The problem of physician self-referral under the Medicare and Medicaid antikickback statute. The Hanlester Network case and the safe harbor regulation.

Dramatic changes have taken place in the legal and ethical status of physician self-referral. In July 1991, the US Department of Health and Human Services issued the "safe harbor" regulation, which permits self-referral only under very narrow constraints. In September 1991, the Department of Health and Human Services Departmental Appeals Board ruled in the landmark Hanlester Network case that joint venture profit distributions are illegal under the antikickback statute when intended to influence investors' reason or judgment in referring Medicare or Medicaid patients. Following this principle on remand in March 1992, the Administrative Law Judge precedentially held that profit distributions violated the statute. Before this remand decision, the Departmental Appeals Board ruling and the safe harbor regulation started the pendulum swinging against self-referral as seen, for example, in the December 1991 revised American Medical Association ethical guidelines. To help providers operate in this new legal and ethical climate, legislation is needed to authorize case-by-case safe harbors.