April 2026 Legal Intelligencer article by Lamb McErlane Health Law Attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

The HHS Office of Inspector General (“OIG”) issued Advisory Opinion No. 26-04 (“Opinion”) on March 4, 2026 regarding a “Requestor’s” proposed arrangement involving a transfer of ownership interests in a Medicare-certified ambulatory surgical center (“ASC”) in connection with Requestor’s sole-physician shareholder’s retirement and broader estate planning strategy (the “Arrangement”). Requestor sought guidance on whether the Arrangement would constitute grounds for sanctions under Sections 1128(b)(7) or 1128A(a)(7) of the Social Security Act (“SSA”) as those sections relate to the Federal Anti-Kickback Statute[1] (“AKS”).

Due to the specific facts and safeguards presented, the OIG issued a favorable opinion even though the OIG found that the Arrangement could generate remuneration (if the requisite intent were present) implicating the AKS and, therefore, declined to impose administrative sanctions.

Factual Background

Requestor is a California-based ASC wholly owned by a single physician (“Physician A”), whose practice focuses on pain management. Physician A’s two children (“Physician B” and “Physician C”) are also physicians practicing within the same field and specialty. The Arrangement proposes a three-phase ownership transition structure, as set forth below, driven primarily by estate planning objectives and the anticipated retirement of Physician A.

Phase 1: Initial Ownership Redistribution. Under Phase 1, upon a valuation of Requestor’s shares, Physician A would: (i) gift a portion of ownership interests to his non-physician spouse (the “Non-Physician Investor”) at no cost; (ii) offer Physician B and Physician C the option to purchase shares at a fair market value (“FMV”); (iii) retain a controlling interest; and (iv) reserve shares for future physician investors. During this first phase, all of the investors would be (x) physicians engaged in the same medical practice specialty who are in a position to refer patients directly to Requestor and perform procedures on such referred patients, or (y) investors who are not employed by Requestor or by any investor, are not in a position to provide items or services to Requestor or any of its investors, and are not in a position to make or influence referrals to Requestor or any of its investors.

Phase 2: Introduction of Future Physician Investors. Under Phase 2: (i) the ASC’s board may vote, at its discretion, to offer a certain amount of equity interests to additional physician investors at FMV; (ii) Physician A would retire from clinical practice and certify that he would not influence referrals; and (iii) Physician A would not formally transition or assign his patient panel to Physician B or Physician C. Physician A’s transition out of active clinical practice would be gradual and non-directed. Additionally, Physician A would not maintain any administrative or governance role with Requestor upon retirement.

Phase 3: Testamentary Transfers. Pursuant to Phase 3, upon the deaths of Physician A and the Non-Physician Investor, ownership interests would pass as a gift to Physician B and Physician C.

During the second and third phases, Requestor certified that all investors would be (x) physicians who are in a position to refer patients directly to Requestor and perform procedures on such referred patients, or investors who are not employed by Requestor or (y) investors who are not employed by Requestor or by any investor, are not in a position to provide items or services to Requestor or any of its investors, and are not in a position to make or influence referrals to Requestor or any of its investors.

Throughout all phases, Requestor certified adherence to a number of structural safeguards, including: (i) no referral-based investment terms; (ii) FMV-based transactions; (iii) proportional returns on investment; (iv) no financing assistance for investors; (v) compliance with ASC operational and nondiscrimination requirements; and (vi) full patient disclosure of ownership and/or investment interests. Additionally, Requestor certified that all ancillary services for Federal health care program beneficiaries performed at the entity would be directly and integrally related to primary procedures performed at the entity, with no separate billing to Medicare or other Federal health care programs. Last, Requestor certified that at least one-third of each physician investor’s medical practice income from all sources for the previous 12-month period would be derived from the physician’s performance of procedures.

The Law

The AKS[2] makes it “a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, the referral of an individual to a person for… any item or service reimbursable under a Federal health care program.” The prohibition extends to remuneration to induce, or in return for, 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 a Federal health care program. Here, remuneration includes the transfer of anything of value. The statute applies to any arrangement where at least one purpose of the remuneration is to induce referrals for items or services reimbursable by a Federal health care program. Violations of the AKS constitute a felony punishable by a maximum fine of $100,000 and/or up to 10 years of jail time, as well as exclusion from Federal health care programs and potential imposition of fines by the OIG.

While statutory exceptions and regulatory safe harbors exist (including those applicable to ASC investments), protection is only available where all elements of a safe harbor are strictly satisfied. Arrangements that fall outside of safe harbor protection are subject to a fact-intensive, case-by-case analysis. Here, the safe harbor for single-specialty ASCs[3] could apply during the first phase of the Arrangement, and the safe harbor for multi-specialty ASCs[4] could apply during the second and third phases of the Arrangement.

The single-specialty ASC safe harbor[5] protects financial distributions to the Physicians and Non-Physician Investor if the following six conditions are met.

1. The terms on which an investment interest is offered to an investor must not be related to the previous or expected volume of referrals, services furnished, or the amount of business otherwise generated from that investor to the entity.
2. At least one-third of each physician investor’s medical practice income from all sources for the previous 12-month period must be derived from the surgeon’s performance of Medicare-covered procedures.
3. The entity or any investor (or individual acting on behalf thereof) must not loan funds to, or guarantee a loan for, an investor if the investor uses any part of such loan to obtain the investment interest.
4. The amount of payment to an investor in return for the investment must be directly proportional to the amount of the capital investment (including the FMV of any pre-operational services rendered) of that investor.
5. All ancillary services for Federal health care program beneficiaries performed at the entity must be directly and integrally related to primary procedures performed at the entity, and none may be separately billed to Medicare or other Federal health care programs.
6. The entity and any physician investors must treat patients receiving medical benefits or assistance under any Federal health care program in a nondiscriminatory manner.

Additionally, as it relates to the case at hand, all of the investors must be: (i) physicians engaged in the same medical practice specialty who are in position to refer patients directly to Requestor and perform procedures on such referred patients; or (ii) investors who are not employed by Requestor or by any investor, are not in a position to provide items or services to Requestor or any of its investors, and are not in a position to make or influence referrals directly or indirectly to Requestor or any of its investors.

The multi-specialty ASC safe harbor[6] includes the same elements as the single-specialty ASC safe harbor, in addition to a requirement that at least one-third of the procedures performed by each physician investor for the previous 12-month period be performed at the investment entity. Similarly, as it relates to the case at hand, all of the investors must be: (i) physicians who are in position to refer patients directly to Requestor and perform procedures on such referred patients; or (ii) investors who are not employed by Requestor or by any investor, are not in a position to provide items or services to Requestor or any of its investors, and are not in a position to make or influence referrals directly or indirectly to Requestor or any of its investors.

Legal Analysis

In this case, the OIG expressly recognized that the Arrangement could involve remuneration, and therefore implicates the AKS, particularly with respect to ownership interests held by referring physicians and the potential for investment returns tied to ASC performance. After determining that remuneration is present, the OIG evaluated whether the Arrangement presented a sufficiently low risk of fraud and abuse in light of applicable safeguards and structural features.

A. Safe Harbor Protection for Financial Disclosures

A central component of the OIG’s analysis focused on whether financial distributions to investors would qualify for protection under the ASC safe harbors.

In Phase 1, the single-specialty ASC safe harbor was satisfied with respect to distributions, based on Requestor’s certifications relative to: (i) no referral-based investment terms; (ii) physician income thresholds tied to procedural work; (iii) no financing assistance for investors; (iv) FMV investment structures; (v) proportional returns on capital; (vi) compliance with ASC operational and nondiscrimination requirement; and (vii) other applicable requirement relative to physician and non-physician investors.

In Phases 2 and 3, the multi-specialty ASC safe harbor would apply, with the additional requirement that physician investors perform at least one-third of their procedures at the ASC and other applicable requirement relative to physician and non-physician investors..

Accordingly, the OIG determined that financial returns on investment, in and of itself, would not present AKS risk where safe harbor conditions are satisfied.

B. Low Risk Determination for Ownership Interest Transfers Outside Safe Harbor

While financial distributions were protected, the gifting of shares to the Non-Physician Investor during phase 1 would not satisfy the safe harbor. Notwithstanding the preceding sentence, the OIG found that gifting of shares from a husband to his wife, who would not maintain any role in the health care industry, posed a sufficiently low risk for the OIG to issue a favorable opinion. Therefore, the transfer was characterized as part of a bona fide estate planning strategy.

As it relates to FMV purchases by Physician B and Physician C, the OIG found that although this would not be protected by a safe harbor, the OIG accepted that the shares would be purchased at FMV and that the Arrangement was supported by legitimate succession planning documentation. Similarly, during phase 2, because future physician investors would purchase shares at fair market value, as part of a bona fide estate planning strategy for which the Requestor maintains supporting documentation, the OIG found sufficiently low risk of fraud and abuse. Similarly, the gift of ownership interest from Physician A and the Non-Physician Investor to Physician B and Physician C in phase 3 was found by the OIG to have a sufficiently low risk of fraud and abuse. Accordingly, in both cases, the OIG concluded that the presence of these elements posed a low risk of fraud and abuse, particularly given the absence of referral-based inducement and the presence of legitimate non-abusive purposes.

C. Retirement and Referral Decoupling

A particularly important feature of the Arrangement was the decoupling of referrals from ownership upon Physician A’s retirement. Here, upon retirement, Physician A would cease clinical practice, certify no direct or indirect referral influence, and avoid transitioning patients to specific physicians within the ASC. Accordingly, the OIG found that this element significantly mitigated concerns that ownership transfers could function as a mechanism to reward or preserve referral streams.

D. OIG Takeaways and Compliance Principles

Consistent with prior advisory opinions and guidance, the OIG’s analysis reinforces several key compliance principles, as set forth below.

1. Safe Harbor Protection Remains Critical, but is not Exclusive. While safe harbor compliance provides strong protection, arrangements falling outside a safe harbor may still be permissible where risk is sufficiently mitigated.
2. Estate Planning Can Be a Legitimate, Non-Abusive Purpose. Ownership transfers driven by a bona fide succession planning (particularly as it relates to family structures) may be permissible where divorced from referral inducement.
3. Non-Referral Source Investors Present Lower Risk. Transfers to individuals who cannot generate or influence referrals (e.g., non-clinician spouses) are less likely to implicate AKS concerns.
4. FMV and Proportionality are Foundational. Investment structures must reflect fair market value and proportional returns to avoid an inference of disguised remuneration.
5. Functional Separation of Referrals and Ownership is Key. The elimination of referral influence, particularly upon retirement, is a critical safeguard.
6. OIG Continues to Evaluate Substance over Harm. Even in the presence of compliant documentation, the OIG assesses whether an arrangement, in practice, functions to induce referrals.

Conclusion and Limitations

Based on the Requestor’s certifications and specific facts presented, the OIG concluded that although the Arrangement could generate remuneration under the AKS, it posed a sufficiently low risk of fraud and abuse such that the OIG would not impose administrative sanctions under Sections 1128A(a)(7) or 1128(b)(7) of the SSA.

It is important to note that the Opinion is limited in scope to the specific Arrangement and is not to be relied upon by any person other than the Requestor. The Opinion is also subject to any additional limitations set forth at 42 C.F.R. Part 1008. While the Opinion may not be specifically relied upon for other arrangements, the Opinion provides a clear compliance roadmap for structuring ASC ownership transitions, particularly those involving family succession and physician retirement, while minimizing AKS risk.

If you have any questions or if we may be of further assistance regarding compliance under the AKS or other health law matters, please feel free to contact Bill Kalogredis, Esq. or Sonal Parekh, Esq.

Read the article in the Legal Intelligencer / Law.com here.

Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, veterinarians, and other health care professionals and their businesses as to contractual, regulatory and transactional matters for over 50 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

Sonal Parekh, Esq., is an associate at Lamb McErlane PC who focuses on health care transactional matters and a broad range of health care regulatory-related issues on behalf of health care systems, physicians, dentists, behavioral health providers, and other health care providers, and is a pharmacist by education and training. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.

*This article is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic, any health care matter, or have any questions or concerns, please contact Vasilios J. (Bill) Kalogredis, Esq. or Sonal Parekh, Esq.

 

[1] See Section 1128B(b) of the SSA.

[2] 42 U.S.C. § 1320a-7b(b).

[3] 42 C.F.R. § 1001.952(r)(2).

[4] 42 C.F.R. § 1001.952(r)(3).

[5] 42 C.F.R. § 1001.952(r)(2).

[6] 42 C.F.R. § 1001.952(r)(3).