A hospital or health system that hands a referring physician free electronic health records (EHR) software is giving something of value to someone in a position to send it patients, the exact structure the Anti-Kickback Statute (AKS) and the Stark Law exist to police. Congress and HHS built a narrow exception for exactly this arrangement: the EHR donation exception at 42 CFR 411.357(w) for the Stark Law and the parallel safe harbor at 42 CFR 1001.952(y) for the AKS, made permanent (the prior sunset date was eliminated) by the 2020 CMS and OIG Regulatory Sprint to Coordinated Care rules. The exception only protects a donation that satisfies every condition. A donor that skips one, and a physician who accepts on that basis, have both built a kickback case against themselves.
What the Exception Actually Protects
The exception covers nonmonetary remuneration in the form of software and information technology and training services, including cybersecurity software, that is used predominantly to create, maintain, transmit, receive, or protect electronic health records. Hardware is not covered under either the Stark exception or the AKS safe harbor, so a donation that throws in laptops, tablets, or servers has already stepped outside the protected arrangement. The software must also be interoperable on the date it is provided, meaning it is certified to the applicable version of the ONC's certification criteria under 45 CFR Part 170. Outdated or uncertified software does not qualify no matter how the rest of the arrangement is papered.
The 15 Percent Cost-Share and the Other Conditions
Before the physician receives the initial donation, or any replacement items, the physician must pay 15 percent of the donor's cost for the software and services, and the donor cannot finance, loan, or otherwise cover that payment. CMS and OIG kept this threshold in the 2020 final rules despite comments asking for a reduced rate for small or rural practices. The arrangement must be in writing and signed, and it cannot make the physician's eligibility, or the amount and type of technology donated, turn on the volume or value of referrals the physician sends the donor. Receipt of the technology also cannot be made a condition of doing business with the donor. The same 2020 rulemaking dropped the exception's separate requirement that a donor not later restrict the software's interoperability, shifting that function to HHS's information-blocking rules instead.
Where Real Arrangements Drift Out of Compliance
The exception tends to fail at the edges, not at the center. A donor that quietly waives, discounts, or reimburses a physician's 15 percent share through a side arrangement, a marketing credit, or a reduced fee elsewhere has recreated the exact inducement the cost-share requirement exists to prevent. A donor that scales its EHR subsidy to a physician's admissions, referrals, or downstream billing volume has built a referral-volume condition into the deal even if no document says so directly. A Fresno, California health system learned this the expensive way: the Department of Justice announced on May 14, 2025 that Community Health System and Physician Network Advantage would pay $31.5 million to resolve False Claims Act allegations that included subsidizing EHR technology at referring physicians' offices in exchange for government healthcare program referrals. Matters like this typically surface first through a whistleblower complaint, then a civil investigative demand or a grand jury subpoena once investigators pull the underlying subsidy agreements; our guide on grand jury subpoenas in healthcare investigations covers what happens next.
The 15 percent cost-share is not a formality. Waiving it through a side arrangement recreates the exact inducement the exception exists to prevent.
Why Early Legal Counsel Is Critical
It is critical that physicians and healthcare entities promptly retain experienced healthcare defense counsel upon receiving a subpoena, audit notice, civil investigative demand, or other government inquiry touching an EHR donation. Early legal intervention can protect the provider's rights, ensure the response accounts for both the Anti-Kickback Statute and Stark Law exposure the same facts can create, avoid inadvertent admissions, and preserve defenses that a delayed response can forfeit. An AKS violation can also trigger OIG program exclusion, a collateral consequence our piece on OIG exclusion's scope and screening burden lays out, and delaying counsel can significantly affect the outcome of the matter.
How Health Law Alliance Can Help
Health Law Alliance defends physicians, hospitals, and healthcare companies against kickback and self-referral allegations tied to EHR donation arrangements, from the initial document request through a False Claims Act theory or a 18 USC 1347 criminal referral. Our bench includes a former federal prosecutor, background that shapes how we evaluate a donation arrangement's cost-share documentation and referral-neutrality before the government does. If your practice has structured, received, or is being asked about a free EHR or technology donation, contact us for a free, confidential consultation.
