February 2001

Health Care E-lert - Proposed Rule on Safe Harbors for Ambulance Restocking, 02/09/01

4 min

The Proposed Rule
On May 22, 2000, the Department of Health and Human Services (HHS) published a proposed rule that, if finalized, will create two "safe harbors" under the Anti-Kickback Statute for certain restocking arrangements between independent ambulance companies and hospitals. Under these types of arrangements, hospitals currently replenish the drugs and supplies that a private ambulance company uses during the transport of a patient to a hospital. The proposed rule can be found at http://oig.hhs.gov/oigreg/ambulancepr.txt.

In the past, these restocking arrangements have come under the scrutiny of HHS in the form of advisory opinions because they were thought to be an inducement for ambulance suppliers to transport patients to hospitals that provided replenishment of supplies for free or at a reduced price. HHS has recognized that the four advisory opinions that they have released on this matter have caused concern and confusion among hospitals and independent ambulance suppliers. Furthermore, the department believes that in many cases ambulance restocking arrangements are necessary for maintaining patient health. HHS agrees that these arrangements ensure that ambulances are fully stocked with supplies for their next transport, without requiring the ambulance operators to restock supplies at their home bases, which could result in the ambulance being out of service for a significant period of time. Therefore, in an attempt to clarify their rules on restocking and promote arrangements that are necessary for rendering adequate emergency medical care, HHS has promulgated a proposed rule which creates a safe harbor for some arrangements that previously were thought to constitute potential violations of the Anti-Kickback Statute.

The Safe Harbors
The safe harbors only apply to the transport of emergency patients to a hospital or other receiving facility.

  • Under the first safe harbor:
    - The ambulance supplier would pay the receiving facility the fair market value for the pharmaceuticals and supplies they acquire from the facility,
    - A commercially reasonable and appropriate remuneration arrangement must be in place before the restocking takes place.
  • Under the second safe harbor, the ambulance suppliers could pay the hospital nothing or reduced price for the drugs and supplies if the following seven requirements are met:

    1) All ambulance suppliers, whether for-profit or not-for-profit, that bring patients to the hospital must be restocked on an equal basis.

    2) Restocking arrangements must be:

      a) available to all ambulance suppliers and hospitals in the service area,
      b) part of an effort to improve the EMS delivery system in this area, and
      c) overseen by an oversight entity, which will vary depending on the size and resources of this area.

    3) Restocking arrangements must be in writing.

    4) The hospital can not bill under Medicare for the supplies used to restock the ambulances, or write off the costs for the drugs and supplies as bad debt.

    5) The ambulance suppliers can't bill separately for the restocked drugs and supplies.

    6) Hospitals and ambulance suppliers must maintain records of the restocked drugs and supplies for HHS inspection.

    7) Hospitals and ambulance suppliers must comply with all other federal, state, and local laws regulating emergency medical care.
Although ambulance companies and hospitals are for the most part pleased with the proposed safe harbors, they have a variety of lingering concerns.

First, these groups believe that federal law should not preempt state and local laws that allow other forms of restocking arrangement that are not covered by the two proposed safe harbors. They argue that this is especially important in rural and isolated areas, which may have circumstances that necessitate different restocking arrangements.

Second, under the second safe harbor, all drugs and supplies that are replenished by the hospital are paid by Medicare in the form of a bundled payment; and, therefore, cannot be billed separately by the hospital or ambulance supplier. Hospitals and ambulance companies, however, argue that some of the drugs and supplies that are replenished are separately billable and that, consequently, there should not be a comprehensive prohibition against separate billing.

Third, these entities disagree with the limited applicability of the safe harbors to emergency transports, since many ambulances transport both emergency and non-emergency patients. They argue that the supplies used in non-emergency transports, although minimal, are necessary to ensure the readiness of the ambulance for all transports.

It remains to be seen whether any of these arguments will affect the finalized version of the regulations.

For further information or assistance with ambulance restocking issues, please contact: Sarah Jirousek-Wint or email sjwint@venable.com .