|
While it has been a rather uneventful summer, a couple of items have happened that deserve comment. One of those is the issuance of final Stark III regulations.
On September 5, 2007, the Centers for Medicare & Medicaid Services (“CMS”) published in the Federal Register (72 FR 51011) the last of three rules that implement the law prohibiting physician self-referrals. The new rules take effect December 4, 2007. What is probably more interesting is that more changes are on the way. CMS has suggested significant changes to the Stark law in conjunction with the proposed physician fee schedule, and there is pending legislation in Congress as well. These proposed changes may affect many current arrangements, including per service lease arrangements, fee arrangements based on percentages, “under arrangements” purchase services, in-office ancillary services, and ownership of hospitals by physicians.
The Referrals Act as amended, commonly referred to as “Stark,” creates a limitation on certain physician referrals and prohibits physicians from referring any Medicare and Medicaid patients to an entity in which the physician has a financial relationship. This includes referrals for the 11 specifically designated health services.
Prohibited financial relationships include (a) ownership and investment interests and (b) compensation arrangements. Ownership or investment interests may be through equity, debt, or other means, and include indirect ownership interests through other entities. Under the regulations, the definition of a compensation arrangement, is extremely broad and includes virtually any form of remuneration. The definition of “physician” includes immediate family members of the physician.
The new regulations do not provide any new exceptions to the law; however they do provide some changes to the existing exceptions. The regulations make significant changes in the physician recruitment arena. As CMS comments in the preamble to the regulations:
Amendments [relating to physician recruitment] include:
Permitting rural health clinics to utilize the exception;
Deeming the geographic area served by a hospital to be the area comprised of all the contiguous zip codes from which the hospital’s inpatients are drawn when the hospital draws fewer than 75 percent of its inpatients from contiguous zip codes;
Permitting a hospital located in a rural area to determine the “geographic area served by the hospital” using an alternative test that encompasses the lowest number of contiguous (or in some case, noncontiguous) zip codes from which the hospital draws at least 90 percent of its inpatients;
Permitting a more generous income guarantee under certain circumstances in the case of a physician who is recruited to replace deceased, retiring or relocating physician;
Permitting group practices to impose certain practice restrictions;
Permitting rural hospitals to recruit physicians into an area outside of the hospital’s geographic service area if it is determined through a CMS advisory opinion that the area has a demonstrated need for the recruited physician;
Exempted from the relocation requirements a physician who, for the 2 years immediately prior to the recruitment arrangement, was employed on a full-time basis by a Federal or State bureau of prisons (or similar entity operating correctional facilities), the Department of Defense or Department of Veterans Affairs, or facilities of the Indian Health Service, provided that the physician did not maintain a separate private practice in addition to such full-time employment;
Exempting from the relocation requirement those physicians whom the Secretary has deemed in an advisory opinion not to have an established medical practice comprised of a significant number of patients who are or could become patients of the recruiting hospital;
Clarifying that a physician must relocate his or her practice from outside the geographic service area to a location inside the service area and either: (1) Move his or her medical practice at least 25 miles; or (2) have a new medical practice that derives at least 75 percent of its revenues from professional services furnished to patients (including hospital inpatients) not seem or treated by the physician at his or her prior medical practice site during the preceding 3 years, measured on an annual basis (fiscal or calendar year; and
Clarifying that [the section relating to income guarantees] pertains to any type of income guarantee.
72 FR 51048
In the Phase II regulations, there was a safe harbor created for determining the fair market value of a physician services. Phase III eliminates that safe harbor. Therefore, it is very important to be certain that a fair market value analysis is accomplished and documented fro nay new venture that implicates that statute.
Regarding compensation arrangements, Phase III specifies that a physician is deemed to have a direct compensation arrangement with the DHS entity if the only intervening entity between the physician and the DHS entity is his/her physician organization. The physician is deemed to “stand in the shoes” of the physician organization.
Copyright 2007 William Mack Copeland.
You can reprint any part
of this newsletter by providing the following acknowledgement: "Reprinted
with permission. William Mack Copeland, www.wmcopeland.com."
The information contained in this newsletter does not constitute
legal advice. No claims, promises or guarantees about the accuracy,
completeness, or adequacy of the information contained herein. As
legal advice must be tailored to the specific circumstances of each
case, and laws are constantly changing, nothing provided herein should
be used as a substitute for the advice of competent counsel. |
