient’s referrals or other 

business generated between the parties. 

Notwithstanding, in the instant case, we 

believe that prohibiting the selection of 

recipients based on total number of 

prescriptions written by the recipient 

would be inconsistent with the MMA 

mandate and congressional intent to 

promote the use of electronic 

prescribing. Accordingly, we confirm 

our interpretation, for purposes of the 

safe harbor at § 1001.952(x), that donors 

may select recipients of electronic 

prescribing technology based upon the 

total number of prescriptions written by 

the recipient, but cannot select them 

based upon the number or value of 

prescriptions written by the recipient 

that are dispensed or paid by the donor 

(or on any other criteria based on any 

other business generated between the 

parties). Donors also may not select 

recipients based on the overall value of 

prescriptions written by the recipient or 

on the volume or value of prescriptions 

written by the recipient that are 

reimbursable by any Federal health care 

program. 

We are not persuaded that PDP 

sponsors or MA organizations should be 

permitted to offer technology selectively 

based on the volume or value of 

business generated for the plan by the 

recipient, especially in the context of 

Part D, which includes some 

reimbursement based on the plan’s 

costs, rather than capitated payments. 

The final safe harbor does not include 

pharmacy benefit managers. 

The safe harbor would not protect 

arrangements that seek to induce a 

recipient to change loyalties from other 

providers or plans to the donor (e.g., a 

hospital using an electronic prescribing 

technology arrangement to induce a 

physician who is on the medical staff of 

another hospital to join the donor 

hospital’s medical staff), because such 

arrangements take into account business 

generated for the donor. 

We understand the commenter’s 

concern about donors excluding rural 

and underserved area physicians from 

their health information technology 

arrangements. Some donors may favor 

large or urban practices over small or 

rural ones. However, we can discern no 

‘‘incentives’’ that could be included 

appropriately in a safe harbor to address 

this concern, nor has the commenter 

proposed any with respect to assisting 

rural or solo practitioners. We note that 

our decision, explained elsewhere, not 

to limit the value of technology that can 

qualify under the safe harbor may assist 

rural and solo practices insofar as 

donors may want to provide them with 

greater resources in recognition of their 


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greater need for assistance in adopting 

electronic prescribing technology. 

Comment: Some commenters 

supported our proposal to exclude from 

safe harbor protection donations that are 

a condition of doing business with the 

donor. 

Response: We are retaining the 

proposed requirement that recipients (or 

any affiliated group, employee, or staff 

member) cannot make the receipt of 

items or services a condition of doing 

business with the donor. We have 

clarified that the condition applies with 

respect to all individuals and entities 

affiliated with the recipient. 

Documentation 

We proposed at § 1001.952(x)(7) a 

requirement that the arrangement for the 

donation of electronic prescribing 

technology be in writing, be signed by 

the parties, identify with specificity the 

items or services being provided and 

their values, and include a certification 

that the donated items and services not 

be technically or functionally equivalent 

to items and services the recipient 

already has. We stated that to permit 

effective oversight of protected 

arrangements, the writing must cover all 

qualifying electronic prescribing 

technology provided by the donor (or 

affiliated parties) to the recipient. For 

example, if a donor provides a piece of 

hardware under one arrangement and 

subsequently provides a software 

program, the agreement regarding the 

software would have to include a 

description of the previously donated 

hardware (including its nature and 

value). 

Comment: Some commenters 

supported the requirement that any 

transfers of technology and services be 

memorialized in a written agreement. 

One commenter objected to including a 

written agreement requirement in the 

safe harbor, arguing that the 

requirement would cause an 

unnecessary delay and increase 

paperwork. Another commenter 

suggested that the safe harbor permit the 

arrangement between the donor and 

recipient to be captured through a 

combination of agreements between the 

recipient, donor, and service provider, 

rather than one agreement. Commenters 

also urged OIG to remove the technical 

and functional equivalency certification 

requirement from the safe harbor. 

Response: We have adopted the 

documentation requirement in the final 

safe harbor at § 1001.952(x)(7) with 

several modifications. With respect to 

the condition requiring that the 

documentation cover all of the 

electronic prescribing items and 

services to be provided by the donor (or 

affiliated parties) to the recipient, we 

have added language to the final safe 

harbor clarifying that the written 

documentation requirement can be 

satisfied by incorporating by reference 

other agreements between the parties or 

by the use of cross references to a master 

list of agreements between the parties 

that is maintained and updated 

centrally, is available for review by the 

Secretary upon request, and preserves 

the historical record of agreements. We 

have eliminated the certification of 

technical and functional nonequivalency. Also, given our decision 

not to limit the value of protected 

donations, we have eliminated the 

requirement that the agreement specify 

the value of the donated technology. 

However, in the interests of 

transparency and accountability, we are 

requiring that the parties document the 

donor’s costs for the technology. We 

have retained the remaining 

documentation requirements, as 

proposed, at § 1001.952 (x)(7). Finally, 

nothing in this safe harbor requires that 

agreements between donors and 

recipients also be signed by third-party 

vendors; however, such documentation 

may be a prudent business practice. 

All Payors Requirement 

Comment: We proposed that, where 

possible, recipients must be able to use 

the protected technology for all patients 

without regard to payor status. 

Commenters that addressed the issue 

universally supported this requirement. 

Response: We agree and have 

included this requirement in the final 

safe harbor at § 1001.952(x)(4). 

Commercial and Other Messaging 

Comment: A commenter requested 

clear and specific rules prohibiting 

inappropriate commercial messaging 

through electronic prescribing 

technology, including electronic 

detailing messages from a manufacturer 

promoting a particular brand or brandname drug. This commenter explained 

that such messaging may 

inappropriately influence clinical 

decision-making. The commenter gave 

the following as examples of 

inappropriate messaging: Messages 

disguised as ‘‘clinical alerts’’ based 

upon biased research not published in 

the public domain and alerts purporting 

to save a patient money when in reality 

the out-of-pocket expense for the drug to 

the patient is higher. Another 

commenter suggested that OIG prohibit 

commercial messaging and require that 

donated technologies present 

information in a neutral and transparent 

manner so as not to influence clinical 

decision-making improperly. Similarly, 

another commenter noted that pop-up 

messaging could inappropriately 

influence prescribing patterns. The 

commenter provided the example of 

making the procedure for prescribing 

certain formulary drugs very easy and 

straightforward, while attempts to 

prescribe other formulary drugs trigger 

multiple pop-up notices or require a 

series of additional steps. 

Response: Technology used for 

marketing purposes would not meet the 

‘‘necessary and used solely’’ standard 

required by the MMA for the electronic 

prescribing safe harbor, because 

marketing information is not the type of 

clinical support that is integral to 

prescribing accurate and appropriate 

items and services for patients. 

We do not believe it would be feasible 

or appropriate to regulate the content of 

commercial messaging or formulary 

compliance activities through these safe 

harbors to the anti-kickback statute. The 

regulation of speech is outside the scope 

of this rulemaking. Nor, in any event, 

would a condition in these safe harbors 

related to the accuracy or objectivity of 

the content of messages or formulary 

activities be sufficiently ‘‘bright line’’ to 

be practical or readily enforceable. That 

said, the commenter raises important 

concerns about messaging and 

formulary activities. Nothing in this 

rulemaking (either for the electronic 

prescribing safe harbor at § 1001.952(x) 

or for the electronic health records safe 

harbor at § 1001.952(y)) should be 

construed to approve of or authorize any 

commercial messaging or formulary 

compliance activity (or any other 

conduct) that is prohibited by any 

Federal, State, or local law or regulation. 

Nothing in this rulemaking protects 

parties from liability for improper 

messaging or formulary activities, 

including, without limitation, liability 

for the promotion of adulterated, 

misbranded, or unapproved drug or 

devices, off-label marketing, consumer 

fraud, inappropriate formulary 

activities, and the like. 

5. Multi-Functional Technology 

We proposed using our regulatory 

authority under section 1128B(b)(3)(E) 

of the Act to create an additional safe 

harbor to protect the provision by 

donors to recipients of some limited 

hardware (including necessary 

operating system software) and 

connectivity services used for more than 

one function, so long as a substantial 

use of the item or service is to receive 

or transmit electronic prescription 

information. 

Comment: Most commenters 

supported a safe harbor that would 

extend protection to technology beyond 


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that which is ‘‘necessary and used 

solely’’ for electronic prescribing. Many 

commenters expressed the hope that 

multi-functional technology would 

ultimately be captured in an electronic 

health records safe harbor. 

Response: We have decided not to 

create a separate safe harbor for multifunctional hardware and connectivity. 

Instead, we are creating a new safe 

harbor for the protection of certain 

arrangements involving electronic 

health records software and services 

(including connectivity services) that 

will more directly further the overall 

goal of widespread adoption of 

interoperable electronic health records 

technology without some of the fraud 

and abuse risks inherent in gifts of 

multi-functional hardware. The public 

comments support this approach, as 

more fully described in the next section. 

As set forth below at § 1001.952(y), we 

have finalized a single safe harbor for 

certain electronic health records 

software or information technology and 

training services. 

C. Electronic Health Records 

Arrangements Safe Harbor (42 CFR 

1001.952(y)) 

Summary of the Proposed Rule 

Prior to publication of the proposed 

rulemaking, many in the hospital 

industry, among others, raised the issue 

of the need for safe harbor protection for 

arrangements involving technology 

other than technology used for 

electronic prescribing. To encourage the 

adoption of electronic health records 

technology consistent with the ultimate 

goal of achieving fully interoperable 

electronic health records for all patients, 

we proposed using our legal authority at 

section 1128B(b)(3)(E) of the Act to 

promulgate two safe harbors related to 

electronic health records software and 

directly related training services that are 

necessary and used solely to receive, 

transmit, or maintain electronic health 

records of the donor’s or recipient’s 

patients. We did not propose protecting 

hardware in either safe harbor, because 

we believed electronic health records 

software and training services were the 

components of electronic health records 

systems most likely to be needed by 

recipients, and because gifts of valuable, 

multi-functional hardware (such as 

computers and servers) would 

inherently pose a higher risk of 

constituting a disguised payment for 

referrals. 

The first proposed safe harbor would 

have applied to donations made before 

adoption by the Secretary of product 

certification criteria, including criteria 

for interoperability, functionality, and 

privacy and security of electronic health 

records technology (‘‘product 

certification criteria’’). (We referred to 

this proposed safe harbor as the ‘‘preinteroperability’’ safe harbor.) See 70 FR 

at 59022–23. Among other provisions, 

we proposed: 

• That the electronic health records 

software would have to be essential to 

and used solely for the transmission, 

receipt, and maintenance of patients’

electronic health records and 

prescription drug information. 

• That the software would have to 

include an electronic prescribing 

component in accordance with the final 

standards established by the Secretary 

under the Part D electronic prescription 

drug program. 

• That the pre-interoperability safe 

harbor would not protect the provision 

of other types of technology (e.g., 

billing, scheduling, or general office 

management software) or any software 

used by the recipient to conduct 

business or engage in activities 

unrelated to the recipient’s medical 

practice. We also proposed to exclude 

from the safe harbor the provision of 

staff to the recipient or its office. 

• That we would define the term 

‘‘electronic health records.’’

• That the safe harbor would include 

documentation provisions comparable 

to those proposed for the electronic 

prescribing safe harbor. 

• That the safe harbor would 

preclude protection for any arrangement 

in which the donor or its agents disable 

the interoperability of any component of 

the software or otherwise imposed 

barriers to compatibility. 

• That the safe harbor might limit the 

aggregate value of protected technology 

that a donor could provide to a recipient 

under the pre-interoperability safe 

harbor or in combination with the other 

proposed safe harbors. We noted that we 

were considering the same alternatives 

we proposed for setting a value for the 

electronic prescribing safe harbor. These 

could include an aggregate dollar cap; a 

limitation that would require cost 

sharing by the recipient; or another 

methodology, including a reduction in 

the amount of any cap over time. 

• That the safe harbor would prohibit 

donors from shifting the costs of the 

donated technology to the Federal 

health care programs or beneficiaries. 

• That the safe harbor would include 

the same categories of donors and 

recipients that we proposed for the 

electronic prescribing arrangements safe 

harbor. 

• That the safe harbor would include 

other requirements drawn from the 

proposed electronic prescribing safe 

harbor, including the restriction on 

arrangements tied to the volume or 

value of referrals or other business 

generated (proposed § 1001.952(x)(6)); 

the anti-solicitation provision (proposed 

§ 1001.952(x)(5)); and the proposed all 

payors condition (proposed 

§ 1001.952(x)(4)). 

• That the pre-interoperability safe 

harbor might sunset once 

interoperability standards were 

finalized. 

Recognizing that once standards and 

product certification criteria were 

developed and adopted by the Secretary 

for electronic health records (including 

standards for interoperability), some 

enhanced flexibility in the conditions 

applicable under a safe harbor for 

electronic health records arrangements 

might be appropriate, we proposed a 

second safe harbor, which we referred to 

as the ‘‘post-interoperability’’ safe 

harbor. We noted that adoption of 

uniform interoperability standards, as 

well as product certification standards 

to ensure that products meet those 

standards, would help prevent certified 

technology from being used by 

unscrupulous parties to lock in streams 

of referrals or other business. While 

interoperability does not eliminate the 

risk of improper referral payments 

(parties might still use the offer or grant 

of interoperable technology as a vehicle 

to induce referrals), it potentially 

mitigates the risk sufficiently to warrant 

different or modified safe harbor 

conditions. 

In summary, for the postinteroperability safe harbor, we 

proposed: 

• Requiring protected technology to 

be certified in accordance with product 

certification criteria adopted by the 

Secretary, and to include an electronic 

prescribing component that complies 

with the electronic prescribing 

standards established by the Secretary 

for the Part D program, to the extent 

those standards are not incorporated 

into the product certification criteria; 

and 

• Including the same conditions 

proposed for the pre-interoperability 

safe harbor, with the following 

differences: (1) Some additional 

software applications might be 

included, so long as electronic health 

records and electronic prescribing 

remained core functions; (2) additional 

categories of donors and recipients 

might be included; (3) specific selection 

criteria might be included to identify 

acceptable methods for selecting 

recipients; and (4) there might be a 

potentially larger limit on the value of 

protected technology. 

When we issued the proposed 

rulemaking, we indicated that, given the 


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number of important variables and the 

inherent risk of fraud and abuse 

typically posed by gifts of items and 

services to potential referral sources, we 

did not have sufficient information to 

draft safe harbor regulatory language. 

We proposed and solicited extensive 

public comment on the scope and 

conditions for the electronic health 

records arrangements safe harbors. 

Summary of the Final Rule 

Consistent with the majority of public 

comments, we have finalized one safe 

harbor for arrangements involving 

electronic health records that, 

effectively, combines the pre- and postinteroperability proposals. Separate safe 

harbors are no longer necessary, in part, 

because criteria for product certification 

are available. The final safe harbor 

protects arrangements involving 

electronic health records software or 

information technology and training 

services necessary and used 

predominantly to create, maintain, 

transmit, or receive electronic health 

records. In many respects, the provision 

of electronic health records technology 

to physicians and others poses greater 

risk of fraud or abuse than the provision 

of electronic prescribing technology; 

electronic health records technology is 

inherently more valuable to physicians 

and other recipients in terms of actual 

cost, avoided overhead, and 

administrative expenses of an office 

practice. The final safe harbor 

conditions, in combination, should 

promote the important national policy 

goal of open, interconnected, 

interoperable electronic health records 

systems that improve the quality of 

patient care and efficiency in the 

delivery of health care to patients, 

without protecting arrangements that 

pose an undue risk of fraud and abuse. 

In summary, the final safe harbor 

includes the following conditions: 

• The safe harbor protects transfers of 

electronic health records software or 

information technology and training 

services necessary and used 

predominantly to create, maintain, 

transmit, or receive electronic health 

records (provided all safe harbor 

conditions are satisfied). We have not 

included hardware. We have clarified 

that the safe harbor covers ‘‘information 

technology services,’’ which we 

interpret as including, for example, 

connectivity and maintenance services. 

We interpret ‘‘training services’’ to 

include help desk and other similar 

support. We have eliminated the 

language that required the training 

services to be ‘‘directly related’’ because 

it was superfluous in light of the 

language requiring the training services 

to be ‘‘necessary and used’’ for 

electronic health records purposes. 

• We have not adopted the proposal 

that the protected technology be used 

solely for electronic health records 

purposes. Instead, we have included a 

condition making clear that electronic 

health records purposes must be 

predominant. Thus, depending on the 

circumstances, some software that 

relates to patient administration, 

scheduling functions, and billing and 

clinical support can be included. We 

have expressly excluded the provision 

of any technology used primarily to 

conduct personal business or business 

unrelated to the recipient’s clinical 

practice or clinical operations, as well 

as the provision of staff to the recipient 

or the recipient’s office. 

• In order to qualify for protection, at 

the time of donation the software must 

be interoperable. Products that are 

certified by a certifying body recognized 

by the Secretary will be deemed 

interoperable under circumstances set 

forth in the regulation. Software must 

contain an electronic prescribing 

capability, either through an electronic 

prescribing component or the ability to 

interface with the recipient’s existing 

electronic prescribing system which 

complies with the foundation standards 

set forth in 70 FR 67568 (November 7, 

2005) and other final electronic 

prescribing standards, when adopted. 

Moreover, the donor (or any agent) must 

not take any steps to disable the 

interoperability of any technology or 

otherwise impose barriers to 

compatibility of the donated technology 

with other technology. 

• The final safe harbor protects 

arrangements involving donors that are 

(i) health plans or (ii) individuals or 

entities that provide covered services 

and submit claims or requests for 

payment to a Federal health care 

program, and recipients that are 

individuals or entities engaged in the 

delivery of health care. 

• The final rule clarifies that donors 

cannot select recipients in a manner that 

directly takes into account the volume 

or value of referrals or other business 

generated between the parties. However, 

donors may select recipients of donated 

electronic health records technology 

using means that do not directly take 

into account the volume or value of 

referrals from the recipient or other 

business generated between the parties. 

The final rule sets forth examples of 

specific criteria that will be deemed to 

meet this condition. 

• The final rule does not limit the 

aggregate value of technology that may 

qualify for safe harbor protection. It 

does contain a requirement that the 

recipient pay 15 percent of the donor’s 

costs. No portion of this contribution 

may be funded by the donor (or any 

affiliate of the donor). 

• The final safe harbor adopts the 

proposed documentation requirements 

and includes a requirement that the 

donor’s costs and recipient’s 

contribution be documented in the 

written agreement between the parties. 

The final safe harbor does not require 

that recipients certify that they do not 

already possess equivalent technology. 

The final safe harbor precludes 

protection if the donor knows that the 

recipient already has equivalent 

technology or acts in deliberate 

ignorance or reckless disregard of that 

fact. The final safe harbor permits 

documentation through crossreferencing or incorporation of other 

agreements between the parties. 

• The final safe harbor adopts the 

proposed conditions related to use of 

the technology by all payors; nonsolicitation by recipients; and the bar on 

cost shifting to Federal programs. 

• The final safe harbor sunsets on 

December 31, 2013. 

General Comments 

Comment: Several commenters urged 

that OIG set out specific regulatory 

language for an electronic health records 

safe harbor. Some commenters believed 

that the lack of specific proposed safe 

harbor regulatory text meant that we 

had not proposed safe harbors. 

Response: These commenters 

misconstrued our proposed rulemaking. 

Nothing in the Administrative 

Procedure Act governing notice and 

comment rulemaking requires an agency 

to propose specific regulatory text; 

rather, the notice shall include ‘‘either 

the terms or substance of the proposed 

rule or a description of the subjects and 

issues involved.’’ 55 U.S.C. 553(b)(3). 

We proposed safe harbors for electronic 

health records technology, as described 

in detail in the preamble to our 

proposed rulemaking. Virtually all 

commenters responded to these 

proposals. The final regulations set forth 

specific regulatory language for a new 

safe harbor at § 1001.952(y). 

Comment: Most commenters 

expressed concern with the pre- and 

post-interoperability bifurcated 

approach to the safe harbors, asserting 

that a bifurcated process was not 

necessary, too confusing, and contrary 

to the goal of achieving widespread 

adoption of health information 

technology. These commenters urged 

OIG to abandon the bifurcated approach 

and publish one final safe harbor for 

remuneration in the form of electronic 

health records technology. Commenters 


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urged OIG and CMS to adopt similar 

approaches to a post-interoperability 

safe harbor under the anti-kickback 

statute and exception under the 

physician self-referral law. However, the 

commenters believed that the product 

certification provision should be 

omitted at this time and added if 

necessary when all of the product 

certification standards have been 

developed. 

Response: We have finalized one safe 

harbor for arrangements involving 

electronic health records software or 

information technology and training 

services. We have coordinated with 

CMS to ensure as much consistency 

between the two sets of regulations as 

possible, given the underlying 

differences in the two statutory 

schemes. 

Comment: Some commenters 

suggested that the general concept of 

interoperability should be incorporated 

into the pre-interoperability safe harbor, 

even if product certification is not 

required. Many commenters stated that 

encouraging electronic health records 

arrangements before interoperability 

standards would be bad public policy. 

Some commenters believed that a 

product certification process that would 

include interoperability standards is 

already underway and within the 

timeframe for this rulemaking. Others 

expressed that OIG should either not 

wait until certification standards are 

adopted before finalizing the postinteroperability safe harbor or should 

not finalize either of the safe harbors 

until the certification standards are 

adopted. One commenter expressed that 

since timetables for the safe harbor 

rulemaking and for the certification 

standards were not known, OIG should 

consider writing the regulation from the 

pre-interoperability perspective and 

should address the post-interoperability 

era in the future. 

Response: We agree with the 

commenters that a bifurcated approach 

is not necessary. We are not 

promulgating separate safe harbors. The 

industry has made considerable 

progress in developing certification 

criteria for electronic health records 

products within a very short time. One 

certification organization has already 

completed an initial set of certification 

criteria for ambulatory electronic health 

records. In some cases, there may be 

products for which no certification 

standards are available. To address this 

situation and to ensure interoperability 

to the extent possible, the final safe 

harbor requires that donated software be 

interoperable and bars donors or their 

agents from taking any actions to disable 

or limit interoperability. This latter 

condition also protects against donors 

who may improperly attempt to create 

closed or limited electronic health 

records systems by offering technology 

that functionally or practically locks in 

business for the donor. 

Comment: Some commenters 

suggested that early adopters of 

electronic health records technology 

should be offered incentives or rewards, 

because otherwise physicians or other 

recipients might delay investing their 

own funds in electronic health records 

systems while waiting for a donor to 

offer them free technology. The 

commenters stated that this delay would 

have a detrimental effect on the 

adoption of electronic health records 

technology. 

Response: It is unclear what types of 

incentives or rewards the commenters 

are requesting. We note that the safe 

harbor does not provide incentives or 

rewards for early adopters, nor would it 

be appropriate for a safe harbor to do so; 

rather, the safe harbor protects the 

transfer of certain electronic health 

records technology when all conditions 

of the safe harbor are satisfied. The safe 

harbor would not protect any cash 

reimbursement paid to recipients for 

costs they incurred in adopting 

technology. 

Comment: One commenter requested 

that OIG and CMS coordinate with the 

Internal Revenue Service (IRS) to 

provide guidance through an IRS 

revenue ruling publication to alleviate 

tax exemption concerns. 

Response: This comment addresses a 

matter outside the scope of this 

rulemaking. 

1. Protected Nonmonetary 

Remuneration 

a. ‘‘Electronic Health Record’’

Comment: We requested comments on 

how to define ‘‘electronic health 

record.’’ One commenter suggested that 

electronic health record be defined as 

electronically originated and/or 

maintained clinical health information, 

that may incorporate data derived from 

multiple sources and that replaces the 

paper record as the primary source of 

patient information. Another 

commenter suggested that OIG protect 

any interoperable component or module 

of an electronic health record. A third 

commenter suggested that ‘‘electronic 

health records’’ be defined for safe 

harbor purposes to accomplish two 

objectives: (1) To promote a connected 

system of electronic healthcare 

information available to all doctors and 

patients whenever and wherever 

possible and (2) to promote the 

collection of quality and outcome 

measures to facilitate pay-forperformance payment methodologies. 

This commenter pointed to the 

Medicare Payment Advisory 

Commission (MedPAC) description of 

electronic health record clinical 

information technology and suggested 

that we define ‘‘electronic health 

record’’ to include applications that 

permit the following functions: Tracking 

patients’ care over time; allowing 

physicians to order medications, 

laboratory work, and other tests 

electronically and access test results; 

providing alerts and reminders for 

physicians; and producing and 

transmitting prescriptions 

electronically. See MedPac Report to the 

Congress Medicare Payment Policy at 

206 (2005) (available at http:// 

www.medpac.gov/publications/ 

congressional_reports/ 

Mar05_EntireReport.pdf.) A commenter 

requested that ‘‘electronic health 

records’’ be defined broadly enough to 

include applications that capture 

clinical trial data. Another commenter 

did not think it was in the best interest 

of the industry for OIG to propose such 

a definition at this time. 

Response: For the purpose of this 

rulemaking, we are adopting a broad 

definition of ‘‘electronic health record.’’

An electronic health record will be 

defined as: ‘‘A repository of consumer 

health status information in computer 

processable form used for clinical 

diagnosis and treatment for a broad 

array of clinical conditions.’’ We are 

adopting a broad definition consistent 

with our goal of encouraging 

widespread adoption of electronic 

health records technology. 

Comment: A commenter stated that 

the term ‘‘electronic health record,’’ as 

used in the proposed rule, is 

inconsistent with the same terminology 

when used within the information 

technology industry, and is therefore 

confusing. The commenter suggested 

that we might have meant to use the 

term ‘‘electronic medical record.’’

According to the commenter, an 

‘‘electronic health record’’ is commonly 

used to describe the broad concept of 

the total health care data that exists 

regarding an individual within an 

electronic universe (including, for 

example, the patient’s personal health 

record, medication history stored by an 

insurance plan, electronic imaging 

results stored at a hospital, etc.), 

whereas an ‘‘electronic medical record’’

typically refers to patient-centric, 

electronically maintained information 

about an individual’s health status and 

care that focuses on tasks and events 

related to patient care, is optimized for 


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use by a physician, and relates to care 

within a single clinical delivery system. 

Response: We recognize that there are 

several ways in which information 

technology terms are used, including 

the terminology ‘‘electronic health 

record’’ and ‘‘electronic medical 

record.’’ For purposes of this safe 

harbor, we have opted to use the term 

‘‘electronic health record,’’ and we have 

included a definition of ‘‘electronic 

health record’’ in this final rule. 

b. Necessary 

i. Technical and Functional Equivalency 

We proposed requiring the recipient 

to certify that the items and services to 

be provided are not technically or 

functionally equivalent to items or 

services the recipient already possesses 

or has obtained. The certification would 

have needed to be updated prior to the 

provision of any necessary upgrades or 

items and services not reflected in the 

original certifications. We expressed our 

concern that the certification process 

would be ineffective as a safeguard 

against fraud and abuse if it were a mere 

formality or if recipients simply 

executed a form certification provided 

by a donor. Therefore, we proposed that 

the donor must not have actual 

knowledge of, and not act in reckless 

disregard or deliberate ignorance of, the 

fact that the recipient possessed or had 

obtained items and services that were 

technically or functionally equivalent to 

those donated by the donor and that the 

recipient would be protected only if the 

certification were truthful. 

Comment: Several commenters 

requested further clarification regarding 

the meaning of ‘‘technically or 

functionally equivalent’’ and the 

meaning of ‘‘significantly enhance the 

functionality’’ as those terms were used 

in the proposed rulemaking. Other 

commenters expressed concerns about 

the requirement, asserting that it would 

deter recipients who are not technology 

experts from adopting health 

information technology, and might 

result in recipients hiring costly 

technology consultants to evaluate their 

existing systems. A commenter 

expressed concern that the safe harbor 

not hinder the goals of widespread 

adoption of electronic health records by, 

for example, excluding from protection 

technology that would standardize the 

technology used by all recipients, or 

updated, user-friendly technology that 

would replace outdated, outmoded, or 

unusable technology. For these reasons, 

several commenters argued that 

technical and functional equivalency 

was not an appropriate or workable 

standard for assessing whether donated 

items and services are necessary and 

that, accordingly, the requirement 

should not be adopted. 

Other commenters suggested 

modifications to the proposed 

regulations. One commenter suggested 

that hospitals should incorporate 

inquiries regarding the technological 

items and services physicians possess 

into the surveys physicians must 

complete to acquire and maintain 

physician privileges. Another suggested 

that any costs associated with the 

certification process should be included 

as part of the services offered by the 

donor. A few commenters suggested that 

the Government should provide 

financial assistance in evaluating the 

existing technology, while another 

commenter proposed that CMS publish 

guidelines for technological equivalence 

upon which all donors and recipients 

could rely. Some commenters urged that 

the certification requirement 

incorporate a ‘‘good faith’’ standard for 

compliance, while other commenters 

expressed concern that donors would 

not be in a position to evaluate the 

technology already possessed by 

potential recipients and, therefore, that 

safe harbor protection for donors should 

not hinge on the recipient’s 

certification. 

Another commenter requested that 

OIG provide ‘‘templates’’ for the written 

certification to ensure a simple and 

transparent certification process. One 

commenter expressed concern that a 

requirement for ongoing certification to 

account for upgrades or new software, 

hardware, or services would create an 

unnecessary burden. Another 

commenter proposed that there should 

be one certification required once final 

interoperability standards for all health 

information technology components are 

finalized. 

Response: Having reviewed the public 

comments, we have concluded that our 

proposal to require recipients to certify 

in writing that they do not possess 

equivalent technology might become 

unnecessarily burdensome. We are not 

requiring a written certification. The 

final safe harbor requires that protected 

donations be limited to electronic health 

records software or information 

technology and training services that are 

necessary and used predominantly to 

create, maintain, transmit, or receive 

electronic health records. We do not 

believe software and services are 

‘‘necessary’’ if the recipient already 

possesses the equivalent software or 

services. The provision of equivalent 

items and services poses a heightened 

risk of abuse, since such arrangements 

potentially confer independent value on 

the recipient (i.e., the value of the 

existing items and services that might be 

put to other uses) unrelated to the need 

for electronic health records technology. 

Thus, if a donor knows that the 

recipient already possesses the 

equivalent items or services, or acts in 

deliberate ignorance or reckless 

disregard of that fact, the donor will not 

be protected by the safe harbor. Prudent 

donors may want to make reasonable 

inquiries to potential recipients and 

document the communications. We do 

not believe this requirement necessitates 

the hiring of technical experts by either 

the donor or recipient. The ‘‘necessary’’

requirement in the final safe harbor 

would not preclude upgrades of items or 

services that enhance the functionality 

of the items or services, including, for 

example, upgrades that make software 

more user-friendly or current. Nor 

would it preclude items and services 

that result in standardization of systems 

among donors and recipients, provided 

that the standardization enhances the 

functionality of the electronic health 

records system (and any software is 

interoperable). 

Comment: A commenter suggested 

that, instead of including a recipient 

certification, as we proposed, the 

written agreement between the donor 

and recipient could affirm their intent to 

comply with the anti-kickback statute 

and relevant regulations, and the parties 

could sign a statement that their 

business transactions do not take into 

account the volume or value of referrals 

or business generated between the 

parties. 

Response: We are not adopting the 

commenter’s suggestion. While the 

suggested affirmation and statements 

may be useful to the parties, they are 

necessarily self-serving and offer little, 

if any, protection against fraud and 

abuse. We note that the critical inquiry 

under the anti-kickback statute is not 

what terms appear on the face of an 

agreement but how the arrangement is 

actually conducted. It is not sufficient 

for safe harbor purposes for 

documentation to contain facially the 

correct terms; the underlying 

arrangement itself must meet all the safe 

harbor conditions. 

Comment: Many commenters 

requested further clarification of OIG’s 

concern about the risk of recipients 

intentionally divesting themselves of 

technically or functionally equivalent 

technology that they already possess or 

have obtained in order to shift costs to 

the donor. See 70 FR 59018. These 

commenters expressed the opinion that 

recipients would not intentionally 

divest themselves of health information 

technology given the low adoption rate 

of health information technology and 


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the time and resource commitment 

necessary to implement and maintain a 

health information technology system. 

Response: When a party that desires 

referrals assumes costs that are 

otherwise the obligation of a party in a 

position to generate referrals, the party 

assuming the costs offers something of 

value to the party with the referrals. 

This cost shifting can occur in many 

ways, including, without limitation, 

shifting the costs of staff, office space, 

or equipment. In the context of 

electronic health records technology, 

this cost-shifting might occur in 

connection with, by way of example, 

ongoing maintenance and help desk 

support for previously purchased 

electronic health records systems. 

Likewise, a recipient might shift costs 

by moving previously purchased 

technology to other uses and replacing 

it with equivalent new technology 

obtained from a donor. We solicited 

comments on how we might address 

this risk. 

Having reviewed the public 

comments, we are not persuaded that 

this risk is particularly reduced in the 

context of electronic health records 

technology. Nonetheless, we believe 

that the totality of final safe harbor 

conditions, including, for example, the 

cost sharing requirement and the sunset 

provision, should adequately address 

our concerns. We are not including any 

separate condition specifically 

addressing divestiture of technology. 

Comment: One commenter requested 

that OIG clarify that the term 

‘‘necessary’’ would not preclude the 

provision of outpatient-focused (also 

referred to as ‘‘ambulatory-focused’’) 

electronic health records software to 

recipients that may already have access 

through the internet or otherwise to an 

inpatient-focused electronic health 

records systems. 

Response: The final rule does not 

preclude the provision of outpatient or 

ambulatory electronic health records 

software to recipients that already have 

access to inpatient-focused systems. 

ii. Covered Technology 

We proposed to protect software and 

directly related training services that are 

necessary and used solely to receive, 

transmit, and maintain electronic health 

records of the donor’s or recipient’s 

patients, provided that the software 

includes an electronic prescribing 

component. Importantly, we stated our 

intention to protect systems that 

improve patient care rather than 

systems comprised solely or primarily 

of technology that is incidental to the 

core functions of electronic prescribing 

and electronic health records. 

Comment: Some commenters asked 

whether our proposal to protect certain 

technology necessary and used to 

‘‘receive, transmit, and maintain’’

electronic health records would include 

technology used to develop, implement, 

operate, facilitate, produce, and 

supplement electronic health records. 

Response: We intended that the final 

rule would encompass the types of uses 

described by the commenters. To make 

this intent clear, we have clarified the 

final rule to provide that the protected 

technology must be necessary and used 

predominantly to ‘‘create, maintain, 

transmit, or receive’’ electronic health 

records. 

Comment: Most commenters believed 

that the proposed scope of the protected 

donation was too narrow. Commenters 

variously suggested that the safe harbor 

should also protect transfers of 

hardware, operating software, 

connectivity items, support services, 

secure messaging, storage devices, 

clinical decision support technology, 

services related to training and ongoing 

maintenance, rights, licenses, and 

intellectual property, as well as 

interfaces and translation software to 

allow recipient offices to exchange data 

with hospital systems, all of which the 

commenters considered necessary for a 

fully functioning electronic health 

records system. 

Some commenters encouraged OIG to 

exclude from protection hardware and 

broadband wireless Internet 

connectivity and to tailor the safe harbor 

protection narrowly to cover software, 

training, and information technology 

support services. One commenter 

opined that ongoing support, such as 

help desk support, could pose a risk of 

abuse, because the recipient would 

become dependent on the donor for the 

help desk support, and might feel 

obligated to refer to the donor to ensure 

continuation of that support. This 

commenter suggested that we protect 

initial, start-up support services, but not 

long-term, ongoing system support. A 

few commenters suggested that the 

scope of support services, training, and 

other items and services should be a 

defined contribution not to exceed 365 

person-days. 

Several commenters urged OIG to 

protect arrangements involving the 

donation of billing software and other 

software for administrative functions, 

such as registration and patient 

scheduling, because much of the ‘‘return 

on investment’’ (i.e., value) for 

physicians who incorporate electronic 

health records systems into their 

practices is the integration of clinical 

and administrative systems. 

Commenters noted that the scope of the 

safe harbor should account for the fact 

that the products on the market 

increasingly integrate administrative 

functions with the clinical electronic 

health records functions. One 

commenter suggested that the safe 

harbor should at least prohibit the 

donation of technology that is unrelated 

to the actual electronic health records 

software, such as technology related to 

office administration. The commenter 

requested that the safe harbor protect 

integrated bundles of applications that 

include an electronic health records 

component, provided that the recipient 

pays for the technology that is unrelated 

to the electronic health records 

software. Another commenter suggested 

that the safe harbor should not protect 

clearly separable administrative 

software (e.g., billing, coding, and 

practice management software), but 

should protect those elements of an 

electronic health records system that 

incidentally facilitate administrative 

functions, such as software that links to 

diagnosis codes for billing purposes. 

The commenter suggested that dual 

functions that support patient care and 

administrative functions are valuable to 

the physician and a driving force behind 

adoption of electronic health records 

systems. 

Response: We have carefully 

considered the comments in light of our 

intention to promote the adoption of 

electronic health records without undue 

risk of fraud and abuse. The final rule 

protects electronic health records 

software or information technology and 

training services necessary and used 

predominantly to create, maintain, 

transmit, or receive electronic health 

records. 

To ensure that the safe harbor is only 

available for software, information 

technology and training services that are 

closely related to electronic health 

records, the safe harbor provides that 

electronic health records functions must 

be predominant. The core functionality 

of the technology must be the creation, 

maintenance, transmission, or receipt of 

individual patients’ electronic health 

records. There must be an electronic 

prescribing component. While 

electronic health records purposes must 

be predominant, the safe harbor protects 

arrangements involving software 

packages that include other 

functionality related to the care and 

treatment of individual patients (e.g., 

patient administration, scheduling 

functions, billing, and clinical support). 

This condition reflects the fact that it is 

common for electronic health records 

software to be integrated with other 

features. 


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Further, we interpret ‘‘software, 

information technology and training 

services necessary and used 

predominantly’’ for electronic health 

records purposes to include the 

following, by way of example: Interface 

and translation software; rights, 

licenses, and intellectual property 

related to electronic health records 

software; connectivity services, 

including broadband and wireless 

internet services; clinical support and 

information services related to patient 

care (but not separate research or 

marketing support services); 

maintenance services; secure messaging 

(e.g., permitting physicians to 

communicate with patients through 

electronic messaging); and training and 

support services (such as access to help 

desk services). 

We interpret the scope of covered 

electronic health records technology to 

exclude: Hardware (and operating 

software that makes the hardware 

function); storage devices; software with 

core functionality other than electronic 

health records (e.g., human resources or 

payroll software or software packages 

focused primarily on practice 

management or billing); or items or 

services used by a recipient primarily to 

conduct personal business or business 

unrelated to the recipient’s clinical 

practice or clinical operations. Further, 

the safe harbor does not protect the 

provision of staff to recipients or their 

offices. For example, the provision of 

staff to transfer paper records to the 

electronic format would not be 

protected. 

While we share the concerns of those 

commenters worried that ongoing help 

desk or other assistance could create 

long-term ties between referral seekers 

and referral sources, we believe the cost 

sharing, interoperability, and sunset 

provisions, among others, should 

address these concerns. We do not 

believe it would be feasible to set 

specific temporal limits on such 

services or specific aspects of such 

services. (We note that, in the context of 

the electronic prescribing safe harbor at 

§ 1001.952(x), the risks associated with 

long-term transfers of remuneration are 

mitigated by the narrower scope of the 

covered technology and the ‘‘used 

solely’’ restriction.) 

Comment: With respect to Internet 

connectivity services, some commenters 

suggested that donations for 

connectivity should be limited to any 

necessary devices for connectivity and 

technical support for selecting and 

installing the appropriate connectivity 

services, but should not include 

connectivity fees, which should be an 

ongoing expense of the recipient. Other 

commenters suggested that covered 

technology should include ‘‘T1’’ lines or 

other enhanced broadband connectivity 

(including connectivity needed to 

transfer medical images and EKGs 

(especially in rural areas)), routers to 

speed download times, secure 

connections and messaging, ongoing 

maintenance and support, and 

interfaces. 

Response: The final safe harbor 

protects the donation of all forms of 

connectivity services. We believe the 

choice of appropriate connectivity 

services is an individual determination 

best made by the donors and recipients 

given their specific circumstances. We 

note that the cost sharing requirement of 

§ 1001.952(y)(11) will apply to these 

services, including connectivity fees. 

Because hardware is not protected 

remuneration under the safe harbor, 

routers or modems necessary to access 

or enhance connectivity would not be 

protected. 

Comment: A commenter asked for 

further clarification on whether the 

donation of an electronic health records 

system operating within an 

‘‘Application Service Provider’’ model 

(a business model that provides 

computer-based services over a 

network) would be covered by the safe 

harbors. 

Response: Subject to the cost sharing 

requirement and other conditions of the 

final safe harbor, the donation of an 

electronic health records system 

operating within an ‘‘Application 

Service Provider’’ model would be 

considered covered technology. 

Comment: A few commenters 

requested that the final rule require 

donors to provide data-migration 

services to a recipient if the recipient 

chooses to abandon the donated 

electronic health record system and 

purchase its own electronic health 

record system. 

Response: We do not believe it would 

be appropriate to require donors to 

provide data migration or any other 

specific service to recipients that choose 

to switch electronic health records 

systems. Donors may provide services if 

they wish, so long as the arrangement 

fits in the safe harbor or otherwise 

complies with the anti-kickback statute. 

We note that, to the extent the data 

migration services involve the provision 

of staff to the recipient’s office in order 

to transfer the data, the services would 

not be protected. 

Comment: A commenter 

recommended that the safe harbor 

specifically protect the provision of 

patient portal software that enables 

patients to maintain on-line personal 

medical records, including scheduling 

functions. 

Response: Nothing in this final safe 

harbor precludes protection for patient 

portal software if it meets all safe harbor 

conditions. 

Comment: Some commenters urged us 

to remove the proposed requirement 

that an electronic health records system 

include an electronic prescribing 

component, because such a requirement 

may stifle investment in electronic 

health records technology in situations 

where electronic prescribing is not 

considered a significant need. These 

commenters suggested that patients 

would most benefit if donors are 

permitted to first adopt electronic health 

records technology and then add 

electronic prescribing. Other 

commenters supported making an 

electronic prescribing component a 

mandatory part of the donated 

electronic health record. 

Response: Nothing in this safe harbor 

rule prevents parties from adopting any 

particular form of technology. However, 

to qualify for safe harbor protection for 

arrangements in which the donor 

provides electronic health records 

technology to actual or potential referral 

sources, we are requiring that the 

donated electronic health records 

system include an electronic prescribing 

capability, either through an electronic 

prescribing component or the ability to 

interface with the recipient’s existing 

electronic prescribing system that meets 

the final standards adopted by the 

Secretary. We are including this 

requirement, in part, because of the 

critical importance of electronic 

prescribing in producing the overall 

benefits of health information 

technology, as evidenced by section 101 

of the MMA. It is our understanding that 

most electronic health records systems 

already include an electronic 

prescribing component. 

Comment: We solicited comments on 

whether the safe harbors should require 

that electronic health records software 

include a computerized physician order 

entry (CPOE) component. Many 

commenters said that, without either 

agreed upon standards or product 

criteria, a CPOE component should not 

be required. These commenters noted 

that CPOE and electronic prescribing 

functionalities can be quite similar and 

may be redundant. These commenters 

were concerned that mandating 

implementation of CPOE technology 

along with electronic health records 

software could deter development of 

either system. Another commenter 

noted that most of the off-the-shelf 

generic CPOE programs have proven 

ineffective to date. Some commenters 


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supported permitting CPOE as part of 

the electronic health record software, so 

long as it is not a particular type of 

CPOE. 

Response: We are persuaded not to 

require that safe harbored transfers of 

electronic health records technology 

include a CPOE component. We note 

that nothing in this safe harbor 

mandates the implementation of any 

particular technology or functions. 

Comment: Most commenters opposed 

our proposal to require that electronic 

health record software be compatible 

with Public Health Information Network 

preparedness standards or BioSense 

standards in order to qualify for safe 

harbor protection. These commenters 

pointed out that there is currently no 

industry consensus on preparedness 

standards, nor are there product criteria 

established for these programs. These 

commenters were concerned that 

clinicians and patients might be 

alarmed by the idea of clinician systems 

being linked to Government systems for 

Biosurveillance purposes. 

Response: We have not included this 

requirement in the final safe harbor. 

2. Interoperability 

We proposed two types of conditions 

that would make compatibility and 

interoperability of donated technology 

key features of protected arrangements. 

These features would encourage the 

adoption of open, interconnected, 

interoperable systems and thereby 

reduce the risk of fraud and abuse. First, 

we proposed that once interoperability 

criteria had been recognized, electronic 

health records technology would need 

to be certified in accordance with 

standards adopted by the Secretary. 

Second, we proposed that donors (or 

their agents) not limit or restrict the use 

of the technology with other electronic 

prescription or health records systems, 

or otherwise impose barriers to 

compatibility. 

Comment: Many commenters 

supported OIG’s proposal to require all 

donations to meet approved 

functionality, interoperability, and 

security certification criteria. Some 

commenters supported the standards of 

the Certification Commission for 

Healthcare Information Technology 

(CCHIT). One commenter suggested that 

we measure interoperability based on 

accepted, consensus-driven standards 

that are already in place, such as the 

Electronic Health Record-Lab 

Interoperability and Connectivity 

Standards or other interoperability 

standards adopted by the Federal 

Government as part of the Consolidated 

Health Informatics (CHI) initiative. See 

www.hhs.gov/healthit/chi. 

Some commenters expressed concern 

that clinicians who adopt health 

information technology prior to the 

existence of final certification standards 

would be unfairly penalized. These 

commenters were also concerned that 

some early adoption arrangements 

might be chilled where certification 

standards are not yet available. These 

commenters requested that we consider 

‘‘grandfathering’’ clinicians whose 

existing health information technology 

systems are not compliant with the 

certification standards by permitting 

them a one-time opportunity to upgrade 

their systems to be compliant. As an 

alternative, a few commenters 

recommended that we condition the 

ongoing use of the safe harbor on the 

donated software being capable of 

exchanging health care information in 

compliance with applicable standards 

once adopted by the Secretary and on 

no action being taken that would pose 

a barrier to the information exchange. 

Response: Having considered the 

options, and consistent with 

Department policy, we have concluded 

that software will qualify for safe harbor 

protection if it is interoperable as 

defined in this final rule (discussed 

further below). Software will be deemed 

to be interoperable if it is certified by a 

certifying body recognized by the 

Secretary. Nothing in the final rule 

precludes donors from providing 

recipients with upgrades to software 

that meet the definition of 

‘‘interoperable’’ in § 1001.952(y) or 

would make the software comply with 

then-existing certification standards. As 

noted below, we are including a 

provision requiring that donors refrain 

from impeding interoperability. 

Comment: We indicated in the 

proposed rulemaking that we were 

considering defining the term 

‘‘interoperable’’ for purposes of the safe 

harbor to mean ‘‘the ability of different 

operating and software systems, 

applications, and networks to 

communicate and exchange data in an 

accurate, secure, effective, useful, and 

consistent manner.’’ See 44 U.S.C. 

3601(6) (pertaining to the management 

and promotion of electronic 

Government services). One commenter 

agreed with this proposed definition. 

Another commenter suggested that we 

incorporate the definition of 

interoperability that has been 

promulgated by CCHIT. Another 

commenter suggested that we adopt the 

definition developed by the National 

Alliance for Health Information 

Technology: ‘‘The ability of different 

information technology systems and 

software applications to communicate, 

to exchange data accurately, effectively, 

and consistently, and to use the 

information that has been exchanged.’’

One commenter suggested that the 

definition of interoperability be flexible 

to adapt to evolving industry standards. 

Several commenters suggested defining 

interoperability as ‘‘the uniform and 

efficient movement of electronic 

healthcare data from one system to 

another, such that the clinical or 

operational purpose and meaning of the 

data is preserved and unaltered.’’ One 

commenter opposed any definition of 

interoperability that would require a 

donor to support electronic 

transmissions from technology supplied 

by other vendors or to host applications 

accessible by software supplied by other 

vendors. 

Response: Having reviewed the public 

comments and upon further 

consideration, we have crafted a 

definition of ‘‘interoperable’’ for 

purposes of the safe harbor that 

combines elements of our original 

proposal and the suggestions of the 

commenters. Under the final safe 

harbor, ‘‘interoperable’’ is defined to 

mean that, at the time of the donation, 

the software is able to (i) communicate 

and exchange data accurately, 

effectively, securely, and consistently 

with different information technology 

systems, software applications, and 

networks, in various settings, and (ii) 

exchange data such that the clinical or 

operational purpose and meaning of the 

data are preserved and unaltered. This 

interoperability must apply in various 

settings, meaning that the software must 

be capable of being interoperable with 

respect to systems, applications, and 

networks that are both internal and 

external to the donor’s or recipient’s 

systems, applications, and networks. In 

other words, software will not be 

considered interoperable if it is capable 

of communicating or exchanging data 

only within a limited health care system 

or community. 

We believe this definition reflects our 

intent to protect only those 

arrangements that will foster open, 

interconnected, interoperable electronic 

health records systems that help 

improve the quality of patient care and 

efficiency in the delivery of health care 

to patients, without undue risk that 

donors might use arrangements to lock 

in referrals from recipients. 

We are mindful that the ability of 

software to be interoperable is evolving 

as technology develops. In assessing 

whether software is interoperable, we 

believe the appropriate inquiry is 

whether the software is as interoperable 

as feasible given the prevailing state of 

technology at the time the items or 

services are provided to the recipient. 


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Parties should have a reasonable basis 

for determining that software is 

interoperable. We believe it would be 

appropriate—and indeed advisable—for 

parties to consult any standards and 

criteria related to interoperability 

recognized by the Department. 

Compliance with these standards and 

criteria will provide greater certainty to 

donors and recipients that products 

meet the interoperability requirement 

and may be relevant in any enforcement 

activities. We note further that parties 

wishing to avoid any uncertainty can 

avail themselves of the ‘‘deeming’’

provision, which provides that software 

that is certified by a body recognized by 

the Secretary will be deemed 

interoperable for purposes of the safe 

harbor. In order to ensure 

interoperability, products must have an 

up-to-date certification at the time of 

donation, and we are requiring that, to 

meet the deeming provision, the 

software must have been certified 

within 12 months prior to the date of 

the donation. 

We are including a condition that the 

donor (or any person on the donor’s 

behalf) must not take any actions to 

limit or restrict the use, compatibility, 

or interoperability of the items and 

services with other electronic 

prescribing or electronic health records 

technology. We believe this language 

clearly reflects our intent that donors 

should not limit or restrict the use, 

compatibility, or interoperability of 

donated technology. We note that 

compliance with this condition in 

§ 1001.952(y)(3) is a separate 

requirement from compliance with 

§ 1001.952(y)(2), which requires that 

products must be interoperable and will 

be deemed interoperable if a certifying 

body recognized by the Secretary has 

certified the software within no more 

than 12 months prior to the date it is 

provided to the recipient. 

If a donor takes actions that would 

cause a certified product to fall out of 

compliance with the interoperability 

standards that apply to the certified 

product, we would consider that to be 

an action to limit or restrict the use, 

compatibility, or interoperability of the 

items or services for purposes of 

§ 1001.952(y)(3). We are not persuaded 

to protect arrangements where use, 

compatibility, or interoperability is 

limited to the products of specific 

vendors; to the contrary, we believe that 

inherent in the concept of 

interoperability is that technology can 

communicate with products of other 

vendors. 

Comment: Many commenters 

supported the proposed prohibition 

against donors or their agents taking any 

actions to disable or limit 

interoperability or otherwise impose 

barriers to compatibility of the donated 

technology with other technology, 

including technology owned or operated 

by competing providers and suppliers. 

Response: As explained above, we 

have included this requirement in the 

final safe harbor at § 1001.952(y)(3). We 

believe this condition will help ensure 

that transfers of health information 

technology will further the policy goal 

of fully interoperable health information 

systems and will not be misused to steer 

business to the donor. 

3. Protected Donors 

We proposed to limit the scope of 

protected donors under § 1001.952(y) to 

hospitals, group practices, PDP 

sponsors, and MA organizations, 

consistent with the MMA-mandated 

donors for the electronic prescribing 

safe harbor. 

Comment: Most commenters said that 

the proposed scope of potential donors 

was too limited. Commenters variously 

suggested that the protected donors 

include some or all of the following 

categories: Nursing facilities; assisted 

living and residential care facilities; 

intermediate care facilities for persons 

with mental retardation; mental health 

facilities; organizations providing 

population health management services 

(such as disease and care management 

programs and services); all components 

of an Integrated Delivery System (IDS) 

(including network providers or other 

entities that operate, support or manage 

network providers); clinical 

laboratories; pharmaceutical 

manufacturers; durable medical 

equipment suppliers; radiation oncology 

centers; community health centers; 

Federally Qualified Health Centers 

(FQHCs), physician-hospital 

organizations; health plans; Regional 

Health Information Organizations 

(RHIOs); dialysis facilities; and other 

entities that, from the commenters’

perspective, enhance the overall health 

of a community. 

One commenter, representing dialysis 

facilities, suggested that the safe harbor 

should protect nonmonetary donations 

by all providers that maintain medical 

staffs to members of the medical staff. 

Another commenter suggested that a 

clinical data exchange (or communitywide health information system) should 

be included as a protected donor, 

because individual stakeholders in 

health information technology projects 

are unlikely to develop, purchase, or 

donate items necessary to implement 

and maintain a true community-wide 

clinical data exchange. 

A few commenters asserted that 

health plans and pharmacy benefits 

managers (PBMs) should be protected 

donors, since, according to the 

commenters, these entities develop 

health information technology and are 

engaged with physicians on a direct 

level to increase the utilization of 

electronic prescribing and health 

records technology. These commenters 

urged that the fraud and abuse risks are 

reduced because health plans and PBMs 

have business incentives to limit 

utilization of prescriptions. A 

commenter recommended permitting all 

entities that bill Medicare to donate 

electronic health records technology. A 

few commenters suggested that any 

entity that has an interest in donating 

health information technology should 

be permitted to do so. 

Response: Mindful that broad safe 

harbor protection may significantly 

further the important public policy goal 

of promoting electronic health records, 

and after carefully considering the 

recommendations of the commenters, 

we have concluded that the safe harbor 

should protect any donor that is an 

individual or entity that provides 

patients with health care items or 

services covered by a Federal health 

care program and submits claims or 

requests for payment for those items or 

services (directly or pursuant to 

reassignment) to Medicare, Medicaid, or 

other Federal health care programs (and 

otherwise meets the safe harbor 

conditions). This approach incorporates 

a bright line test focused on those 

individuals and entities that participate 

directly in the provision of health care 

to patients and are therefore in the best 

position to advance the implementation 

of electronic health records adoption 

through participation in interoperable 

electronic health records systems. In 

other words, the test focuses on those 

individuals and entities with a 

substantial and central stake in patients’

electronic health records. Individuals 

and entities that can satisfy this 

definition include, for example, 

hospitals, group practices, physicians, 

nursing and other facilities, pharmacies, 

laboratories, oncology centers, 

community health centers, FQHCs, and 

dialysis facilities. 

In addition, we are persuaded that 

health plans, which generally arrange 

for the provision of health care items 

and services rather than providing them 

directly, should be protected donors. 

We originally proposed including only 

PDP sponsors and MA organizations. 

However, in the final rule, we are 

including any health plan that meets the 

definition of ‘‘health plan’’ set forth at 

§ 1001.952(l)(2), an existing safe harbor 


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under the anti-kickback statute for 

certain managed care arrangements. 

This definition includes a broad array of 

health plans that may cover Federal 

health care program beneficiaries, 

including, but not limited to, PDP 

sponsors, MA organizations, and 

Medicaid managed care plans. We note 

that our decision to include health plans 

as protected donors does not reflect our 

endorsement of the proposition that 

health plans necessarily present a lower 

risk of fraud and abuse because they 

have economic incentives to limit 

utilization. Rather, our decision reflects 

the direction provided by Congress with 

respect to PDP sponsors and MA 

organizations, as well as the important 

and central role health plans play in the 

adoption and use of electronic 

prescribing and health records systems. 

In the preamble to the proposed rule, 

we noted our concern that providers 

and suppliers of ancillary services 

would not have a comparable stake in 

advancing the goal of interoperable 

electronic health records for patients, as 

well as our concern about instances of 

abusive referral payments by ancillary 

services providers, such as laboratories. 

Having reviewed the public comments, 

we are persuaded that ancillary services 

providers and suppliers have a stake in 

the development of interoperable 

electronic health records sufficient to 

warrant safe harbor protection. We 

remain concerned about the potential 

for abuse by laboratories, durable 

medical equipment suppliers, and 

others, but believe that the safe harbor 

conditions in the final rule and the fact 

that the safe harbor is temporary should 

adequately address our concerns. We 

intend to monitor the situation. If 

abuses occur, we may revisit our 

determination. Among other things, we 

will be alert to patterns of increased 

utilization correlated with transfers of 

nonmonetary remuneration in the form 

of electronic health records technology. 

While increased utilization would not 

necessarily indicate fraud or abuse (and 

might, in some circumstances, reflect 

improved quality of care), the 

determination must be made on a caseby-case basis. We note that, 

notwithstanding the safe harbor, parties 

remain liable under various Federal and 

State laws for billing abuses, including 

over-billing and billing for items and 

services that are not medically 

necessary. 

We have not included as protected 

donors pharmaceutical, device, or 

durable medical equipment 

manufacturers, or other manufacturers 

or vendors that indirectly furnish items 

and services used in the care of patients. 

These entities do not provide health 

care items or services to patients or 

submit claims for those services. Our 

enforcement experience demonstrates 

that unscrupulous manufacturers have 

offered remuneration in the form of free 

goods and services to induce referrals of 

their products. Given this enforcement 

history, and the lack of a direct and 

central patient care role that justifies 

safe harbor protection for the provision 

of electronic health records technology, 

we are not including manufacturers as 

protected donors. We believe there is a 

substantial risk that, in many cases, 

manufacturers’ primary interest in 

offering technology to potential referral 

sources would be to market their 

products. 

Nothing in this preamble discussion 

should be construed to suggest that only 

parties that provide covered services or 

have the ability to bill Federal programs 

are in a position to make unlawful 

payments for referrals. To the contrary, 

under the anti-kickback statute, the 

party offering or paying the illegal 

remuneration need not be a party that 

provides a covered service or a party in 

a position to bill a Federal health care 

program. Rather, in this final regulation 

we have focused on parties that provide 

covered services and bill the programs 

as a bright line way to identify those 

individuals and entities with direct, 

frontline patient care responsibilities 

and, therefore, a substantial stake in 

promoting interoperable electronic 

health records systems. 

With respect to categories of 

individuals and entities that are not 

included in the safe harbor, depending 

on the facts and circumstances, safe 

harbor protection might not be needed 

or safe harbor protection may be 

available under other safe harbors. The 

anti-kickback statute is implicated by 

remunerative arrangements that might 

induce or reward the generation of 

Federally payable health care business. 

Arrangements between parties where 

there is no potential or actual Federal 

program business of any kind generally 

should not raise concerns under the 

anti-kickback statute. Moreover, even 

where the statute is implicated, 

arrangements that do not qualify for safe 

harbor protection are not necessarily 

illegal. Thus, the fact that an entity is 

not included as a protected donor does 

not mean that a transfer of electronic 

health records technology by that entity 

necessarily would violate the antikickback statute. Rather, a 

determination would depend on the 

facts and circumstances, including the 

intent of the parties. Parties seeking 

assurance that their arrangement does 

not violate the anti-kickback statute may 

have the arrangement evaluated through 

the OIG’s voluntary advisory opinion 

process. 

Comment: A commenter requested 

that the list of protected donors be 

expanded to include research and 

manufacturing entities and suggested 

that blind trusts could be established 

utilizing funds from several 

pharmaceutical companies to reduce the 

risk of fraud and abuse. Another 

commenter requested that we include 

entities in the research-based 

biopharmaceutical industry as 

permissible donors, noting that the 

widespread adoption of health 

information technology could reduce 

the need for proprietary systems used 

solely for purposes of clinical trial 

programs. 

Response: As noted in the preceding 

response, we are not including research 

and manufacturing entities, or entities 

in the research-based biopharmaceutical 

industry, as protected donors for 

purposes of this final safe harbor. These 

entities do not provide covered services 

to beneficiaries and do not submit 

claims to a Federal health care program. 

Arrangements involving remuneration 

in the form of electronic health records 

technology provided by these entities 

would need to be evaluated on a caseby-case basis under the anti-kickback 

statute. We believe the ‘‘blind trust’’

proposal offered by the commenter is 

also more appropriately addressed caseby-case under the anti-kickback statute 

based on the totality of facts and 

circumstances of the particular 

arrangement. 

Comment: One commenter strongly 

urged OIG to expand the list of 

protected donors to give physicians the 

opportunity to choose between different 

software offerings. Other commenters 

suggested that the safe harbor require an 

open, transparent Request for Proposal 

(RFP) process whereby the donating 

entity would be required to offer 

technology from a minimum of three 

vendors for the recipient to select. These 

commenters expressed the view that a 

multi-vendor, open RFP process would 

ensure competitive market pricing and 

would allow recipients to participate in 

the selection process to ensure that 

services meet the needs of their clinical 

practices, while also protecting against 

the recipient being locked-in by the 

donating entity. Another commenter 

requested that the rulemaking clearly 

state that physicians should be free to 

choose their own electronic health 

records systems or should be offered a 

choice by entities providing subsidies or 

assistance for purchasing these systems. 

Response: Physicians and other 

recipients remain free to choose any 

electronic health technology that suits 


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their needs. Nothing in the safe harbor 

is to the contrary. However, we are not 

requiring donors to facilitate that choice 

for purposes of the safe harbor. Donors 

must offer interoperable products and 

must not impede the interoperability of 

any technology they decide to offer. We 

decline to require the type of RFP 

process requested by the commenter, as 

it would be unnecessarily burdensome 

and impractical and would potentially 

impose substantial transaction costs on 

donors. In addition, nothing in this safe 

harbor requires donors to give any 

particular level, scope, or combination 

of items and services. Some donors may 

choose to offer comprehensive packages, 

while others may elect to offer only 

individual components of an electronic 

health records system. 

Comment: Commenters from the 

laboratory industry strongly urged OIG 

to include laboratories as protected 

donors. They argued that reducing 

duplicative laboratory testing is a 

potential benefit to the implementation 

of interoperable electronic health 

records. These commenters stated that 

clinical laboratories should be included 

in the safe harbor to achieve a level 

playing field and the goal of widespread 

adoption of technology. They also 

objected to OIG’s characterization of the 

industry with respect to historical and 

current fraud and abuse concerns. 

Response: We are including clinical 

laboratories as protected donors for the 

reasons noted above. However, in our 

experience, laboratories and others have 

used free or deeply discounted goods, 

such as computers and fax machines, to 

influence referrals improperly, and we 

remain concerned about potentially 

abusive kickback schemes involving free 

or deeply discounted goods. However, 

we believe the potential public benefit 

from interoperable electronic health 

records is so significant that some 

additional safe harbor protection is 

warranted for the limited purposes of 

this safe harbor. In this rule, it is our 

expectation that the combination of 

conditions in the safe harbor, including 

the sunset provision, will protect the 

programs from abuse during a limited 

period of time for the purpose of 

spurring widespread adoption of 

interoperable electronic health records 

technology. We intend to monitor the 

situation; if we discover instances of 

abuse, we may revisit our determination 

to include clinical laboratories (or any 

other category of potential donor). 

Comment: A commenter requested 

that health information technology 

vendors be included as protected 

donors. 

Response: We decline to include 

health information technology vendors 

as protected donors. In many cases, no 

safe harbor protection will be needed. 

Moreover, we are concerned that if 

vendors are included as protected 

donors, entities that are not included in 

the safe harbor will expand their lines 

of business to become vendors to 

circumvent the safe harbor limitations. 

Comment: Some commenters 

suggested that the safe harbor should 

protect nonmonetary donations offered 

by partnerships or consortia of 

otherwise permissible donors, so that 

parties could work together and share 

the cost of expanding needed health 

information technology in the 

community. 

Response: Because consortia and 

partnerships can be structured in 

various ways, it is difficult for us to 

conclude with confidence that in all 

circumstances they would not pose an 

undue risk of abuse. We believe the 

better approach to the issue of consortia 

and partnerships is a case-by-case 

approach. 

4. Protected Recipients 

Comment: Most commenters 

expressed the view that the categories of 

protected recipients were too limited 

and urged OIG to be more expansive. 

Commenters suggested that all or some 

of the following should be included: 

Non-staff physicians; physicians who 

are network providers; physicians who 

have contracted with an IDS; physicians 

and other licensed health care 

professionals whose patients regularly 

receive inpatient and/or outpatient care 

at the donor hospital or health system; 

hospitalists; intensivists; physician 

assistants; nurse practitioners; 

audiologists; and independent 

contractors of group practices. 

Commenters noted that many nonphysician providers would greatly 

benefit from safe harbor protection, 

given the fact that non-physician 

providers generally have limited 

resources available to fund office 

technology. A commenter suggested 

including all non-physician providers 

that furnish Medicare or Medicaid 

covered services and might benefit from 

the adoption of electronic health records 

systems. 

Many commenters suggested that the 

categories of permissible recipients be 

expanded to include the following 

providers and suppliers and their staffs: 

nursing facilities, assisted living and 

residential care facilities, intermediate 

care facilities for persons with mental 

retardation, mental health facilities, 

clinical laboratories, durable medical 

equipment providers, pharmacies 

(including long-term care pharmacies), 

community health centers, network 

providers or other entities that operate, 

support or manage network providers, 

physician-hospital organizations, health 

plans, RHIOs, and other entities 

designed to enhance the overall health 

of the community. Commenters also 

requested that FQHCs, as defined in the 

Medicaid statute and Medicare 

regulations, be included as permissible 

recipients. 

Response: We agree with the 

commenters that additional protection 

would further the goal, and achieve the 

benefits, of widespread adoption of 

electronic health records technology 

and, given the overall design of the safe 

harbor, can be accomplished without 

undue risk of fraud and abuse. The final 

rule permits donation of protected 

remuneration to any individual or entity 

engaged in the delivery of health care, 

without regard to whether the recipient 

is on a medical staff, is a member of a 

group practice, or is in network of a PDP 

sponsor or MA organization. Protected 

recipients would include practitioners, 

providers, and suppliers that furnish 

services directly to Federal health care 

program beneficiaries, as well as those 

that furnish services to health plan 

enrollees. Protected recipients can 

include, among others, physicians, 

group practices, physician assistants, 

nurse practitioners, nurses, therapists, 

audiologists, pharmacists, nursing and 

other facilities, FQHCs and community 

health centers, laboratories and other 

suppliers, and pharmacies. 

Comment: Many commenters 

requested that protected donors be 

permitted to donate technology to all 

members of a group practice, or to the 

group practice as a whole, even if all 

members do not routinely provide 

services to the donor. Some commenters 

suggested that group practices should be 

permitted to donate to other group 

practices. One commenter asked for 

clarification as to whether the proposed 

safe harbor would apply only to the 

specific physician recipient of the 

donated technology or whether, for 

example, all members of a group 

practice could use the technology that 

was donated to the physician. 

Response: The final rule contains no 

limitation on the recipient’s 

membership on a donor’s medical staff. 

Further, the safe harbor protects the 

donation of the technology to a 

physician or group practice. As such, 

donors are permitted to provide 

technology to the group practice as a 

whole, which should address the 

concerns raised by the commenters. 

Comment: Some commenters stated 

that hospital donors may not want to 

donate the full value of an electronic 

health records system to physicians 


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outside of their medical staff. These 

commenters suggest permitting outside 

physicians to have access to the 

information in the hospital’s electronic 

health records system by allowing the 

outside physicians to use or sublicense 

the hospital’s electronic health records 

system at the hospital’s cost. These 

commenters also suggested allowing 

outside physicians to take advantage of 

the pricing obtained by the hospitals for 

electronic health records technology 

and related services. 

Response: The final safe harbor has 

been expanded to include all physicians 

as recipients, regardless of whether the 

physician is a member of the donor’s 

medical staff. Nothing in the safe harbor 

requires hospitals or other donors to 

offer recipients a full electronic health 

records system. We interpret the 

commenters’ suggestion that community 

physicians be permitted to access 

electronic data at the hospital’s cost to 

be a comment seeking clarification that 

any aggregate dollar limit on donated 

technology be calculated based on the 

donor’s costs rather than retail value to 

the recipient. In this regard, the final 

safe harbor incorporates a cost sharing 

requirement based on the donor’s costs. 

It does not incorporate an aggregate 

dollar limit. 

5. Selection of Recipients 

In light of the enhanced protection 

against some types of fraud and abuse 

offered by certified, interoperable 

systems, the final rule permits donors to 

use selective criteria for choosing 

recipients, provided that neither the 

eligibility of a recipient, nor the amount 

or nature of the items or services, is 

determined in a manner that directly 

takes into account the volume or value 

of referrals or other business generated 

between the parties. We have 

enumerated several selection criteria 

which, if met, are deemed not to be 

directly related to the volume or value 

of referrals or other business generated 

between the parties (for example, a 

determination based on the total 

number of hours that the recipient 

practices medicine or a determination 

based on the size of the recipient’s 

medical practice). Selection criteria that 

are based upon the total number of 

prescriptions written by a recipient are 

not prohibited, but the final regulation 

does prohibit criteria based upon the 

number or value of prescriptions written 

by the recipient that are dispensed or 

paid by the donor, as well as any criteria 

directly based on any other business 

generated between the parties. The final 

safe harbor would not protect 

arrangements that seek to induce a 

recipient to change loyalties from other 

providers or plans to the donor. 

We expect that this approach will 

ensure that donated technology can be 

targeted at recipients who use it the 

most in order to promote a public policy 

favoring adoption of electronic health 

records, while discouraging especially 

problematic direct correlations with 

Federal health care program referrals. 

This approach is a deliberate departure 

from other safe harbors under the antikickback statute based on the unique 

public policy considerations 

surrounding electronic health records 

and the Department’s goal of 

encouraging widespread adoption of 

interoperable electronic health records. 

We caution, however, that outside of the 

context of electronic health records, as 

specifically addressed in this final rule, 

both direct and indirect correlations 

between the provision of free or deeply 

discounted goods or services and the 

volume or value of referrals or other 

business generated between the parties 

are highly suspect under the antikickback statute (and may evidence 

outright violations) and do not meet the 

requirements of other safe harbors under 

the statute or § 1001.952. 

Comment: Several commenters 

commended OIG for its efforts to 

prevent fraud and abuse by prohibiting 

efforts to increase referrals or other 

changes in practice patterns. Some 

commenters noted that donors should 

not be allowed to choose physicians 

selectively based upon the volume of 

their prescribing, size of practice, or 

whether they would be likely to adopt 

the technology, and stated that donors 

should give technology to all of their 

physicians. One commenter suggested 

eliminating the criteria permitting 

donors to select recipients based on any 

reasonable and verifiable manner that is 

not directly related to the volume or 

value of referrals or other business 

generated between the parties. The 

commenter stated that this criteria is too 

open-ended and subjective and could 

become a major loophole. 

Other commenters supported the use 

of such criteria and expressed the view 

that the use of selection criteria to select 

recipients will improve quality of care 

and ensure successful adoption of 

health technology by physicians. These 

commenters offered suggestions on the 

standards for selection criteria. Some 

commenters suggested that OIG 

consider broad criteria for selection of 

recipients, and that donors should be 

permitted to make this decision based 

upon their own financial model. One 

commenter requested that OIG confirm 

that donations based on total number of 

prescriptions are allowed under all of 

the proposed safe harbors. 

One commenter recommended that 

selection criteria related to the volume 

or value of referrals should be 

permitted, as long as the criteria are 

linked to achieving greater improvement 

in quality of patient care or greater 

success in adoption of health 

information technology. The commenter 

provided the following examples: 

Participation in hospital quality 

improvement activities; participation in 

medical staff meetings and activities; 

specialty; department (if information 

technology is rolled out by department); 

readiness to use health information 

technology; consistent use of hospital 

based information technology systems; 

acting as a ‘‘physician champion’’ of 

hospital based information technology 

systems; willingness to serve as a trainer 

for other physicians; size of medical 

practice; or willingness to contribute 

some resources to the information 

technology project. Another commenter 

requested that any list of criteria 

included in the regulation be inclusive, 

rather than exclusive, and that we 

provide further guidance on how to 

interpret the criteria. 

Response: Some of the commenters’

suggestions are too subjective, 

impractical, and insufficiently bright 

line to be ‘‘deeming’’ provisions for 

purposes of this rulemaking. Although 

we believe it is important to provide 

some guidance with respect to selection 

criteria, we do not think it is possible to 

enumerate a comprehensive list. 

Therefore, we are providing several 

bright line criteria in the final rule, 

along with a general provision that 

permits other reasonable and verifiable 

selection criteria that do not relate 

directly to the volume or value of 

referrals or other business generated 

between the parties. Specifically, we are 

including the following criteria: 

• The determination is based on the 

total number of prescriptions written by 

the recipient (but not the volume or 

value of prescriptions dispensed or paid 

by the donor or billed to a Federal 

health care program); 

• The determination is based on the 

size of the recipient’s medical practice 

(for example, total patients, total patient 

encounters, or total relative value units); 

• The determination is based on the 

total number of hours that the recipient 

practices medicine; 

• The determination is based on the 

recipient’s overall use of automated 

technology in his or her medical 

practice (without specific reference to 

the use of technology in connection 

with referrals made to the donor); 


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• The determination is based on 

whether the physician is a member of 

the donor’s medical staff, if the donor is 

a hospital or other entity with a formal 

medical staff; 

• The determination is based on the 

level of uncompensated care provided 

by the recipient; or 

• The determination is made in any 

reasonable and verifiable manner that 

does not directly take into account the 

volume or value of referrals or other 

business generated between the parties. 

Comment: Some commenters inquired 

whether it would be permissible under 

the safe harbor for a donor to offer a 

staggered roll-out of electronic health 

records technology, so that the 

technology could be provided on a 

selective basis, either by specialty, 

hospital department, or otherwise. 

These commenters suggested that the 

safe harbor should not enumerate 

specific examples of when a staggered 

offering is deemed ‘‘not directly related 

to’’ referrals or other business, but rather 

should allow donors to offer 

information technology, as appropriate 

for each hospital’s individual financial 

situation. 

Response: The final rule prohibits the 

selection of recipients using any method 

that takes into account directly the 

volume or value of referrals from the 

recipient or other business generated 

between the parties. The final rule 

provides some examples of acceptable 

criteria and also permits any other 

determination that is reasonable and 

verifiable. Given the potential variation 

in arrangements, it is not entirely clear 

to us how the commenters would 

implement their ‘‘staggered roll-out.’’

Such arrangements should be evaluated 

for compliance with the safe harbor on 

a case-by-case basis. We note that 

nothing in the safe harbor requires that 

technology be provided to all potential 

recipients contemporaneously. 

Comment: One commenter 

recommended that OIG reaffirm that 

physicians who receive donated 

technology remain free to choose what 

health information may or may not be 

shared with the hospital or entity 

providing the technology, consistent 

with current law and the wishes of 

patients and physicians. 

Response: Nothing in this final rule 

regulates the sharing of health 

information. Nothing in this final rule 

permits donors to influence the medical 

decision-making of recipients or 

requires recipients to act in a manner 

that would violate any law or ethical 

obligation to patients. 

Comment: A commenter requested 

that OIG prohibit donors from selecting 

recipients in a manner that punishes or 

rewards past prescribing practices or 

influences future prescribing practices. 

Another commenter recommended that 

any incidental increase in the volume of 

referrals that results from increased 

quality and patient care be expressly 

permitted. 

Response: Any selection criteria 

directly related to past, present, or 

future volume of prescriptions 

dispensed or paid by the donor or billed 

to a Federal health care program, or to 

any other business generated between 

the parties are strictly prohibited. Any 

selection criteria that punish or reward 

past prescribing practices or influence 

future prescribing practices would give 

rise to an inference that the selection 

criteria are tied directly to the volume 

or value of referrals. We are not 

adopting the commenter’s suggestion 

that we expressly permit increases in 

the volume or value of referrals 

attributable to increased quality and 

patient care. Whether an increase in the 

volume of referrals between a donor and 

recipient is attributable to increased 

quality and patient care, rather than an 

impermissible incentive, requires an 

evaluation of the particular facts and 

circumstances. 

Comment: A commenter requested 

that PDP sponsors and MA 

organizations be permitted to determine 

eligibility, or the amount or nature of 

the items and services, in a manner that 

takes into account the volume and value 

of prescriptions written by the recipient 

that are paid by the PDP sponsor or MA 

organization. This commenter believed 

that PDP sponsors and MA 

organizations have the financial 

incentive to control drug utilization 

costs to compete effectively in the 

Medicare Part D marketplace. 

Response: We are not persuaded. The 

fact that PDP sponsors and MA 

organizations have some incentives to 

control costs is not sufficient to warrant 

different safe harbor treatment. Neither 

eligibility for, nor the amount or nature 

of the items or services, may be 

determined by taking into account the 

volume or value of prescriptions written 

by the recipient for enrollees of the MA 

organization or PDP sponsor. Nothing in 

the safe harbor precludes PDP sponsors 

and MA organizations from offering 

protected items and services to health 

care professionals with whom they have 

network agreements. 

Comment: One commenter requested 

that we protect donations when 

provided to a physician or clinic that 

provides a certain level of 

uncompensated charity care or 

combination of charity care and volume 

of Medicaid patients. 

Response: The provision of 

uncompensated care would be an 

acceptable selection criterion (e.g., a 

hospital can elect to provide technology 

only to rural and solo practitioners that 

provide high levels of uncompensated 

care when selecting among eligible 

recipients). We have included a 

criterion in the final regulations at 

§ 1001.952(y)(5) that expressly permits 

selection of recipients based on the level 

of uncompensated care provided by the 

recipient. We do not believe it would be 

appropriate for us to establish a 

particular level of uncompensated care 

necessary to qualify for safe harbor 

protection. Donors should have 

flexibility to respond to the particular 

needs of their communities by selecting 

recipients based on levels of 

uncompensated care that reflect those 

needs. The total number of Medicaid 

patients served by the practice could 

also be acceptable, so long as there is no 

direct correlation with Medicaid 

patients referred between the donor and 

recipient. 

Comment: We proposed including a 

requirement that the prescribing health 

care professional, practitioner, 

pharmacy, or pharmacist (or any 

affiliated group, employee, or staff 

member) does not make the receipt of 

items or services a condition of doing 

business with the donor. Those 

commenters that commented on this 

condition favored it. A commenter 

noted that, as proposed by CMS for the 

proposed exception under the physician 

self-referral law, the anti-solicitation 

provision would be a core protection 

against fraud and abuse. The commenter 

suggested that our final rule should 

mirror the language proposed by CMS, 

which barred making the receipt, as 

well as the amount or nature, of items 

or services a condition of doing business 

with the donor. See 70 FR 59182, 59187 

(October 11, 2005). 

Response: We agree that a provision 

barring recipients from conditioning 

their business on donations of 

technology can safeguard against fraud 

and abuse and should be included in 

the final safe harbor. We further agree 

that, in this regard, the safe harbor 

under the anti-kickback statute should 

be consistent with the exception under 

the physician self-referral law. 

Accordingly, we are including a 

provision that mirrors the provision 

proposed by CMS, with modifications 

appropriate to the different nature of 

recipients addressed by the two rules. 

For consistency, we are making the 

same modifications to the comparable 

condition in the electronic prescribing 

arrangements safe harbor. 


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6. Value of Technology 

We proposed, as a further safeguard 

against fraud and abuse, to limit the 

aggregate value of the qualifying 

electronic prescribing technology that a 

donor could provide to a recipient. We 

solicited public comment on the 

applicable amount and methodology for 

limiting the aggregate value of donated 

technology. 

We also indicated that we were 

considering setting an initial cap, for 

both the electronic prescribing and 

electronic health records safe harbors, 

which would be lowered after a certain 

period of time sufficient to promote the 

initial adoption of the technology. This 

approach would have the effect of 

encouraging investments in the desired 

technology while also ensuring that, 

once the technology has been widely 

adopted and, as often occurs with 

technology, costs decrease as technology 

becomes more widely adopted, the safe 

harbor cannot be abused to disguise 

payments for referrals. 

Comment: We solicited public 

comments that address the retail and 

nonretail costs (i.e., the costs of 

purchasing from manufacturers, 

distributors, or other nonretail sources). 

Only a few commenters provided 

concrete information on the cost of 

health information technology, while 

most commenters simply noted the cost 

was high, that financial incentives were 

imperative, and that adoption was not 

equally affordable by all sectors of the 

health care field. 

Response: We appreciate commenters 

providing this information, and we have 

taken the information into consideration 

in finalizing the safe harbor. The 

Administration supports the adoption of 

health information technology as a 

normal cost of doing business to ensure 

patients receive high quality care. 

Comment: Most commenters shared 

the opinion that there should not be a 

cap on the value of donated technology, 

stating that there is not a consistent or 

appropriate way to determine fair 

market value or establish a monetary 

cap that would accommodate all 

situations and account for the rapid 

advancement in technology. Some 

commenters believed that the attempt to 

ascertain the value of donations for the 

purpose of fraud protection would 

become a barrier to adoption of 

electronic health records, unnecessarily 

discourage potential donors from 

providing technology, or would result in 

a reduction on the ‘‘return on 

investment’’ for electronic prescribing 

and electronic health records. Other 

commenters expressed concern that a 

low cap might discourage the 

implementation of electronic health 

records technology, while a high cap 

may serve to pressure hospitals to 

provide the maximum allowable 

amount. 

However, a few commenters shared 

the concern of OIG that allowing donors 

to provide items or services without 

limiting the value of such support could 

provide a potential for fraud and abuse. 

One commenter asserted that the value 

of donations will be self-limiting, 

because donors are unlikely to spend 

more than is necessary, thereby 

eliminating the need for a cap. Another 

commenter argued that a cap is not 

necessary so long as the donation is 

made without limiting or restricting the 

use of the electronic prescribing or 

electronic health records technology to 

services provided by the donating 

entity, and so long as the donation does 

not take into account the volume or 

value of referrals. Another commenter 

recommended that OIG limit the design 

or utility of the protected donated 

technology by requiring that it not have 

more than incidental value to the 

recipient, beyond the function for which 

it is intended. 

Response: We agree with the 

commenters that determining the value 

of donated technology poses certain 

difficulties, and we are not including a 

cap on the amount of protected 

donations in the final safe harbor. While 

gifts of valuable items and services to 

existing or potential referral sources 

typically pose a high risk of fraud and 

abuse, we believe that the combination 

of safe harbor conditions in the final 

safe harbor, including the sunset 

provision, should adequately safeguard 

against abusive electronic health records 

arrangements. 

Comment: Many commenters, while 

opposing the imposition of a cap, 

offered other suggestions for limiting the 

value of protected nonmonetary 

remuneration. Several commenters 

suggested a limit on the value of 

protected nonmonetary remuneration in 

the form of a percentage contribution 

from the recipient, i.e., cost sharing by 

the recipient. These commenters 

suggested requiring either a set 

percentage contribution by the recipient 

or a scaled percentage contribution by 

the recipient that would lower the 

required percentage contribution once a 

pre-determined threshold amount was 

reached. Some commenters also 

suggested that we consider a cost 

sharing method that would be based on 

set amounts that would be donated, 

with the recipient paying any remaining 

costs. The amounts could be revised 

over time to account for the fluctuating 

expense of technology and other 

changes that may arise. One commenter 

noted that studies have shown that 

individuals value services more when a 

portion of the cost is shared. This 

commenter suggested that recipients 

should, at a minimum, be required to 

contribute towards the purchase of 

wireless internet access. 

Response: We agree that cost sharing 

is an appropriate method to address 

some of the fraud and abuse risks 

inherent in unlimited donations of 

technology. Accordingly, the safe harbor 

establishes a percentage contribution 

that must be incurred by the recipient 

of the electronic health records 

technology. Specifically, the final rule 

offers safe harbor protection only if the 

recipient pays 15 percent of the donor’s 

cost of the technology. We believe the 

15 percent cost sharing requirement is 

high enough to encourage prudent and 

robust electronic health records 

arrangements, without imposing a 

prohibitive financial burden on 

recipients. Requiring financial 

participation by a recipient should 

result in selection of technology 

appropriate for the recipient’s practice 

and increase the likelihood that the 

recipient will actually use the 

technology. Moreover, this approach 

requires recipients to contribute toward 

the benefits they may experience from 

the adoption of interoperable electronic 

health records (for example, a decrease 

in practice expenses or access to 

incentive payments related to the 

adoption of health information 

technology). We note that, depending on 

the circumstances, a differential in the 

amount of cost sharing imposed by a 

donor on different recipients could give 

rise to an inference that an arrangement 

is directly related to the volume or value 

of referrals or other business generated 

between the parties, thus rendering the 

arrangement ineligible for safe harbor 

protection. In this regard, the reason and 

basis for the differential should be 

closely scrutinized. 

We note that all donated software and 

health information technology and 

training services would be subject to the 

cost sharing requirements. It is our 

understanding that many updates and 

upgrades are included in the initial 

purchase price of the technology and 

would not trigger additional cost 

sharing responsibility on the part of the 

recipient at the time the update or 

upgrade is provided to the recipient. 

Any updates, upgrades, or modifications 

to the donated electronic health records 

system that were not covered under the 

initial purchase price for the donated 

technology would be subject to separate 

cost sharing obligations by the recipient 

(to the extent that the donor incurs 


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additional costs). To ensure that 

recipients incur the requisite 15 percent 

of the costs, donors (and their affiliates) 

are prohibited from providing financing 

or making loans to recipients to fund the 

recipient’s payment for the technology. 

With respect to calculation of the 

costs for internally-developed 

(‘‘homegrown’’) software (that is, 

software that is not purchased from an 

outside vendor), and internallydeveloped add-on modules and 

components (that is, software purchased 

from an outside vendor and internally 

customized to ensure operational 

functionality), parties should use a 

reasonable and verifiable method for 

allocating costs and are strongly 

encouraged to maintain 

contemporaneous and accurate 

documentation. Methods of cost 

allocation will be scrutinized to ensure 

that they do not inappropriately shift 

costs in a manner that provides an 

excess benefit to the recipient or results 

in the recipient effectively paying less 

than 15 percent of the donor’s true cost 

of the technology. 

Comment: One commenter suggested 

that the entire electronic health records 

safe harbor sunset no later than five 

years from the date of publication of the 

final rulemaking, with the possibility for 

the sunset to be delayed upon an 

administrative finding by the Secretary 

that there is still a need for the safe 

harbor. The commenter observed that, 

in the future, electronic health records 

technology will be a standard and 

necessary part of a medical practice, and 

there will no longer be a need for third 

parties to donate it to physicians to spur 

adoption of the technology. Moreover, 

the commenter observed that 

incompatibility across a network of 

providers will cease to be an issue once 

interoperability of technology becomes 

the norm. For these reasons, the 

commenter concluded that the rationale 

for establishing a safe harbor to the antikickback statute will decrease over time. 

Response: We agree with this 

commenter that the need for a safe 

harbor for donations of electronic health 

records technology should diminish 

substantially over time as the use of 

such technology becomes a standard 

and expected part of medical practice. 

Over time, physicians and others who 

receive donated technology from third 

parties may begin to realize the 

economic benefits from increased 

efficiencies and quality of care, at which 

point they may be expected to shoulder 

the costs associated with producing 

those benefits. As we indicated earlier 

in this rulemaking, we are promulgating 

an anti-kickback safe harbor for 

donations of valuable technology to 

promote its use in the interests of 

quality of care, patient safety, and 

health care efficiency, notwithstanding 

the substantial risk of fraud and abuse 

normally associated with gifts of 

valuable goods and services to referral 

sources. Our goal is to promote the 

beneficial uses of technology without 

undue risk of fraud and abuse. As the 

technology becomes widely used and an 

accepted part of medical practice, the 

balance between promoting health 

information technology and preventing 

fraud and abuse changes. 

A sunset provision would also 

address some of our concerns about gifts 

of unlimited amounts of valuable 

technology. As noted above, we have 

concluded that we cannot readily 

develop an appropriate cap on the 

amount of protected technology. A 

sunset provision, in effect, would cap 

the amount of protected technology that 

could be donated by third parties in a 

different way, thereby safeguarding 

against fraud and abuse in the long run. 

All arrangements occurring after the 

sunset date would be subject to case-bycase evaluation under the anti-kickback 

statute. 

We solicited comments on our overall 

approach to crafting a set of safe harbor 

conditions and how we might ensure 

that the conditions, taken as a whole, 

provide sufficient protection against 

fraud and abuse. Given the difficulties 

inherent in limiting the value of 

donated technology and our relaxing of 

the ordinary principle that 

remuneration cannot be linked in any 

manner to the volume or value of 

referrals, we believe the sunset 

provision suggested by the commenter 

will provide appropriate additional 

protection. 

For all of these reasons, we are 

adopting the suggestion of the 

commenter, with modifications. We are 

sunsetting the safe harbor on December 

31, 2013. This date is consistent with 

the President’s goal of adoption of 

electronic health records technology by 

2014. See President George W. Bush’s 

Health Information Technology Plan 

announced April 26, 2004; http:// 

www.whitehouse.gov/infocus/ 

technology/economic_policy200404/ 

chap3.html. Under § 1001.952(y)(13), all 

transfers of items and services must 

occur, and all conditions of the safe 

harbor must have been satisfied, on or 

before December 31, 2013. Nothing in 

the safe harbor would preclude the 

Secretary from extending the time 

period in accordance with notice-andcomment rulemaking. However, we do 

not believe it would be appropriate to 

have a condition in a regulation that is 

contingent on an administrative 

determination. 

We observe that the sunset provision 

is also consistent with the language in 

the preamble to the proposed rule that 

stated: 

‘‘We are considering setting an initial cap, 

which would be lowered after a certain 

period of time sufficient to promote the 

initial adoption of the technology. This 

would have the effect of encouraging 

investments in the desired technology while 

also ensuring that, once the technology has 

been widely adopted and its costs have come 

down, the safe harbor cannot be abused to 

disguise payments for referrals.’’ 70 FR at 

59020. 

(We note that we are not similarly 

sunsetting the electronic prescribing 

safe harbor at § 1001.952(x), as that safe 

harbor is mandated by statute, and we 

do not have authority to limit its 

duration. Moreover, the risk of fraud 

and abuse is substantially greater with 

respect to donations of electronic health 

records technology than it is for 

donations of technology necessary and 

used solely for electronic prescribing 

under § 1001.952(x).) 

Comment: A few commenters 

suggested that we not sunset the preinteroperability safe harbor once the 

post-interoperability safe harbor was 

finalized, as we had proposed. 

Response: We are not finalizing a 

separate pre-interoperability safe harbor. 

Comment: One commenter stated that 

CMS should study the issue of a cap 

since health information technology 

capabilities and costs are rapidly 

evolving. 

Response: This comment addresses 

matters outside the scope of this 

rulemaking. 

Comment: A few commenters 

suggested that the final rule should 

allow the donors to reimburse recipients 

for previously implemented electronic 

health records systems in an amount 

equal to the lesser of the fair market 

value of the donated technology or the 

donated value cap, should a cap be 

adopted. These commenters also 

requested that recipients be given 

assurance by the donor that any 

technology previously purchased that is 

equivalent to donated technology and 

meets the applicable interoperability 

standards would be integrated into the 

donor’s system. 

Response: We are not adopting these 

suggestions. The commenters’

suggestions go beyond the scope of the 

safe harbor and appear to be a request 

for the safe harbor to provide retroactive 

protection for previously purchased 

technology. The safe harbor protects the 

donation of technology that meets all of 

the conditions of the safe harbor. 


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Reimbursement for previously incurred 

expenses is not protected and poses a 

substantial risk of fraud and abuse. 

Comment: We solicited comment in 

the proposed rulemaking about our 

proposal to prohibit donors from 

shifting the financial burden of 

providing electronic health records 

technology to the Federal health care 

programs or beneficiaries. Some 

commenters suggested that a cap on the 

value of donated technology would 

address our concern. One commenter 

suggested that the Department mandate 

savings that must be realized over a 

particular period of time. This 

commenter believed that pay for 

performance incentives should 

eventually mitigate the risk of cost 

shifting. 

Response: For the reasons noted 

above, we are not including a cap on the 

value of donated technology. Moreover, 

we do not believe it is feasible for us to 

mandate particular levels of savings as 

a condition of safe harbor protection or 

to rely on the future implementation of 

pay for performance incentives. We 

continue to believe that our proposed 

condition is prudent and the best way 

to prevent cost shifting to the Federal 

programs and their beneficiaries. We 

have included the condition in the final 

safe harbor at § 1001.952(y)(12). 

7. Documentation 

Comment: One commenter suggested 

omitting any requirement that the 

written agreement documenting the 

arrangement specify the covered items 

and services and their values. Another 

commenter requested clarification as to 

whether all parties to a three-tier 

technology arrangement (i.e., the donordistributor of the technology, the vendor 

of the technology, and the recipient of 

the technology) would be required to 

sign the written agreement required by 

the safe harbor. 

Response: In light of the cost sharing 

condition of the final safe harbor, we are 

requiring documentation of the cost to 

the donor of the donated technology, 

and the recipient’s expected 

contribution thereto. Moreover, we are 

requiring that the cost sharing 

contribution be made and documented 

before the items and services can qualify 

for safe harbor protection. The 

documentation must be specific as to 

the items and services donated, the 

actual cost to the donor, and the amount 

of the recipient’s cost sharing obligation. 

The documentation must cover all of the 

electronic health records items and 

services to be provided by the donor (or 

affiliated parties) to the recipient. With 

respect to this requirement, we have 

added language to the final safe harbor 

clarifying that the written 

documentation requirement can be 

satisfied by incorporating by reference 

the agreements between the parties or 

by the use of cross references to a master 

list of agreements between the parties 

that is maintained and updated 

centrally, is available for review by the 

Secretary upon request, and preserves 

the historical record of agreements. 

Nothing in the safe harbor requires that 

agreements between donors and 

recipients also be signed by third-party 

vendors; however, such documentation 

may be a prudent business practice. 

D. Community-Wide Health Information 

Systems 

Comment: Some commenters 

responded to our request for public 

comments on the need for, and the 

conditions that should pertain to, a safe 

harbor for community-wide health 

information systems. These commenters 

supported the creation of a safe harbor 

and suggested the safe harbor mirror the 

community-wide health information 

systems exception under section 1877 of 

the Act, with certain suggested 

revisions, including, for example, that 

the safe harbor should protect all types 

of providers, not just physicians. 

Another commenter offered suggestions 

on revisions to the section 1877 

exception. 

Response: We are not addressing a 

safe harbor for community-wide health 

information systems at this time; 

however, we will take into 

consideration the comments received 

should we develop a proposal for such 

a safe harbor. Comments on the section 

1877 exception should be addressed to 

CMS. 

III. Regulatory Impact Statement 

We have examined the impact of this 

rule as required by Executive Order 

12866, the Unfunded Mandates Reform 

Act of 1995, the Regulatory Flexibility 

Act (RFA) of 1980, and Executive Order 

13132. 

Executive Order 12866 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if 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 must be prepared for major 

rules with economically significant 

effects (i.e., $100 million or more in any 

given year). 

This is not a major rule, as defined at 

5 U.S.C. 804(2), and it is not 

economically significant, since it will 

not have a significant effect on program 

expenditures, and there are no 

additional substantive costs to 

implement the resulting provisions. 

This final rule will create new safe 

harbors under the anti-kickback statute 

for certain entities to provide 

technology-related items and services to 

certain parties for electronic prescribing 

and health records purposes in doing so, 

this rulemaking imposes no 

requirements on any party. Parties may 

voluntarily seek to comply with this 

provision so that they have assurance 

that their actions will not subject them 

to any enforcement actions under the 

anti-kickback statute. 

The safe harbors should facilitate the 

adoption of electronic prescribing and 

health records technology by filling a 

gap rather than creating the primary 

means by which physicians or other 

recipients will adopt these technologies. 

In other words, donors will not fund all 

of the health information technology 

used by recipients. However, since we 

cannot predict which entities will offer 

these items and services, we cannot 

determine with certainty the aggregate 

economic impact of this final 

rulemaking. We do not believe, 

however, that the impact of this 

electronic prescribing safe harbor rule 

would approach $100 million annually. 

Therefore, this final rule is not a major 

rule. We note that this final rule will 

remove a perceived obstacle to the 

provision of qualifying electronic 

prescribing technology and electronic 

health records software or information 

technology and training services (for 

purposes of this Regulatory Impact 

Statement, herein referred to as 

‘‘qualifying health information 

technology’’) by certain entities, which 

effort advances the goal of the adoption 

of interoperable information technology. 

Although this final rule applies to 

donations of qualifying health 

information technology by hospitals, 

group practitioners, PDP sponsors, MA 

plans, and other donors, we do not 

expect that all entities would use these 

final safe harbors (in some cases, 

existing safe harbors may also be 

available or parties may use the OIG’s 

advisory opinion process). 

Our analysis under Executive Order 

12866 of the expenditures that entities 

may choose to make under this final 

rule is restricted by potential effects of 

outside factors, such as technological 

progress and other market forces, future 

certification standards, and the 

companion final physician self-referral 

exceptions. Furthermore, both the costs 

and potential savings of electronic 

prescribing, electronic health records, 


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and other functional components vary 

to the extent to which each element 

operates as a stand alone system or as 

part of an integrated system. 

As noted in the proposed electronic 

prescribing standards rule, which was 

published on February 4, 2005 (70 FR 

6256, 6268–6273), donors may 

experience net savings with electronic 

prescribing in place and patients would 

experience significant, positive health 

effects. We have not repeated that 

analysis in this final rule. Moreover, we 

have not replicated the extensive 

analysis of costs, benefits, and potential 

impact on patient care contained in the 

companion physician self-referral final 

rule. We believe the analysis set forth 

there may be similarly relevant to the 

potential impact of the final safe 

harbors. As also noted there, we assume 

that qualifying health information 

technology costs and benefits will be 

realized eventually. Even without 

government intervention, there is a 

lively market today, and as consensus 

standards evolve, that market will grow. 

The question as to the regulatory impact 

of this final rule is: to what extent 

would the use of these final antikickback safe harbors accelerate 

adoption of electronic prescribing and 

electronic health records, taking into 

account available policy instruments, 

notably the development of 

interoperability criteria? The baseline 

information is uncertain. As described 

in more detail in the physician selfreferral final rule, there are numerous 

estimates of adoption of electronic 

prescribing by health plans, hospitals, 

physicians, and (for prescribing of drugs 

only) pharmacies. As noted there, these 

estimates are highly sensitive to 

assumptions. For example, the costs 

may be higher or lower depending on 

the nature of, and information 

technology needs of, donors and 

recipients. The rate of adoption might 

be higher or lower than estimated. We 

believe the substantial majority of 

recipients will be physicians. The 

proportion receiving remuneration 

could be lower or higher than estimated, 

depending on willingness of hospitals, 

group practices, MA organizations, and 

PDP sponsors and other donors to 

subsidize investments in health 

information technology. 

The Office of Management and Budget 

(OMB) has reviewed this rule in 

accordance with Executive Order 12866. 

Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that agencies assess the anticipated 

costs and benefits of Federal mandates 

before issuing any rule that may result 

in the mandated expenditure by State, 

local, or tribal Governments, in the 

aggregate, or by the private sector, of 

$100 million in 1995 dollars (a 

threshold adjusted annually for inflation 

and now approximately $120 million). 

This final rule would impose no 

mandates. Any actions taken under this 

rule would be voluntary. Any 

expenditures would be undertaken by 

Government-owned hospitals in their 

business capacity, without any 

necessary impact on State, local, or 

tribal Governments, or their expenditure 

budgets, as such. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

and the Small Business Regulatory 

Enforcement and Fairness Act of 1996, 

which amended the RFA, require 

agencies to analyze options for 

regulatory relief of small businesses. For 

purposes of the RFA, small entities 

include small businesses, nonprofit 

organizations, and Government 

agencies. Most hospitals and most other 

providers and suppliers are small 

entities, either by nonprofit status or by 

having revenues of $6 million to $29 

million in any one year. Individuals and 

States are not included in the definition 

of a small entity. We are not preparing 

an analysis for the RFA because we have 

determined that this final rule will not 

have a significant impact on small 

businesses. We base our decision on the 

fact that we expect the rulemaking on 

electronic prescribing and health 

records to be beneficial to the affected 

entities because it will allow them to 

better reap the benefits of increased use 

of electronic prescribing and health 

records technology, including reduction 

of medical errors and increased 

operational efficiencies. 

In addition, section 1102(b) of the 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 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined 

that this rule will not have a substantial 

negative impact on the operations of a 

substantial number of small rural 

hospitals. If this rule has any impact, it 

would be a substantial positive impact 

in reducing medical errors and 

increasing operational efficiencies 

through the use of technology. 

Executive Order 13132 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule that imposes substantial direct 

requirement costs on State and local 

Governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation does not impose 

any costs on State or local Governments, 

preempt State or local law, or otherwise 

have Federalism implications, the 

requirements of Executive Order 13132 

are not applicable. 

IV. Paperwork Reduction Act 

In accordance with section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995, we are required 

to solicit public comments, and receive 

final OMB approval, on any information 

collection requirements set forth in 

rulemaking. The safe harbors 

promulgated in this final rule impose 

some minimal information collection 

requirements. Specifically, for an 

arrangement to fall within the final safe 

harbors it would have to fulfill the 

following documentation requirements: 

(1) There must be a writing signed by 

the parties; (2) the written agreement 

must identify the items or services being 

provided and their cost; and (3) the 

written agreement must incorporate or 

cross-reference prior relevant 

agreements. 

Compliance with a safe harbor under 

the Federal anti-kickback statute is 

voluntary, and no party is ever required 

to comply with a safe harbor. Instead, 

safe harbors merely offer an optional 

framework for structuring business 

arrangements to ensure compliance with 

the anti-kickback statute. All parties 

remain free to enter into arrangements 

without regard to a safe harbor, so long 

as the arrangements do not involve 

unlawful payments for referrals under 

the anti-kickback statute. Thus, we 

believe that the documentation 

requirements necessary to enjoy safe 

harbor protection do not qualify as an 

added paperwork burden in accordance 

with 5 CFR 1320.3(b)(2), because the 

requirements are consistent with usual 

and customary business practices and 

because the time, effort, and financial 

resources necessary to comply with the 

requirements would largely be incurred 

in the normal course of business 

activities. 

List of Subjects in 42 CFR Part 1001 

Administrative practice and 

procedure, Fraud, Health facilities, 

Health professionals, Medicare. 

■ Accordingly, 42 CFR part 1001 is 

amended as follows: 


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PART 1001—[AMENDED] 

■ 1. The authority citation for part 1001 

is revised to read as follows: 

Authority: 42 U.S.C. 1302, 1320a–7, 

1320a–7b, 1395u(j), 1395u(k), 1395w–

104(e)(6), 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 introductory text, by 

adding and reserving paragraph (w), and 

by adding new paragraphs (x) and (y) to 

read as follows: 

§ 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: 

* * * * * 

(x) Electronic prescribing items and 

services. As used in section 1128B of the 

Act, ‘‘remuneration’’ does not include 

nonmonetary remuneration (consisting 

of items and services in the form of 

hardware, software, or information 

technology and training services) 

necessary and used solely to receive and 

transmit electronic prescription 

information, if all of the following 

conditions are met: 

(1) The items and services are 

provided by a—

(i) Hospital to a physician who is a 

member of its medical staff; 

(ii) Group practice to a prescribing 

health care professional who is a 

member of the group practice; and 

(iii) A PDP sponsor or MA 

organization to pharmacists and 

pharmacies participating in the network 

of such sponsor or organization and to 

prescribing health care professionals. 

(2) The items and services are 

provided as part of, or are used to 

access, an electronic prescription drug 

program that meets the applicable 

standards under Medicare Part D at the 

time the items and services are 

provided. 

(3) The donor (or any person on the 

donor’s behalf) does not take any action 

to limit or restrict the use or 

compatibility of the items or services 

with other electronic prescribing or 

electronic health records systems. 

(4) For items or services that are of the 

type that can be used for any patient 

without regard to payor status, the 

donor does not restrict, or take any 

action to limit, the recipient’s right or 

ability to use the items or services for 

any patient. 

(5) Neither the recipient nor the 

recipient’s practice (or any affiliated 

individual or entity) makes the receipt 

of items or services, or the amount or 

nature of the items or services, a 

condition of doing business with the 

donor. 

(6) Neither the eligibility of a 

recipient for the items or services, nor 

the amount or nature of the items or 

services, is determined in a manner that 

takes into account the volume or value 

of referrals or other business generated 

between the parties. 

(7) The arrangement is set forth in a 

written agreement that—

(i) Is signed by the parties; 

(ii) Specifies the items and services 

being provided and the donor’s cost of 

the items and services; and 

(iii) Covers all of the electronic 

prescribing items and services to be 

provided by the donor (or affiliated 

parties). This requirement will be met if 

all separate agreements between the 

donor (and affiliated parties) and the 

recipient incorporate each other by 

reference or if they cross-reference a 

master list of agreements that is 

maintained and updated centrally and is 

available for review by the Secretary 

upon request. The master list should be 

maintained in a manner that preserves 

the historical record of agreements. 

(8) The donor does not have actual 

knowledge of, and does not act in 

reckless disregard or deliberate 

ignorance of, the fact that the recipient 

possesses or has obtained items or 

services equivalent to those provided by 

the donor. 

Note to paragraph (x): For purposes of 

paragraph (x) of this section, group practice 

shall have the meaning set forth at 42 CFR 

411.352; member of the group practice shall 

mean all persons covered by the definition of 

‘‘member of the group or member of a group 

practice’’ at 42 CFR 411.351, as well as other 

prescribing health care professionals who are 

owners or employees of the group practice; 

prescribing health care professional shall 

mean a physician or other health care 

professional licensed to prescribe drugs in 

the State in which the drugs are dispensed; 

PDP sponsor or MA organization shall have 

the meanings set forth at 42 CFR 423.4 and 

422.2, respectively; prescription information 

shall mean information about prescriptions 

for drugs or for any other item or service 

normally accomplished through a written 

prescription; and electronic health record 

shall mean a repository of consumer health 

status information in computer processable 

form used for clinical diagnosis and 

treatment for a broad array of clinical 

conditions. 

(y) Electronic health records items 

and services. As used in section 1128B 

of the Act, ‘‘remuneration’’ does not 

include nonmonetary remuneration 

(consisting of items and services in the 

form of software or information 

technology and training services) 

necessary and used predominantly to 

create, maintain, transmit, or receive 

electronic health records, if all of the 

following conditions are met: 

(1) The items and services are 

provided to an individual or entity 

engaged in the delivery of health care 

by—

(i) An individual or entity that 

provides services covered by a Federal 

health care program and submits claims 

or requests for payment, either directly 

or through reassignment, to the Federal 

health care program; or 

(ii) A health plan. 

(2) The software is interoperable at 

the time it is provided to the recipient. 

For purposes of this subparagraph, 

software is deemed to be interoperable 

if a certifying body recognized by the 

Secretary has certified the software 

within no more than 12 months prior to 

the date it is provided to the recipient. 

(3) The donor (or any person on the 

donor’s behalf) does not take any action 

to limit or restrict the use, compatibility, 

or interoperability of the items or 

services with other electronic 

prescribing or electronic health records 

systems. 

(4) Neither the recipient nor the 

recipient’s practice (or any affiliated 

individual or entity) makes the receipt 

of items or services, or the amount or 

nature of the items or services, a 

condition of doing business with the 

donor. 

(5) Neither the eligibility of a 

recipient for the items or services, nor 

the amount or nature of the items or 

services, is determined in a manner that 

directly takes into account the volume 

or value of referrals or other business 

generated between the parties. For the 

purposes of this paragraph (y)(5), the 

determination is deemed not to directly 

take into account the volume or value of 

referrals or other business generated 

between the parties if any one of the 

following conditions is met: 

(i) The determination is based on the 

total number of prescriptions written by 

the recipient (but not the volume or 

value of prescriptions dispensed or paid 

by the donor or billed to a Federal 

health care program); 

(ii) The determination is based on the 

size of the recipient’s medical practice 

(for example, total patients, total patient 

encounters, or total relative value units); 

(iii) The determination is based on the 

total number of hours that the recipient 

practices medicine; 

(iv) The determination is based on the 

recipient’s overall use of automated 

technology in his or her medical 

practice (without specific reference to 

the use of technology in connection 

with referrals made to the donor); 


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(v) The determination is based on 

whether the recipient is a member of the 

donor’s medical staff, if the donor has 

a formal medical staff; 

(vi) The determination is based on the 

level of uncompensated care provided 

by the recipient; or 

(vii) The determination is made in 

any reasonable and verifiable manner 

that does not directly take into account 

the volume or value of referrals or other 

business generated between the parties. 

(6) The arrangement is set forth in a 

written agreement that —

(i) Is signed by the parties; 

(ii) Specifies the items and services 

being provided, the donor’s cost of those 

items and services, and the amount of 

the recipient’s contribution; and 

(iii) Covers all of the electronic health 

records items and services to be 

provided by the donor (or any affiliate). 

This requirement will be met if all 

separate agreements between the donor 

(and affiliated parties) and the recipient 

incorporate each other by reference or if 

they cross-reference a master list of 

agreements that is maintained and 

updated centrally and is available for 

review by the Secretary upon request. 

The master list should be maintained in 

a manner that preserves the historical 

record of agreements. 

(7) The donor does not have actual 

knowledge of, and does not act in 

reckless disregard or deliberate 

ignorance of, the fact that the recipient 

possesses or has obtained items or 

services equivalent to those provided by 

the donor. 

(8) For items or services that are of the 

type that can be used for any patient 

without regard to payor status, the 

donor does not restrict, or take any 

action to limit, the recipient’s right or 

ability to use the items or services for 

any patient. 

(9) The items and services do not 

include staffing of the recipient’s office 

and are not used primarily to conduct 

personal business or business unrelated 

to the recipient’s clinical practice or 

clinical operations. 

(10) The electronic health records 

software contains electronic prescribing 

capability, either through an electronic 

prescribing component or the ability to 

interface with the recipient’s existing 

electronic prescribing system, that 

meets the applicable standards under 

Medicare Part D at the time the items 

and services are provided. 

(11) Before receipt of the items and 

services, the recipient pays 15 percent 

of the donor’s cost for the items and 

services. The donor (or any affiliated 

individual or entity) does not finance 

the recipient’s payment or loan funds to 

be used by the recipient to pay for the 

items and services. 

(12) The donor does not shift the costs 

of the items or services to any Federal 

health care program. 

(13) The transfer of the items and 

services occurs, and all conditions in 

this paragraph (y) have been satisfied, 

on or before December 31, 2013. 

Note to paragraph (y): For purposes of 

paragraph (y) of this section, health plan 

shall have the meaning set forth at 

§ 1001.952(l)(2); interoperable shall mean 

able to communicate and exchange data 

accurately, effectively, securely, and 

consistently with different information 

technology systems, software applications, 

and networks, in various settings, and 

exchange data such that the clinical or 

operational purpose and meaning of the data 

are preserved and unaltered; and electronic 

health record shall mean a repository of 

consumer health status information in 

computer processable form used for clinical 

diagnosis and treatment for a broad array of 

clinical conditions. 

Dated: June 15, 2006. 

Daniel R. Levinson, 

Inspector General. 

Approved: July 14, 2006. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 06–6666 Filed 8–1–06; 8:45 am] 

BILLING CODE 4152–01–P 


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