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Ambulance restocking is a common practice in many parts of the country, with hospitals and other healthcare providers replenishing ambulance supplies that are used when a patient is transported to the facility. This allows the ambulance to be ready immediately in the event they are needed for another emergency. While this practice appears beneficial to all parties involved, these restocking arrangements could be a violation of the anti-kickback statute. This is because the entity receiving the patient is giving something of value to a potential source of Federal health care program revenue. By participating in these arrangements, healthcare entities open themselves up to possible criminal prosecution, in addition to civil money penalties. However, good news has arrived.

With the publication of the latest anti-kickback safe harbor rule, healthcare entities nationwide can now safely enter into properly structured ambulance restocking arrangements with ambulance providers. On December 4, 2001, the Department of Health and Human Services Office of Inspector General (OIG) issued a final safe harbor rule addressing ambulance restocking arrangements under the anti-kickback statute. This final safe harbor addressed concerns the OIG received from commenters, resulting in several major changes from the proposed safe harbor that was issued in May of 2000.

By issuing this new safe harbor regulation, healthcare entities that participate in ambulance restocking, and structure their arrangements according to the final rule, are exempt from liability or prosecution under the anti-kickback statute. While the final rule issued in December lists only one safe harbor, there are several different types of ambulance restocking arrangements (referred to in the final rule as "replenishment arrangements") which can find protection under this rule. The structure of these arrangements is clarified within the final rule, and questions from the proposed rule issued in 2000 are answered, insuring that emergency medical services remain efficient and cost effective without unwanted abuse of the system.

The final safe harbor regulations outline three categories of restocking: (1) general restocking, (2) fair market value restocking, and (3) Government-mandated restocking. In order to qualify for the safe harbor, healthcare entities must satisfy the conditions listed under only one of these categories.

General Restocking
This category is available for both free restocking arrangements, and those arrangements under which the ambulance provider pays for the supplies that are restocked (regardless of whether they are paying fair market value). There are two conditions applied to arrangements that fall under this category. First, the facility that receives the patient must restock supplies equally for ambulance providers in one or more of the following three categories: (1) all ambulance providers, (2) all non-profit and governmental providers, or (3) all non-charging providers (such as volunteers and municipal providers). The most important thing is that the facility treat all members of each category equally. The second condition applied to this category is that the restocking must be conducted publicly.

Fair Market Value Restocking
This category applies to those arrangements where the receiving facility is paid fair market value for those supplies that are restocked. This category is fairly straightforward, however, it does not include the restocking of drugs, due to state and federal drug laws. The two conditions that must be met for fair market value arrangements are that: (1) the restocking of supplies is conducted at fair market value, and (2) the arrangements for fair market value payment are commercially reasonable and made in advance.

Government Mandated Restocking
The last category of protected arrangements covers the restocking of both drugs and supplies, if done according to a State or local statute, ordinance, regulations, or binding protocol. These laws may require hospitals, or other healthcare facilities, to restock ambulances that deliver patients to the hospital with those drugs or medical supplies used during patient transportation.

In addition to satisfying the conditions specific to each category, all arrangements must satisfy four conditions that apply to all three restocking categories.

Appropriate Billing of Federal Health Care Programs
In order to qualify for protection under this safe harbor, both the healthcare entity conducting the restocking and the ambulance provider must comply with Federal health care program billing for restocked drugs and medical supplies. There are numerous program payment and coverage rules associated with billing that must be followed to ensure security from liability.

Documentation Requirements
These requirements have been simplified from the version contained in the proposed rule. Under the final rule, either party to a restocking arrangement can be responsible for the documentation, as long as the other party involved receives and holds a copy of it for five (5) years. The report that is usually prepared by the ambulance service provider (also known as the pre-hospital care report, trip sheet, patient care report, or patient encounter report) meets the requirements of this condition if: (1) the drugs and supplies used and restocked are identified, and (2) the receiving facility files a copy of the report within a reasonable amount of time.

No Ties to Referrals
This condition is one similar to a condition found in other anti-kickback statute safe harbors. It prohibits restocking arrangements that have any relation to the volume or value of referrals or business between the parties to the arrangement, if the payment may be made in any part by a Federal health care program such as Medicare or Medicaid.

Compliance With Other Applicable Laws
Satisfaction of the final condition requires that both parties to a restocking arrangement comply with all Federal, State and local laws that regulate ambulance services, including emergency services and the provision of drugs and medical supplies. This can also include laws relating to the handling of controlled substances, and those related to the activities of an ambulance provider.

As is true for all anti-kickback statute safe harbors, structuring arrangements to meet the conditions above is not mandatory, but voluntary. An arrangement that does not meet all of the conditions provided above does not automatically become illegal. These arrangements should, however, be evaluated on a case-by-case basis in order to determine the relative level of risk potentially associated with the arrangement. It is for this reason that parties to an ambulance restocking arrangement may choose to restructure to take advantage of the safe harbor protection. By restructuring, an entity can be sure that they will not be subject to OIG sanctions or possible civil and criminal action in the future.

This brief overview of the new safe harbor is the starting point for restructuring, but does not contain all the intricacies of the final rule. Any party who chooses to restructure should closely examine all the conditions applicable to the category they choose, and structure their arrangement accordingly. This may require an assessment of which safe harbor category is applicable, and how the OIG will interpret various aspects of the arrangement in question. The final rule is fairly complex, but if it is applied correctly, it can potentially offer protection for many types of ambulance restocking arrangements.