The Medicare anti-kickback statute states that a health care provider (such as a DME supplier) cannot provide anything of value to a person or entity in exchange for referring, or arranging for the referral of, patients covered by a government health care program (Medicare, TRICARE, Medicare Advantage, Medicaid). Violation of the anti-kickback statute is a criminal offense. The payer and the payee are equally liable under the statute. Courts have enumerated the “one purpose” test which states that if one purpose behind a payment to a referral source is intended to induce referrals, then the anti-kickback statute is violated notwithstanding that the primary purpose of the payment is to pay for legitimate services and notwithstanding that the payment is the fair market value equivalent of the referral sources’ services. Because the anti-kickback statute is so broad, the Office of Inspector General (OIG) has published a number of safe harbors. If the arrangement falls within the fact situation, then the compensation paid does not violate the anti-kickback statute. A relevant safe harbor is the Personal Services and Management Contracts safe harbor (PSMC safe harbor). This safe harbor contains a number of requirements, including (i) the DME supplier and physician will enter into a written agreement with a term of at least one year; (ii) the supplier will pay the physician for legitimate services; (iii) the compensation will be set one year in advance ($6000 over the next 12 months) and will not take into account the expected volume of business between the parties; and (iv) the compensation will be the fair market value equivalent of the physician’s services. The federal Stark physician self-referral statute states that if a physician (or immediate family member) has an ownership/compensation arrangement with a provider that furnishes designated health services (DHS), then the physician cannot refer patients, covered by Medicare or Medicaid, to the provider. A DME supplier falls within the definition of a provider that furnishes DHS. Unlike the anti-kickback statute, Stark imposes civil (not criminal) liability. There are a number of exceptions to Stark. Two exceptions are (i) the non-cash/non-cash equivalent expenditure exception and (ii) the Personal Services exception. The non-cash/non-cash equivalent expenditure exception states that a provider can expend up to $380 per year on non-cash/non-cash equivalent items for a referring physician. The physician’s staff is not covered by this exception. The Personal Services exception is similar to the PSMC safe harbor. Most states have their own versions of the Medicare anti-kickback statute. Some state anti-kickback statutes apply only if the payer is the state’s Medicaid program. Other state anti-kickback statutes apply regardless of the payer—the statute will apply even if the payer is a commercial insurer. Separate from anti-kickback statutes, some states have physician self-referral statutes that are similar to Stark. Each state has a version of a Medical Practices Act (MPA) which is a set of statutes that are specific to physicians. The DME supplier can provide gifts, entertainment, trips, meals, and similar items to a physician as long as the combined value of all of these items do not exceed $380 in a 12-month period. Separate from furnishing gifts and entertainment, and subsidizing trips, the DME supplier can pay the physician for legitimate services. For example, if the supplier has a legitimate need for a medical director, then the supplier and physician can enter into a Medical Director Agreement that complies with both the PSMC safe harbor to the Medicare anti-kickback statute and the Personal Services exception to Stark. Another legitimate way for money to exchange hands between a DME supplier and a physician is for the physician to rent space to the supplier or vice versa. The rental agreement must comply with the Space Rental safe harbor to the Medicare anti-kickback statute and the Space Rental exception to Stark. Among other requirements, (i) the parties must execute a written lease agreement that has a term of at least one year; (ii) the rent paid must be fixed one year in advance (e.g., $48,000 over the next 12 months), and (iii) the rent must be fair market value. Before a DME supplier pays money to a physician for services, or provides gifts and meals to a physician, the supplier needs to (i) examine the requirements of the Medicare anti-kickback statute, Stark, and applicable state statutes and (ii) consult with a health care attorney.