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. 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 donation that misses one is outside the Stark exception, and under the AKS it loses safe harbor protection, where liability depends on the facts and circumstances, including the intent of the parties.
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 necessary and 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 at the time it is provided, and it is deemed interoperable if, on that date, it is certified by a certifying body authorized by the ONC to the certification criteria in the then-applicable version of 45 CFR Part 170. Software that is not interoperable when it is provided 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, or any party related to the donor, cannot finance that payment or loan the funds for it. CMS and OIG kept this threshold in the 2020 final rules despite comments asking them to eliminate it 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, depend directly on the volume or value of referrals or other business generated between the parties. 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 take any action to limit or restrict the software's interoperability, with CMS reasoning that newer and separate authorities are better suited to deter information blocking.
Where Real Arrangements Drift Out of Compliance
A donor that waives or discounts a physician's 15 percent share leaves the physician short of the 15 percent of the donor's cost the exception requires, and the donor, or any party related to the donor, cannot finance that payment or loan the funds for it. 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 settled allegations involving EHR subsidies: 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. The claims resolved were allegations only, with no determination of liability, and the settlement included a whistleblower's False Claims Act claims. In a False Claims Act investigation, the Attorney General may issue a civil investigative demand for documents, written answers, or oral testimony. Our glossary explains the grand jury subpoena, and our guide on grand jury subpoenas in healthcare investigations covers document and testimony subpoenas, grand jury secrecy, and privilege.
The physician must pay 15 percent of the donor's cost before receiving an initial or replacement donation, and the donor cannot finance that payment or loan the funds for it.
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 relevant defenses. 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 healthcare professionals and companies under federal investigation, including 18 USC 1347 healthcare fraud investigations and related civil False Claims Act exposure. Our bench includes a former federal prosecutor. If your practice has structured, received, or is being asked about a free EHR or technology donation, contact us for a free, confidential consultation.
