| -- End Ad Box ---> | | | | where a physician (or entity owned by a |
| On August 19, 2008, the Centers for Medicare | | | | physician) leases space and/or equipment to |
| and Medicaid Services (CMS) published final | | | | another entity and the physician subsequently |
| Stark rules in its 2009 Final Hospital Inpatient | | | | refers patients to that other entity for services. |
| Prospective Payment Systems Rule | | | | For example, this would prohibit a cardiologist |
| (Final Rule). The Final Rule contains several | | | | from leasing a CT scanner to a hospital on a |
| significant modifications to the Stark regulations, | | | | per-click basis if that cardiologist refers patients to |
| some of which will require physicians, hospitals, or | | | | the hospital for CT services. While the original |
| other healthcare providers to unwind or | | | | proposal only restricted per-click payments |
| restructure their arrangements. Several of the | | | | when the physician was a lessor, CMS also sought |
| new Stark regulations are not effective until | | | | comment on whether it should prohibit per-click |
| October 1, 2009, in order to give parties time to | | | | payments in situations in which the physician is the |
| unwind or restructure arrangements which are | | | | lessee and a DHS entity is the lessor. |
| impacted by the changes, but other provisions are | | | | Under the Final Rule, CMS prohibits the use of |
| effective October 1, 2008. In addition to these | | | | per-click payment methodologies for leasing |
| new Stark changes, healthcare providers must | | | | arrangements under the space and equipment |
| stay tuned for additional Stark and Medicare | | | | lease exceptions, fair market value exception, and |
| payment regulatory changes, which are expected | | | | the exception for indirect compensation |
| to be published in November 2008 as part of the | | | | arrangements to the extent that these charges |
| 2009 Medicare Final Physician Fee Schedule, and in | | | | reflect services provided to patients referred |
| future rulemakings. | | | | between the parties. Notably, the per-click |
| In the Final Rule, CMS makes various revisions to | | | | prohibition applies whether the lessor is the |
| the Stark regulations. Some of these revisions | | | | referring physician or an entity in which the |
| emanate from proposals contained in the 2008 | | | | referring physician has an ownership interest. The |
| Medicare Proposed Physician Fee Schedule and | | | | Final Rule is also broader than the original proposal |
| some of the revisions emanate from proposals | | | | and applies if the lessor is a DHS entity that |
| contained in the 2009 Inpatient Prospective | | | | refers patients to a physician or physician |
| Payment System Proposed Rule. Because many | | | | organization lessee. |
| of the proposals are interrelated, CMS opted to | | | | CMS notes that it is not prohibiting per-click |
| finalize them in one rulemaking, making it easier to | | | | compensation arrangements involving |
| analyze their integrated application to financial | | | | non-physician-owned lessors to the extent that |
| relationships between physicians and entities that | | | | such lessors are not referring patients for DHS, |
| provide designated health services (DHS). | | | | nor are they prohibiting per-click payments to |
| Summary of the Final Rule | | | | physician lessors for services rendered to patients |
| This section will summarize the major points | | | | who were not referred to the lessee by the |
| contained in the Final Rule. Further detail on the | | | | physician lessors. However, CMS reminds |
| significant aspects of the Final Rule will be set | | | | stakeholders that all such arrangements must still |
| forth later in this article. A synopsis of the Stark | | | | satisfy all of the requirements of the lease |
| changes as they appear in the Final Rule is as | | | | exceptions, including the requirements that they |
| follows: | | | | be fair market value and commercially reasonable. |
| Stand in the Shoes Provisions: | | | | Notably, in addition to the per-click restrictions, |
| Effective October 1, 2008, only physicians who | | | | CMS also states that on demand rental |
| have an ownership or investment interest in their | | | | agreements are effectively per-click or per-use |
| physician organizations (e.g., group practice) will be | | | | arrangements, and that it considers these types |
| required to stand in the shoes (SITS) of | | | | of agreements to be covered by the final |
| those organizations. Employed physicians and | | | | provision. Accordingly, on demand rental |
| physicians with a titular ownership interest | | | | payments are also now prohibited for leases of |
| may (but are not required to) stand in the shoes | | | | space and equipment to the extent that these |
| of their physician organizations. The Final Rule also | | | | charges reflect services provided to patients |
| carves out an exception for physicians | | | | referred between the parties. However, CMS |
| participating in financial arrangements that satisfy | | | | declined to prohibit all time-based leasing |
| the Stark exception for academic medical centers | | | | arrangements (e.g., block time leases), as CMS |
| and grandfathers a limited group of arrangements | | | | believes that may meet the requirements of the |
| that previously met the Stark indirect | | | | space and equipment lease exceptions. CMS |
| compensation arrangement exception. | | | | cautions, however, that the same concerns that |
| Set in Advance and Amendments to | | | | arise with respect to per-click payments can exist |
| Agreements: CMS now states that it is reversing | | | | with certain time-based leasing such as leasing the |
| its prior Stark II Phase III position and permitting | | | | space or equipment in small blocks of time (e.g., |
| multi-year agreements to be amended after the | | | | once a week for 4 hours), and parties entering |
| first year without violating Stark’s set | | | | into block leases should carefully structure them |
| in advance requirement. | | | | taking into account the anti-kickback statute. |
| Period of Disallowance: Effective October 1, | | | | The final per-click prohibitions are effective for |
| 2008, CMS establishes a rule that sets the outer | | | | lease payments made on or after October 1, |
| limit of the time period during which referrals are | | | | 2009. CMS delayed the effective date of these |
| prohibited as a result of a financial relationship that | | | | changes to provide parties sufficient time to |
| fails to satisfy a Stark exception. Disallowance | | | | restructure existing arrangements or to unwind |
| begins when the relationship fails to satisfy an | | | | such arrangements. |
| exception and ends no later than the date that it | | | | Services Provided Under Arrangements- |
| satisfies an exception and the parties have | | | | Time to Unwind |
| returned all overpayments or paid all | | | | Under current Stark law, only entities to which |
| underpayments. | | | | CMS makes payment for the DHS are considered |
| Alternative Method for Compliance with | | | | to be furnishing DHS. Prior to the changes |
| Signature Requirements: Effective October 1, | | | | contained in the Final Rule, Stark generally |
| 2008, if a financial relationship complied with an | | | | permitted physicians to invest in entities which |
| applicable Stark exception, except for meeting | | | | provided services under arrangements to |
| the signature requirement, Medicare payments to | | | | hospitals because the physician did not have an |
| the entity will be permitted if the signature | | | | ownership interest in the hospital (i.e., entity |
| requirement is satisfied within thirty (30) days (for | | | | furnishing DHS). The Final Rule significantly expands |
| knowing failures) or ninety (90) days (for | | | | the definition of entity to include entities |
| inadvertent failures) after the commencement of | | | | that perform services that are in turn billed as |
| the relationship. | | | | DHS by another entity. As a practical matter, this |
| Percentage-Based Leasing Arrangements: | | | | change means that referring physicians likely will |
| Effective October 1, 2009, CMS eliminates | | | | not be able to have an ownership or investment |
| percentage-based compensation in space and | | | | interest in under arrangements service |
| equipment leases, paralleling its new treatment of | | | | providers. |
| per-click payments in space and equipment | | | | Specifically, under the Final Rule, effective October |
| leases. Under the Final Rule, compensation for the | | | | 1, 2009, an entity for purposes of Stark |
| rental of office space or equipment that is | | | | will include the person or organization that has: (1) |
| determined using a formula based on a | | | | billed for the DHS; or (2) performed the DHS. |
| percentage of the revenue raised, earned, billed, | | | | Under these new rules, where one entity |
| collected, or otherwise attributable to the services | | | | performs a service that is billed by another entity, |
| performed, or business generated in the office | | | | both entities are considered DHS entities with |
| space, or the services performed or business | | | | respect to that service. Pursuant to the Final Rule, |
| generated through the use of equipment is | | | | any financial relationship between the service |
| prohibited. | | | | provider and the physicians who refer to it for |
| Per-Click Leasing Arrangements: | | | | services that the hospital bills under |
| Effective October 1, 2009, CMS eliminates the | | | | arrangements will need to comply with a Stark |
| use of per-click fee payments in space and | | | | exception. The arrangement will be analyzed as a |
| or equipment leases when the payments reflect | | | | direct financial relationship if the referring physician |
| services provided to patients referred between | | | | stands in the shoes of the service provider or as |
| the parties. This per-click fee prohibition | | | | an indirect financial relationship if the physician |
| applies to both direct leasing arrangements and | | | | does not, or is not required to, stand in the shoes |
| indirect leasing arrangements (e.g., leases between | | | | of the service provider. Direct compensation |
| physician-owned leasing companies and hospitals). | | | | exceptions should be available to protect referrals |
| Services Provided Under | | | | for the service provider’s non-owner |
| Arrangements: Effective October 1, 2009, | | | | physicians, but very few exceptions are available |
| both the hospital that bills for services provided | | | | for referring physicians who own an interest in |
| under arrangements and the entity that | | | | the service provider. |
| performs the services to the hospital will be | | | | CMS does not define what it means to |
| considered to be furnishing designated health | | | | perform a service, but does indicate that |
| services (DHS) under Stark. This | | | | an organization is not performing DHS if it only |
| change will effectively eliminate a referring | | | | leases or sells space or equipment, furnishes |
| physician’s ability to own interests in such | | | | supplies that are not separately billable, or |
| service providers. CMS does not define what it | | | | provides management, billing services or personnel |
| means to perform the services, but does | | | | to the entity performing the service. CMS does |
| signify that an organization is not performing a | | | | state that the common meaning of the term |
| DHS if it only leases or sells space or equipment, | | | | perform applies and it considers a physician |
| furnishes supplies that are not separately billable, | | | | or physician organization to have performed DHS |
| or provides management, billing services, or | | | | if the physician or physician organization does the |
| personnel to the entity performing the services. | | | | medical work for the service and could bill for the |
| Exception for Obstetrical Malpractice | | | | service, but the physician or organization has |
| Insurance Subsidies: Effective October 1, 2008, | | | | contracted with a hospital and the hospital bills for |
| CMS adds an alternative exception for subsidies | | | | the service instead. CMS warns, however, that |
| of malpractice insurance premiums provided by | | | | a physician service provider cannot escape the |
| hospitals, federally qualified health centers, and | | | | reach of the statute by doing substantially all of |
| rural health clinics. | | | | the medical work for a service, and arranging for |
| Ownership or Investment Interest in | | | | the billing entity or some other entity to complete |
| Retirement Plans: Effective October 1, 2008, CMS | | | | the service. |
| narrows the so-called retirement plan | | | | Further, certain entities such as physician-owned |
| exception to ensure that referring physicians | | | | medical device companies, are safe for now. In |
| cannot use it to evade Stark’s self-referral | | | | response to commenters that were concerned |
| prohibition by investing in a DHS entity via their | | | | that implant or medical device companies should |
| employer’s retirement plan. Under the Final | | | | not be considered an entity under Stark, CMS |
| Rule, only a physician’s ownership or | | | | states that we are not adopting the position |
| investment interest in their employer-sponsored | | | | that physician-owned implant or other medical |
| retirement plan is protected. | | | | device companies necessarily perform the |
| Burden of Proof: Under the Final Rule, CMS | | | | DHS’, and are therefore an |
| revises the regulations to place the burden of | | | | entity’ on that basis. |
| proof in appeals of Stark-based payment denials | | | | In the preamble commentary, many stakeholders |
| on the entity appealing the denial. This burden is | | | | expressed concern that the proposals would |
| consistent with the burden of proof on Medicare | | | | disrupt access to care, particularly in underserved |
| providers and suppliers appealing payment denials | | | | or rural areas. In response, CMS notes that it is |
| based upon other reasons, such as a failure to | | | | not prohibiting services to be furnished under |
| meet a condition of coverage. Moreover, CMS | | | | arrangements. For example, with respect to |
| clarifies that the burden of production at each | | | | service providers that furnish services to rural |
| level of appeal is initially on the DHS entity, but | | | | patients, CMS states that the new rules will not |
| may shift to CMS (or its contractors) depending | | | | alter the availability of the exception for an |
| upon the evidence presented by the DHS entity. | | | | ownership interest in a rural provider, but as a |
| Disclosure of Financial Relationships Report | | | | DHS entity, a physician owner/investor in such a |
| (DFRR): The Final Rule announces that CMS | | | | service provider would need to meet an |
| is proceeding with its proposal to send the DFRR | | | | ownership exception (such as the rural provider |
| to 500 hospitals. The DFRR is designed to collect | | | | exception) in order to protect his or her referrals |
| information regarding the ownership and | | | | to the service provider. |
| investment interests and compensation | | | | With respect to ownership or investment |
| arrangements between hospitals and physicians. | | | | interests that will not qualify for the rural provider |
| Hospitals will have sixty (60) days to complete | | | | exception, CMS believes access will not be |
| the DFRR and may be subject to civil monetary | | | | significantly disrupted for several reasons. First, |
| penalties of up to $10,000 per day that the | | | | CMS states that the final rules do not prohibit |
| submission is late, although CMS will first issue a | | | | physician group practices or other physician |
| letter to the hospital and the hospital may obtain | | | | organizations from contracting with a hospital for |
| an extension for good cause. | | | | the provision of services under |
| Stand in the Shoes (SITS)- CMS | | | | arrangements. CMS points out that any |
| Simplifies the SITS Doctrine | | | | physician that has a compensation arrangement |
| Under the Stark Phase III SITS doctrine, referring | | | | (not an ownership or investment interest) with |
| physicians are treated as standing in the shoes of | | | | the physician group practice or other physician |
| their physician organization for purposes of | | | | organization may refer patients for services that |
| applying the rules that describe direct and indirect | | | | are provided by the hospital under |
| compensation arrangements between the | | | | arrangements provided that one of the |
| referring physician and a DHS entity. Under Stark | | | | compensation exceptions is met. Moreover, CMS |
| Phase III, a physician organization was defined as | | | | notes that to the extent that an owner/investor |
| a physician, physician practice, or a group practice. | | | | in the physician service provider has referred the |
| When performing a Stark analysis, the SITS | | | | patient for a service but then personally performs |
| provisions are applied for purposes of evaluating | | | | the service, there is no referral and Stark is not |
| the relationship between a DHS entity and a | | | | implicated. CMS does caution, however, that |
| referring physician when a physician organization is | | | | despite the personal performance of the |
| an intervening link in the chain of relationships and | | | | professional component, the technical component |
| linked to the physician with no other intervening | | | | to any service or a facility fee that is billed by |
| links between them. Under the SITS doctrine, a | | | | any provider under arrangements is |
| referring physician is considered to have the same | | | | considered a referral. CMS also believes that in |
| compensation arrangements as the physician | | | | many cases physician groups could provide the |
| organization in whose shoes the physician stands. | | | | services and bill for them directly (without the |
| If a physician stands in the shoes of his or her | | | | need to contract with a hospital to provide them |
| physician organization, the physician (and DHS | | | | under arrangements), and that to the |
| entity) will have to satisfy a more stringent direct | | | | extent that the services would be DHS when |
| Stark exception with regard to financial | | | | performed and billed by the physician group |
| relationships between the physician organization | | | | directly, referrals to the physician entity could be |
| and the DHS entity, to which the physician refers. | | | | protected by the in-office ancillary services |
| Industry stakeholders, such as academic medical | | | | exception. |
| centers (AMCs) and integrated tax-exempt | | | | It is expected that there are a substantial number |
| health care delivery systems (IDSs), | | | | of existing under arrangements |
| responded to the Phase III SITS provisions with | | | | transactions involving physician-owned entities that |
| concerns as to how the SITS provisions would | | | | will have to be unwound or restructured before |
| apply in such settings, and how mission | | | | the October 1, 2009 effective date. One issue |
| support payments and similar payments | | | | that appears to be left uncertain is whether an |
| (support payments) would satisfy the | | | | entity that performs some, but not substantially |
| requirement contained in many direct Stark | | | | all, of the medical work for the service (e.g., |
| exceptions that compensation be fair market | | | | turnkey management service provider) will be |
| value for items or services provided. These | | | | considered to be performing DHS. |
| stakeholders argued that prior to Stark Phase III | | | | New Alternative Exception for Obstetrical |
| SITS, these support payments were analyzed | | | | Malpractice Insurance Subsidies |
| under the indirect compensation arrangement | | | | The current Stark regulations include an exception |
| rules, and were permitted. In order to address | | | | for obstetrical malpractice insurance premium |
| these concerns, CMS delayed the applicability of | | | | subsidies that meet the anti-kickback safe harbor |
| SITS for one year only to certain compensation | | | | for such subsidies. In order to address concerns |
| arrangements involving AMCs and IDSs. Shortly | | | | that the current exception was unnecessarily |
| after publication of the one-year delay, other | | | | restrictive and limited access to obstetrical care in |
| stakeholders urged that the applicability of the | | | | underserved areas, CMS finalizes an alternative |
| SITS provisions to support payments should not | | | | exception for malpractice insurance premium |
| be dependent upon whether the system is an | | | | subsidies, which protects subsides paid by a |
| AMC or has a particular status under the Internal | | | | hospital, federally qualified healthcare center |
| Revenue Service. | | | | (FQHC), or rural health clinic (RHC). |
| In response, CMS proposed in the 2009 IPPS | | | | CMS did not extend the new alternative exception |
| proposed rule, two alternative ways to address | | | | to other entities because it was not persuaded |
| SITS. The first proposal included two options for | | | | that there would be no risk of program or patient |
| revising the Phase III SITS provisions, and the | | | | abuse. |
| second proposal left the Phase III SITS provisions | | | | The new alternative exception allows hospitals, |
| untouched, but proposed creating a new | | | | FQHCs, and RHCs to provide an obstetrical |
| regulatory exception for support payments. | | | | malpractice insurance subsidy to a physician who |
| Ultimately, in the Final Rule, CMS provides more | | | | regularly engages in obstetrical practice as a |
| flexibility for healthcare providers under the SITS | | | | routine part of a medical practice that is: (1) |
| doctrine. Specifically, CMS finalizes certain revisions | | | | located in a primary care HPSA , rural area, or |
| to the stand in the shoes Phase III provisions to | | | | area with a demonstrated need, as determined |
| deem only a physician who has an ownership or | | | | by the Secretary in an advisory opinion; or (2) is |
| investment interest in a physician organization to | | | | comprised of patients at least 75% or whom |
| stand in the shoes of that physician organization. | | | | reside in a medically underserved area |
| Further, physicians with only a titular ownership | | | | (MUA) or are part of a medically |
| interest are not required to stand in the shoes | | | | underserved population (MUP). The criteria |
| of their organizations. Physicians with titular | | | | of this new exception focus on the patient |
| ownership interests are those physicians without | | | | population served by the physician receiving the |
| the ability or the right to receive the financial | | | | subsidy, rather than focusing on the location of |
| benefits of ownership or investment, including, but | | | | the entity providing the subsidy. |
| not limited to, the distribution of profits, dividends, | | | | In addition, the new alternative exception requires |
| proceeds of sale, or similar returns on investment | | | | the following: (1) the arrangement is set out in |
| (e.g., captive P.C.). In sum, CMS provides more | | | | writing, signed by the physician, and the hospital, |
| flexibility under the Final Rule, now only permitting | | | | FQHC, or RHC, and specifies the payments to be |
| (but not requiring as it did under Stark Phase III), | | | | made and the terms under which the payments |
| non-owner physicians and titular owners to stand | | | | are to be provided; (2) the arrangement is not |
| in the shoes of their physician organizations. | | | | conditioned on the physician’s referral of |
| Additionally, CMS creates a carve out from the | | | | patients to the entity providing the payment; (3) |
| SITS provisions for arrangements that meet the | | | | the hospital, FQHC, or RHC does not determine |
| requirements of the AMC Stark exception in | | | | (directly or indirectly) the amount of payment |
| Section 411.355(e), but CMS declined to finalize a | | | | based upon the volume of value of any actual or |
| separate exception for compensation | | | | anticipated referrals or other business generated |
| arrangements involving support payments in the | | | | between the parties; (4) the physician is allowed |
| context of AMCs and IDS. CMS stated that it | | | | to establish staff privileges any hospital, FQHCs, |
| was not its intention, now or in the future, to | | | | or RHCs and to refer business to such entities |
| regulate financial relationships between DHS | | | | (except as referrals may be restricted under an |
| entities and referring physicians by making | | | | employment contract); (5) The payment is made |
| exceptions to rules or exceptions within existing | | | | to the person or organization (other than the |
| exceptions simply in response to complaints or | | | | physician) that is providing malpractice insurance |
| concerns in the industry. CMS also declined to | | | | (including a self-funded organization); (6) the |
| finalize its earlier proposal regarding compensation | | | | physician treats obstetrical patients who receive |
| arrangements between physician organizations and | | | | medical benefits or assistance under any Federal |
| AMC components for the provision of services | | | | health care program in a nondiscriminatory |
| required to satisfy the AMC’s obligations | | | | manner; (7) the insurance is a bona fide |
| under the Medicare graduate medical education | | | | malpractice insurance policy or program and the |
| rules, as CMS believes that existing exceptions | | | | premium, if any, is calculated based on a bona fide |
| (e.g., bona fide employment, personal service | | | | assessment of the liability risk covered under the |
| arrangements, and fair market value) provide | | | | insurance; (8) for each coverage period (not to |
| adequate protection for arrangements between | | | | exceed one year), at least 75% of the |
| physician organizations and AMCs for GME-related | | | | physician’s obstetrical patients treated |
| services. | | | | under the coverage of the malpractice insurance |
| CMS also continues the grandfathering of certain | | | | during the prior year (not to exceed one year) (a) |
| indirect compensation arrangements and allows | | | | resided in a rural area, HPSA, MUA, or an area |
| those arrangements to continue to avoid SITS | | | | with a demonstrated need for the |
| until the expiration of their current term (if such | | | | physician’s obstetrical services as |
| term has been in effect since the publication of | | | | determined by the Secretary in an advisory |
| Stark II Phase III (September 5, 2007)). | | | | opinion or (b) were part of a medically |
| Arrangements that were grandfathered that are | | | | underserved population ; and (9) the arrangement |
| up for renewal prior to October 1, 2008, will need | | | | does not violate the anti-kickback statute, or any |
| to comply with the current (Phase III) SITS rules, | | | | Federal or State law or regulation governing billing |
| in which all physicians (owners and non-owners) in | | | | or claims submission. |
| a physician organization stand in the shoes of the | | | | With respect to physicians with a part-time |
| physician organization, but agreements that are up | | | | obstetrical practice, the new alternative exception |
| for renewal after October 1, 2008 will need to | | | | also allows payment of the obstetrical portion of |
| comply with the new more flexible SITS | | | | malpractice insurance that is related exclusively to |
| provisions. | | | | services provided in a rural area, primary care |
| Overall, the final SITS provisions are more flexible | | | | HPSA, or an area with demonstrated need for |
| and should provide relief for certain industry | | | | the physician’s obstetrical services, or in |
| stakeholders, such as AMCs, IDSs, and physician | | | | any area if at least 75% of the physician’s |
| organizations that are not owned by referring | | | | obstetrical patients treated in the coverage period |
| physicians. | | | | resided in a rural area or MUA or were part of a |
| Entity SITS not Finalized | | | | MUP. |
| Last, CMS did not finalize the entity version of | | | | DHS entities and physicians who rely upon this |
| SITS that would have considered a DHS entity to | | | | new alternative exception will not be protected |
| stand in the shoes of an organization in which it | | | | under the anti-kickback safe harbor. |
| had a 100 percent ownership interest. CMS | | | | Ownership or Investment Interest in Retirement |
| cautions, however, that arrangements that | | | | Plans- Loophole Closed |
| attempt to evade restrictions on payments for | | | | Under current Stark regulations, ownership and |
| referrals by using interposed organizations are | | | | investment interests do not include an interest in |
| highly suspect under the fraud and abuse laws | | | | a retirement plan. In response to concerns that |
| and will be subject to close scrutiny. | | | | some physicians were using retirement plans to |
| Set in Advance and Amendments to | | | | purchase or invest in other entities (other than |
| Agreements- CMS Changes its Position | | | | the one that is sponsoring the retirement plan), |
| In response to comments in the preamble | | | | CMS finalizes its earlier proposal to make clear |
| discussion, CMS indicates that it has reconsidered | | | | that the exclusion from the definition of |
| its earlier Stark II Phase III Final Rule position, that | | | | ownership or investment interest of an |
| a multi-year agreement for rental of office space | | | | interest in a retirement plan pertains only to an |
| or a personal service arrangement may not be | | | | interest in an entity arising from a retirement plan |
| amended during its term without violating the | | | | offered by that entity to the physician (or his or |
| Stark exceptions’ requirements that the | | | | her immediate family member) through the |
| compensation under the arrangement be set | | | | physician’s (or immediate family |
| in advance for the term of the agreement. | | | | member’s) employment with that entity. |
| This earlier position was widely criticized as | | | | Accordingly, under the Final Rule, a referring |
| imposing additional transaction costs on the parties | | | | physician, for example, that is employed by a |
| to these agreements by requiring them to | | | | practice, and through his employment which such |
| terminate an existing agreement and enter into a | | | | practice, has an interest in the practice’s |
| new agreement with modified terms rather than | | | | retirement plan, and the practice’s |
| simply amending the agreement. | | | | retirement plan then invests in a home health |
| CMS now states that in light of the new final | | | | agency, will need to rely upon an ownership |
| revisions with respect to percentage-based and | | | | exception for his investment in the home health |
| per-click compensation formulae, an | | | | agency, just as if he or she had invested directly |
| agreement is permitted to be amended as long as | | | | in the home health agency. As a practical matter, |
| the following criteria are met: (1) All of the | | | | unless the rural provider exception applies, there |
| requirements of an applicable exception are | | | | likely is no applicable ownership exception for |
| satisfied; (2) The amended rental charges or | | | | which the referring physician can rely. CMS views |
| compensation (or compensation formula) is | | | | this regulatory clarification as closing a loophole |
| determined before the amendment is | | | | that otherwise would have allowed physicians and |
| implemented, and the formula is sufficiently | | | | group practices to skirt the general prohibition |
| detailed that it can be verified objectively; (3) The | | | | under Stark. |
| formula for amended rental charges does not | | | | Burden of Proof- Not on CMS |
| take into account the volume or value of referrals | | | | The Final Rule clarifies, by modifying regulatory |
| or other business generated by the referring | | | | text, that when a DHS entity appeals a claim for |
| physician; and (4) The amended rental charges or | | | | payment that was denied on the basis that it was |
| compensation (or compensation formula) remain in | | | | furnished pursuant to a prohibited referral under |
| place for at least one year for the date of | | | | Stark, the DHS entity has the burden of proof at |
| amendment. CMS also clarifies that this rule | | | | each level of the appeals process to establish that |
| regarding amendment of arrangements between | | | | the service was not provided pursuant to such a |
| DHS entities and physicians applies to all | | | | prohibited Stark referral. CMS states that this |
| compensation exceptions that include a one-year | | | | approach is consistent with the current Medicare |
| term requirement. This change in position | | | | claims appeals process. |
| represents CMS’ current interpretation of | | | | Further, CMS clarifies that the burden of |
| set in advance and is not a change in | | | | production, at each level of appeal, is on the |
| regulation. | | | | claimant initially, but the burden may shift to CMS |
| Period of Disallowance for Non-Compliant | | | | or its contractors during the course of the |
| Relationships Defined | | | | proceeding depending upon the sufficiency of the |
| Under Stark, the period of time for which a | | | | evidence presented by the claimant. |
| physician cannot refer DHS to an entity and for | | | | Although CMS insists that it is appropriate to |
| which the entity cannot bill Medicare because the | | | | require a provider or supplier to demonstrate that |
| financial relationship between the referring | | | | its financial relationship with a referring physician |
| physician and the entity failed to satisfy all of the | | | | does, in fact, satisfy an exception and that the |
| requirements of an exception is referred to as | | | | claim at issue should be paid, it is notable that |
| the period of disallowance. In the Final Rule, | | | | Medicare’s Recovery Audit Contractors |
| CMS finalizes its earlier period of disallowance | | | | (RACs) who are paid on a contingency fee |
| proposals which were intended to place an outside | | | | basis and who will be auditing providers nationwide |
| limit on the period of disallowance in certain | | | | in the near future , have in their arsenal a new |
| circumstances. Specifically, the period of | | | | Stark payment denial code. Specifically, CMS |
| disallowance begins at the time the financial | | | | issued a transmittal to contractors, which instructs |
| relationship fails to satisfy the requirements of an | | | | such contractors to use new claim adjustment |
| applicable exception and ends no later than: (1) | | | | reason code No. 213 when denying claims based |
| where the noncompliance is unrelated to | | | | on noncompliance with Stark. Interestingly, in the |
| compensation, the date that the financial | | | | transmittal, CMS attempts to educate such |
| relationship satisfies all of the requirements of an | | | | contractors regarding Stark and then states, in |
| applicable exception; (2) Where the noncompliance | | | | part, please note that the statute enumerates |
| is due to payment of excess compensation, the | | | | various exceptions,
You can read these |
| date which all excess compensation is returned, | | | | exceptions in Section 1877 of the Social Security |
| and the financial relationship satisfies all of the | | | | Act Sec. 1877
Given the complexity of the |
| requirements of an applicable exception; or (3) | | | | Stark prohibition and related regulations, arming |
| Where the noncompliance is due to payment of | | | | CMS contractors, including RACs, with a Stark |
| compensation that is insufficient to satisfy the | | | | denial code may have unforeseen results for |
| requirements of an applicable exception, the date | | | | healthcare providers. |
| on which all additional required compensation is | | | | Disclosure of Financial Relationships Report |
| paid, and the financial relationship satisfies all of the | | | | (DFRR)- It’s Coming |
| requirements of an applicable exception. | | | | In order to assist in enforcement of Stark, CMS |
| In the preamble, CMS notes that this new rule | | | | created an information collection instrument, |
| creates only an outside limit and is not intended to | | | | referred to as the Disclosure of Financial |
| prevent parties from arguing that the period of | | | | Relationships Report (DFRR). The DFRR is |
| disallowance ended sooner on the theory that the | | | | designed to collect information concerning the |
| financial relationship ended sooner. CMS does | | | | ownership and investment interests and |
| caution, however, that the beginning and end | | | | compensation arrangements between physicians |
| dates of a financial relationship for purposes of | | | | and hospitals. In the Final Rule, CMS announces |
| the disallowance period do not necessarily | | | | that it is proceeding with its proposal to send the |
| correspond with the term of the parties’ | | | | DFRR to 500 hospitals, both general acute care |
| written agreement. CMS also notes that taking | | | | hospitals and specialty hospitals. Notably, CMS |
| action to fix the outside date of the period of | | | | states that to the extent that it does not find a |
| disallowance does not vitiate a DHS | | | | physician self-referral violation based upon the |
| entity’s overpayment for any claims | | | | results of the DFRR, this should not be taken as |
| submitted during the period of disallowance as a | | | | an affirmative statement that the financial |
| result of the prohibited referrals. | | | | relationships are in compliance, and the |
| CMS provides a practical example of how the | | | | government will not be estopped from |
| period of disallowance rules apply in a situation in | | | | determining that there is such a violation. |
| which a physician is paid excess compensation | | | | In the Final Rule, CMS announced that the DFRR |
| under a personal services agreement for months | | | | would only be used as a one-time information |
| 1-6 and, near the end of month 6, the parties | | | | collection effort, and at this time, CMS is not |
| discover the error, with the result that, on July 1, | | | | instituting a regular ongoing reporting or disclosure |
| the physician repays the excess compensation for | | | | process for hospitals. Depending upon the |
| months 1-6 and the arrangement otherwise | | | | information received, however, CMS may propose |
| complies with all of the requirements of an | | | | future rulemaking to use the DFRR or some |
| applicable exception. Under the Final Rule, in the | | | | other instrument as a periodic or regular collection |
| example, the period of disallowance will end no | | | | instrument. |
| later than the date the party repays the excess | | | | Under the DFRR collection effort, hospitals will |
| compensation which is July 1. | | | | have 60 days to complete the DFRR, and |
| In discussing the period of disallowance rules, CMS | | | | although a hospital may be subject to civil |
| makes clear its view that simply correcting a | | | | monetary penalties of up to $10,000 per day for |
| financial relationship that falls outside of an | | | | each day beyond the deadline for disclosure of |
| applicable Stark exception due to technical | | | | such information, CMS states that it would not |
| noncompliance is not adequate. CMS believes | | | | impose a civil monetary penalty in any amount |
| that the statute does not contemplate that | | | | before issuing a letter to a hospital. A hospital |
| parties have a right to back-date arrangements, | | | | may also, upon a demonstration of good cause, |
| return compensation, or otherwise attempt to | | | | obtain an extension for submitting the DFRR. |
| turn back the clock so as to bring arrangements | | | | In response to commenters’ concerns |
| into compliance retroactively. | | | | regarding confidentiality of the information |
| Alternative Method for Compliance- CMS Provides | | | | collected under the DFRR, CMS states that it has |
| Some Flexibility for Technical Defects Due to | | | |
established numerous safeguards to |
| Missing Signatures | | | | physically house the data
In addition, we will |
| A host of Stark compensation exceptions include | | | | release such information, where appropriate, to |
| a signature requirement. This has created some | | | | federal law enforcement agencies such as the |
| exposure for certain DHS entities, such as | | | | HHS’s Office of the Inspector General |
| hospitals, because they may have many | | | | (OIG) and the Department of Justice (DOJ). |
| agreements with physicians that, if not signed, will | | | | CMS does state, however, that it will not release |
| fall outside of a Stark exception. CMS provides | | | | the information collected as a matter of course |
| some relief in the Final Rule by adopting a limited | | | | to such agencies, but will do so only where a |
| amendment that applies to existing compensation | | | | specific referral is warranted. |
| exceptions, which permits payments to an entity | | | | Notably, the preamble language is silent on |
| that fully complied with an applicable Stark | | | | whether CMS will share the information collected |
| exception, except with respect to a signature | | | | under the DFRR with its own contractors to meet |
| requirement, if: (1) the failure to comply with the | | | | their stated purpose [t]o assist in enforcement |
| signature requirement was inadvertent and the | | | | of the physician self-referral statute. |
| entity rectifies the failure to comply within 90 | | | | What’s Next? |
| days after the commencement of the financial | | | | Without a doubt, many of the changes to Stark |
| relationship (with regard to whether the referrals | | | | contained in the Final Rule will require modification, |
| have occurred or compensation paid), or (2) the | | | | restructuring, or unwinding of numerous existing |
| failure to comply with the signature requirement | | | | common healthcare arrangements. Healthcare |
| was not inadvertent (knowing) and the entity | | | | providers will have some additional time to comply |
| rectifies the failure within 30 days after the | | | | with many of the significant aspects of the Final |
| commencement of the financial relationship. This | | | | Rule, but providers should begin identifying |
| accommodation for temporary noncompliance | | | | arrangements that will need to be changed in |
| with a signature requirement, however, may only | | | | some manner to ensure that the arrangement |
| be used once every three years with respect to | | | | comes into compliance before the effective date. |
| a particular referring physician. | | | | Healthcare providers, in particular physicians and |
| Percentage-Based Compensation Formulae- The | | | | group practices, must also stay tuned for future |
| Demise of Percentage-Based Compensation for | | | | Stark and Stark-related changes, as CMS is |
| Rental of Office Space and Equipment | | | | expected to continue to focus on areas it |
| In an earlier proposal, due to its concerns | | | | believes are vulnerable to patient and program |
| regarding heightened risk of program and patient | | | | abuse. Specifically, there are many additional Stark |
| abuse, CMS planned on eliminating | | | | and Medicare payment rules which are expected |
| percentage-based compensation arrangements | | | | to be published in some form later this year as |
| except in the context of physician personally | | | | part of the 2009 Medicare Final Physician Fee |
| performed service agreements. In this Final Rule, | | | | Schedule and in future rulemakings. For example, |
| CMS adopts a more targeted approach and | | | | as part of the 2009 Medicare Proposed Physician |
| declines to limit percentage arrangements to only | | | | Fee Schedule (2009 MPPS), CMS is |
| personally performed physician services. Rather, | | | | proposing to require all physicians to enroll as an |
| CMS targets percentage-based compensation only | | | | IDTF for each practice location furnishing |
| in the context of space and equipment leases. | | | | diagnostic testing services (except diagnostic |
| Specifically, the Final Rule amends the current | | | | mammography). If adopted, this rule will eliminate |
| Stark exceptions for the rental of office space, | | | | the ability of physician practices to share |
| the rental of equipment, fair market value | | | | diagnostic imaging equipment and facilities, even if |
| compensation arrangements, and indirect | | | | the equipment or facility is located in the same |
| compensation arrangements to prohibit the use of | | | | building as the term is defined under the Stark |
| compensation formulae for space and equipment | | | | law in connection with the location requirements |
| leases based upon a percentage of the revenue | | | | of the in-office ancillary services exception. |
| raised, earned, billed, collected, or otherwise | | | | Further, physicians providing and billing for |
| attributable to the services performed or business | | | | diagnostic testing services must also stay apprised |
| generated in the office space lease or to the | | | | of changes related to the purchased diagnostic |
| services performed on or business generated by | | | | testing rule (or anti-markup rule). CMS is revisiting |
| the use of leased equipment. | | | | changes it had enacted to the anti-markup rule, |
| Effectively, by implementing these changes, CMS | | | | which are currently slated to go into effect on |
| ends most percentage-based arrangements for | | | | January 1, 2009. With respect to the anti-markup |
| the lease of space or equipment (direct or | | | | final rule, CMS is now proposing two alternative |
| indirect) between DHS entities and referring | | | | approaches for application of this rule. One |
| physicians. Current percentage-based leasing | | | | proposal would apply the anti-markup rule in all |
| arrangements for office space or equipment that | | | | cases in which the professional or technical |
| run afoul of these new rules will need to be | | | | component of a diagnostic testing service is |
| restructured prior to October 1, 2009, the | | | | either: (1) purchased from an outside supplier, or |
| effective date. | | | | (2) performed or supervised by a physician who |
| Further, of particular significance, although CMS did | | | | does not share a practice with the billing physician |
| not extend this new percentage-based prohibition | | | | or group. For purposes of this rule, a physician will |
| outside of the space and equipment lease context | | | | share a practice if he or she is employed |
| (e.g., management services), CMS warns that it | | | | or contracts with only one physician or group |
| intends to continue to monitor compensation | | | | practice. The second alternative approach would |
| formulae in arrangements between DHS entities | | | | maintain the current final rule which looks to the |
| and referring physicians and, if appropriate, may | | | | location (billing physician’s office) of the |
| further restrict percentage-based formulae in a | | | | test, but the proposal would expand the definition |
| future rulemaking. | | | | of such location to include testing services |
| Per-Click Leasing Arrangements Prohibited- | | | | performed within the same building in which the |
| Block Time Leases Survive for Now | | | | billing physician regularly furnishes patient care (as |
| Although unit-of-service (per-click) | | | | opposed to the earlier approach of same office |
| payments were generally permitted under the | | | | suite). |
| Stark law, due to concerns that this type of | | | | Last, CMS has also promised future proposals, |
| compensation methodology was inherently | | | | which may narrow the in-office ancillary services |
| susceptible to abuse, CMS introduced a proposal in | | | | exception, an exception that is crucial to many |
| the 2008 Proposed Physician Fee Schedule which | | | | physicians and group practices providing ancillary |
| prohibited the use of per-click payments involving | | | | services (e.g., physical therapy, imaging services, |
| space and/or equipment leases in those situations | | | | lab) through their offices. |