Ann & Natalie’s Compliance Corner
This month, we discuss the highly anticipated Stark Phase III Final Rule. Missed last month’s article on the new guidance available to practices to help avoid fraud, waste and abuse charges within Medicaid? Click here.
As many of you know, the Stark Law (also referred to as the Physician Self-Referral Law), found in Section 1877 of the Social Security Act, prohibits physicians from referring Medicare and Medicaid patients to an entity with which they or any immediate family members have a financial relationship, if the entity provides certain “designated health services” (DHS) reimbursable by Medicare or Medicaid, unless an exception applies. It also prohibits an entity from filing claims with Medicare or Medicaid (or billing another entity, individual, or third party payer) for a prohibited referral.
On August 27, 2007, the Centers for Medicaid and Medicare Services (CMS) released the highly anticipated Stark Phase III Final Rule (Final Rule). This release follows the publication of an interim final rule to the Stark Law (“Phase I Rule”) on January 4, 2001, which presented the physician self-referral prohibition, the statutory exceptions to this prohibition, and the regulatory exceptions for certain arrangements. A subsequent interim rule followed (“Phase II Rule”) on March 26, 2004 which created additional regulatory exceptions and responded to comments received from the Phase I Rule.
The Final Rule includes clarifications and modifications to the Phase II Interim Final Rule. Published officially on September 5, 2007, the Final Rule becomes effective on December 4, 2007.
Here are some of the significant compliance issues addressed in the Phase III Final Rule that your practice should be aware of:
- Modification of the definition of indirect compensation. The changes require physicians to “stand in the shoes” of affiliates so that the relationship is not analyzed as an indirect relationship, but rather as a direct ownership or compensation relationship. This requires arrangements that previously did not constitute indirect compensation arrangements to comply with the provisions governing direct compensation arrangements.
- Clarification that “incident to” services also include supplies that meet applicable requirements with respect to rules governing group practice compensation.
- Clarification of who qualifies as a “physician in a group practice” to require an independent contractor physician to have a direct contractual relationship with the group.
- Significant changes to the exceptions for physician recruitment and retention payments in underserved areas. The changes provide more flexibility to recruit more physicians to underserved areas.
- Elimination of the compensation safe harbors within the definition of Fair Market Value. While the changes do not prohibit hourly payments, they eliminate the protection created for determining the hourly amount.
- Clarification of which provisions in office space and equipment lease agreements may be amended during the initial and subsequent terms of an agreement.
- The listing of certain “practice restrictions” that are now permissible in physician recruitment arrangements (e.g., non-solicitation provisions and reasonable liquidated damages).
CMS says that the Final Rule reduces “the regulatory burden on the health care industry through the interpretation of statutory exceptions and modification of the exceptions that were created using the Secretary’s discretionary authority.”
To view a copy of the Final Rule, click here.
Disclaimer: The content of Compliance Corner is for general informational purposes only and should not be interpreted as compliance guidance or advice. Consult your compliance advisor or attorney for compliance or legal advice on specific issues related to your practice or compliance program.
