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Stark Law Update Carolyn Heyman-Layne, JD (907) 257-7870 Heather Campbell, RN, JD (515) 283-1000 Dorsey & Whitney LLP.

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Presentation on theme: "Stark Law Update Carolyn Heyman-Layne, JD (907) 257-7870 Heather Campbell, RN, JD (515) 283-1000 Dorsey & Whitney LLP."— Presentation transcript:

1 Stark Law Update Carolyn Heyman-Layne, JD (907) Heather Campbell, RN, JD (515) Dorsey & Whitney LLP

2 Stand in the Shoes Eliminated FMV exception Recruitment Exception Changes Retention Exception Changes Academic Medical Centers Productivity Bonuses Independent Contractor Physicians Compliance Training Correction of Non-Monetary Overpayments Stark III- December 2007

3 Medicare Physician Fee Schedule and IPPS Provisions- “Stark IV” Services provided “under arrangements” Unit of Service (Per Click) Payments in Lease Arrangements Percentage-Based Compensation Changes to Stand in Shoes Alternative Method for Compliance with Signature Requirements Period of Disallowance Obstetrical Malpractice Insurance Subsidies Ownership or Investment Interests in Retirement Plans Effective Dates- Phased in over the next year

4 Stark III- FMV Eliminated safe harbor FMV runs both ways, i.e., covers payments by DHS entity to physician and payments by physician to DHS entity Effect of eliminating exception for payment by physician to DHS entity Doesn’t apply to space leases

5 Recruitment-Noncompetes Non-competes are prohibited only if they “unreasonably restrict the recruited physician’s ability to practice medicine in the geographic area served by the hospital.’’

6 Recruitment-Relocation Clarifies that a physician must relocate his or her practice from outside the hospital’s geographic service area to a location inside the service area and either: –move his or her medical practice at least 25 miles; or –have a new medical practice that derives at least 75% of its revenues from professional services furnished to patients not previously seen by the physician at his or her medical practice during the past 3 years;

7 Recruitment-Geographic Area Under Phase III, the geographic area may include one or more ZIP codes from which the hospital draws no inpatients, provided that such ZIP codes are surrounded by ZIP codes from which the hospital draws at least 75 percent of its inpatients. For those hospitals that draw fewer than 75 percent of its inpatients from all of the contiguous ZIP codes from which it draws inpatients, the geographic area served by the hospital will be deemed to be the area composed of all of the contiguous ZIP codes from which the hospital draws its inpatients

8 Recruitment-Rural Hospitals Permits rural hospitals to determine their "geographic service area" using an alternative test that encompasses the lowest number of contiguous zip codes from which the hospital draws at least 90 percent of its inpatients.

9 Income Guarantees Phase II limited the costs allocable by the physician practice to the recruited physician to the actual additional incremental costs to the practice attributable to the recruited physician. Phase III permits more generous income guarantees, under certain circumstances, when a physician is recruited to replace a deceased, retiring, or relocating physician.

10 Recruitment Signatory Recruited physician must be a signatory to the recruitment assistance agreement entered into between the hospital and the physician Insufficient to allow the recruited physician to sign a one-page acknowledgement agreeing to be bound by the terms of the recruitment agreement.

11 Retention Exception Changes Phase II exception for retention payments by a hospital in an HPSA to a physician who received a bona fide, firm, written offer that would require the physician to move at least 25 miles and outside the geographic area served by the hospital seeking to retain the physician. Phase III permits a written certification by the physician that the physician has a bona fide opportunity for future employment that would require a move of his or her medical practice at least 25 miles and outside the service area of the current hospital.

12 Productivity Bonuses Permits payment of a productivity bonus (but not profit sharing) to a physician for income directly derived from designated health service referrals that are “incident to” the physician’s performance of services.

13 Compliance Training Protects certain compensation arrangements for compliance training for which physicians may receive Continuing Medical Education (CME) credit –compliance training must be the primary focus of the program and not just incidental to a CME program. –Internet-based compliance training may qualify under this exception if the physician accesses the on-line training while in the entity’s local community or service area and all other elements of the exception are satisfied. –Reimbursement of a physician’s out-of-pocket expenses for training outside of the entity’s community or service area is not covered.

14 Correction of Non-Monetary Overpayments Can correct if inadvertently exceed the non- monetary compensation limit by no more than 50%, and the physician who receives the compensation returns the excess amount by the earlier of: –the end of the calendar year in which he or she receives it; or –180 consecutive calendar days from receipt –Can only rely once every 3 years for particular physician

15 MPFS and IPPS- Stark IV “Stark IV” is culmination of 2008 Medicare Physician Fee Schedule provisions and 2001 Inpatient Prospective Payment System provisions Effective Dates- October 1, 2008 and October 1, 2009, depending on the provision

16 “Under Arrangements” MFPS for first introduced the idea that the definition of entity would be revised Stark IV- Amends the definition of entity under to provide that an entity furnishes DHS if it is: –the person or entity that performs the DHS; or –the person or entity that presents a claim for Medicare benefits for DHS; Where one entity performs and another bills for DHS, both are now DHS entities with respect to the service

17 Under Arrangements Physician owner of an entity that provides services “under arrangements” may now have an ownership interest in that entity that will not qualify for an exception. No definition of what it means to “perform” the service- a service is performed if the physician organization provides medical services and could bill for the services but instead contracts with the provider and the provider bills for the service Not furnishing DHS if the entity only: –Leases or sells space/equipment –Furnishes supplies –Provides management or billing services –Provides personnel

18 Unit of Service (Per Click) Payments - Leases Revises the exceptions for rental of office space, rental of equipment Preamble - concerns about whether per click leases are consistent with fair market value, commercially reasonable Concerns that lessees are paying physician-owned companies more than they would a non-physician owned company Questions of whether it is commercially reasonable to continue to lease and pay a per-click rate when volumes would support purchase of equipment outright.

19 Percentage Based Compensation Formulae Compensation formula for rental charges under office space and equipment exceptions cannot be based on a percentage of revenue Includes use of percentage of revenue raised, earned, billed, collected, or otherwise attributable to services performed or business generated in lease leased space or with the leased equipment. CMS has stated it is taking a “targeted approach” with the limitations and will continue to evaluate percentage-based compensation in other exceptions Effective October 1, 2009 No grandfathering

20 Stand in the Shoes Stark III provided that a physician will stand in the shoes of his/her physician organization with respect to compensation arrangements between the physician organization and the DHS entity. CMS was concerned that entities were exploiting a loophole in the indirect compensation exception Under the new regulations, the requirement is that the relationship between the physician organization and the DHS entity must meet a direct compensation exception Physician organization is a medical practice comprised of two or more physicians organized to provide patient care services Under Stark III, a hospital that employed physicians was not a physician organization.

21 Stand in the Shoes Stark III SITS created issues for AMCs and integrated delivery systems CMS delayed the application of SITS to AMCs and to tax-exempt integrated delivery systems New rule provides for “required” and “permissive” SITS, depending on the nature of the physician’s ownership interest in the physician organization

22 SITS-Required A physician who has an ownership or investment interest in a physician organization will stand in the shoes of that organization EXCEPT - if the physician has a “titular” ownership interest “Titular” ownership interest-a physician has no right to any of the financial benefits of ownership. Physician and his/her wholly owned PC are always treated the same for purposes of SITS Physician who stands in shoes of his or her wholly owned PC also SITS of his/her physician organization

23 SITS-Permissive Nonowner physicians may, but are not required, to stand in the shoes of physician organizations Different treatment for owners/employees

24 Alternative Method for Compliance-Signatures Creates a new exception for arrangements that comply with an exception except for the signature requirement: –Applies to signature requirements under space rental, equipment rental, physician recruitment, FMV, indirect compensation, referral services, obstetrical malpractice subsidies, retention payments, electronic prescribing and electronic health records exceptions –If noncompliance is inadvertent - must obtain required signatures within 90 consecutive days following the date of noncompliance –If noncompliance is not inadvertent- must obtain the required signatures within 30 consecutive days following date of noncompliance –May only use this exception once every 3 years with respect to the same referring physician

25 Period of Disallowance Attempts to define the period of disallowance that is associated with a noncompliant relationship: –Begins at the time the financial relationship fails to meet all of the requirements of an applicable exception –Ends no later than the date the relationship meets all of the requirements of an applicable exception and all excess compensation is returned or underpayment has been paid

26 Period of Disallowance CMS stresses that the period of disallowance sets the outer limits for the period to allow providers to be certain of when billing will be permitted again Can make an argument on a case by case basis for a shorter period of disallowance

27 Amendments In Stark III, CMS took the position that in order to satisfy “set in advance” requirement, if parties desired to change the compensation, the parties could not amend an agreement, but instead would be required to terminate the agreement and enter into a new agreement Now, rule is that amendments during the term of the agreement will be consistent with the set in advance requirement if all of the requirements of an exception are satisfied; the amended compensation is determined before the amendment is implemented; the amended compensation does not take into account the volume or value of referrals; and the amended compensation remains in place for at least one year

28 Obstetrical Malpractice Insurance Subsidies Retains the current exception Provides an alternative set of requirements under which hospitals, FQHCs, and rural health clinics may provide obstetrical malpractice insurance subsidies to physicians who engage in OB practice as a routine part of their medical practice: –If practice is in a rural areas. HPSA or area with demonstrated need per advisory opinion, or at least 75% of the physician’s OB patients must reside in a medically underserved area, or be members of a medically underserved population –In writing, signed by parties and specify payments; –Not conditioned on referral of patients –No consideration of volume or value of referrals or other business generated between the parties

29 Obstetrical Malpractice Insurance Subsidies (cont’d) –Physician must be permitted to establish staff privileges at any entity and refer to any entity –Payment is made to the person or organization providing the insurance (not physician) –Physician must treat Federal health care program OB patients in a nondiscriminatory manner –Insurance must be bona fide malpractice insurance and the premium must be calculated based on bona fide risk covered under the insurance –For each coverage period (not to exceed 1 yr), at least 75% of the physician’s OB patients treated under the insurance during the prior period (not to exceed 1 yr) must have either resided in a rural area, HPSA, MUA, or an area with a demonstrated need as determined in an advisory opinion, or been part of a MUP

30 Ownership/Investment In Retirement Plans Ownership or investment interest does not include an interest in an entity that arises from a retirement plan offered by that entity to the physician (or a member of his or her immediate family) through the physician’s (or immediate family member’s ) employment Previously, excluded any interest in a retirement plan Perceived loophole where physician could use this exception to purchase or invest in entities to which he or she referred

31 Questions? THANK YOU!


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