Renting Medical Equipment? A Guide to the AKS Equipment Rental Safe Harbor (42 CFR § 1001.952(c))

For small medical practices, renting equipment often feels like a practical way to save money while accessing the latest technology. However, what seems like a simple rental arrangement can quickly become a legal minefield if it inadvertently violates the federal Anti-Kickback Statute (AKS). Under the AKS, it is illegal to knowingly and willfully offer, pay, solicit, or receive any form of remuneration in exchange for patient referrals or the generation of business reimbursable by federal health care programs.

Recognizing that some financial arrangements are both common and legitimate, the Office of Inspector General (OIG) has created a series of "safe harbors" to protect providers who meet specific criteria. The equipment rental safe harbor, codified at 42 CFR § 1001.952(c), is particularly relevant for practices that rent medical devices, diagnostic tools, or other equipment. This article explains what the safe harbor requires, identifies risks for small practices, and provides a step-by-step compliance roadmap.

Understanding the Anti-Kickback Statute

The AKS is a criminal statute with broad reach. Even if no one intended to commit fraud, arrangements that are structured improperly can still be seen as creating opportunities for illegal inducements. For example, renting an MRI machine at below fair market value in exchange for referrals to a hospital could expose a practice to AKS liability. Violations can lead to criminal charges, civil monetary penalties, exclusion from Medicare and Medicaid, and even False Claims Act liability when claims arise from illegal arrangements.

Because of this, the OIG has developed safe harbors that describe payment and business practices not treated as offenses under the AKS. To qualify for protection, an agreement must meet all elements of a safe harbor. Falling short means the arrangement does not automatically violate the AKS but could be subject to government scrutiny.

The Equipment Rental Safe Harbor Explained

The equipment rental safe harbor (42 CFR § 1001.952(c)) allows small practices and other providers to lease medical equipment under certain conditions without running afoul of AKS. To qualify, a lease must satisfy the following requirements:

1. Written Agreement
   The lease must be set out in writing and signed by the parties. Informal, unwritten arrangements do not qualify.

2. Term of at Least One Year
   The lease must specify a term of at least one year. Short-term or month-to-month agreements do not meet safe harbor requirements.

3. Equipment Identified
   The agreement must clearly describe the equipment covered. This prevents practices from using vague descriptions to disguise additional, improper perks.

4. Set Compensation
   Payment must be fixed in advance and consistent with fair market value (FMV). The amount cannot vary based on the volume or value of referrals.

5. Commercial Reasonableness
   The arrangement must make sense even if no referrals are made. In other words, the practice must have a legitimate business need for the equipment.

6. No Excessive Use of Equipment
   The rented equipment must not be used in a way that suggests it was acquired primarily to generate referrals for federally reimbursable services.
   

Small practices often underestimate how easy it is to stray outside the safe harbor. Common pitfalls include:

• Below FMV Rent
  A hospital rents a diagnostic machine to a practice for a symbolic amount, expecting referrals in return.

• Flexible Usage Terms
  A lease that allows unlimited use of equipment for free beyond a set number of hours can be seen as hidden remuneration.

• Free Maintenance or Supplies
  Including consumables or technical support without proper valuation may violate FMV standards.

• Short-Term “Test” Leases
  Month-to-month rentals or trial agreements without a one-year term are noncompliant.

A small orthopedic clinic entered into an agreement with a local hospital to rent an X-ray machine. The hospital charged a nominal $100 per month for equipment worth thousands and did not require written documentation. Over time, regulators discovered that the clinic referred nearly all surgical patients back to the hospital.

Because the arrangement lacked FMV rent, a written agreement, and commercial reasonableness, it failed to meet safe harbor protections. The Office of Inspector General determined that the lease was effectively an inducement for referrals. The clinic was fined $250,000 and required to implement a compliance program with mandatory contract reviews.

The case illustrates that even small practices can face significant consequences when rental agreements are poorly structured.

Best Practices for Structuring Equipment Rental Agreements

To ensure compliance with the equipment rental safe harbor, small practices should follow these steps:

1. Document Everything in Writing
   Draft detailed contracts that describe the equipment, rental fee, and responsibilities of both parties.

2. Establish a One-Year Term
   Avoid short-term or month-to-month rentals; clearly state the term of the lease.

3. Use Independent FMV Assessments
   Hire an appraiser or use reputable FMV benchmarks to set rental payments.

4. Separate Other Services
   Do not bundle equipment rental with unrelated services, like staff support or maintenance, unless properly valued.

5. Review Commercial Reasonableness
   Ask whether the lease would still make sense if no patients were referred.

6. Conduct Annual Compliance Audits
   Review all contracts to confirm they continue to meet safe harbor criteria.

Safe harbor compliance is not just a legal technicality. For small practices, it is the difference between a functional business arrangement and potential financial disaster.

• Financial Penalties: Civil monetary penalties under AKS can exceed $100,000 per violation.

• Exclusion from Federal Programs: Violations can lead to loss of Medicare/Medicaid eligibility.

• Reputation Damage: Allegations of kickbacks can erode patient trust.

• False Claims Act Liability: Claims tainted by improper arrangements can result in treble damages.

By adhering to the equipment rental safe harbor, small practices can minimize risks and demonstrate good faith compliance.

Renting medical equipment may seem like a straightforward business decision, but under the Anti-Kickback Statute, improperly structured leases can create enormous legal and financial exposure. The equipment rental safe harbor at 42 CFR § 1001.952(c) provides a clear framework for avoiding risk, but only if practices meet all requirements: written agreements, one-year terms, FMV rent, commercial reasonableness, and independence from referrals.

For small practices, the path forward is clear: document contracts thoroughly, rely on independent valuations, and implement compliance audits. By doing so, you protect your practice not only from OIG investigations, but also from the reputational and financial fallout of being accused of kickbacks.

Boosting compliance resilience requires more than policies alone. An AKS compliance automation solution can streamline processes, simplify record-keeping, and deliver continuous risk assessments, helping you stay audit-ready and avoid compliance pitfalls.

1. U.S. Department of Health & Human Services, Office of Inspector General. Safe Harbor Regulations. 

2. 42 CFR § 1001.952(c). Equipment Rental, Safe Harbor. Legal Information Institute.

3. OIG Advisory Opinions. Guidance on Equipment Leases and Compliance Risks.