1. 1 By JONELL B. WILLIAMSON UNDERSTANDING AND WORKING WITH THE LATEST STARK LAW DEVELOPMENTS January 5, 2009 26 th Annual National CLE Conference Law Education Institute January 3-7, 2009

2. 2 Stark Prohibition Physician may not refer: Physician may not refer: Medicare or Medicaid patients Medicare or Medicaid patients For designated health services (DHS) For designated health services (DHS) To an entity with which the physician or an immediate family member has a financial relationship; To an entity with which the physician or an immediate family member has a financial relationship; Unless covered by an exception Unless covered by an exception 42 U.S.C.§ 1395 nn 42 U.S.C.§ 1395 nn

3. 3 Sanctions Denial of payment Denial of payment Refund of amounts collected due to improper billing Refund of amounts collected due to improper billing Civil Money Penalties Civil Money Penalties Civil Money Penalties for circumvention schemes Civil Money Penalties for circumvention schemes Exclusion Exclusion Potential False Claims Act Liability Potential False Claims Act Liability

4. 4 Designated Health Services (DHS) Clinical laboratory services Clinical laboratory services Physical therapy, occupational therapy, and speech-language pathology services Physical therapy, occupational therapy, and speech-language pathology services Radiology and certain other imaging services Radiology and certain other imaging services Radiation therapy services and supplies Radiation therapy services and supplies Durable medical equipment and supplies Durable medical equipment and supplies Parenteral and enteral nutrients, equipment and supplies Parenteral and enteral nutrients, equipment and supplies Prosthetics, orthotics and prosthetic devices and supplies Prosthetics, orthotics and prosthetic devices and supplies

5. 5 DHS - cont. Home health services Home health services Outpatient prescription drugs Outpatient prescription drugs Inpatient and outpatient hospital services Inpatient and outpatient hospital services Except: DHS does not include services reimbursed under composite rate: ASC or SNF Part A. [Exception not available for home health services] Except: DHS does not include services reimbursed under composite rate: ASC or SNF Part A. [Exception not available for home health services] Note: Outpatient speech-language pathology services is now a specific category of DHS Note: Outpatient speech-language pathology services is now a specific category of DHS

6. 6 Entity A physicians sole practice or a practice of multiple physicians or any other person, sole proprietorship, public or private agency or trust, corporation, partnership, limited liability company, foundation, nonprofit corporation, or unincorporated association that furnishes DHS. A physicians sole practice or a practice of multiple physicians or any other person, sole proprietorship, public or private agency or trust, corporation, partnership, limited liability company, foundation, nonprofit corporation, or unincorporated association that furnishes DHS.

7. 7 Entity - cont. Does not include referring physician, but does include his or her medical practice. Does not include referring physician, but does include his or her medical practice. Does not include a physicians practice when it bills Medicare for a purchased diagnostic test. Does not include a physicians practice when it bills Medicare for a purchased diagnostic test.

8. 8 Entity - cont. Changed definition of Entity at §411.351 Changed definition of Entity at §411.351 Prior to October 1, 2009, a person or entity is considered to be furnishing DHS if it is the person or entity to which CMS makes payment for the DHS Prior to October 1, 2009, a person or entity is considered to be furnishing DHS if it is the person or entity to which CMS makes payment for the DHS On and after October 1, 2009, both parties to an arrangement may be considered an entity if one party performs DHS and the other party bills for DHS On and after October 1, 2009, both parties to an arrangement may be considered an entity if one party performs DHS and the other party bills for DHS Affects services provided under arrangements with DHS entities Affects services provided under arrangements with DHS entities

9. 9 Financial Relationship §411.354 A direct or indirect ownership or investment interest in an entity that furnishes DHS; or A direct or indirect ownership or investment interest in an entity that furnishes DHS; or A direct or indirect compensation arrangement with an entity that furnishes DHS A direct or indirect compensation arrangement with an entity that furnishes DHS

10. 10 Indirect Ownership/Investment Unbroken chain of persons or entities between physician and DHS entity Unbroken chain of persons or entities between physician and DHS entity DHS Entity has actual knowledge (or reckless disregard or deliberate ignorance) of interest DHS Entity has actual knowledge (or reckless disregard or deliberate ignorance) of interest

11. 11 Indirect Compensation Unbroken chain of entities between physician and entity Unbroken chain of entities between physician and entity Aggregate compensation to physician from closest link in chain varies with volume or value or referrals to DHS entity Aggregate compensation to physician from closest link in chain varies with volume or value or referrals to DHS entity Entity furnishing DHS has actual knowledge or acts in reckless disregard of relationship Entity furnishing DHS has actual knowledge or acts in reckless disregard of relationship

12. 12 Direct Compensation: Stand in the Shoes Concept Physician deemed to have direct compensation arrangement with DHS Entity if Physician deemed to have direct compensation arrangement with DHS Entity if only intervening entity between the physician and the entity is his or her physician organization; and only intervening entity between the physician and the entity is his or her physician organization; and physician has an ownership or investment interest in the physician organization physician has an ownership or investment interest in the physician organization Physician is permitted to stand in the shoes of physician organization if only intervening entity between physician and DHS entity is the physician organization Physician is permitted to stand in the shoes of physician organization if only intervening entity between physician and DHS entity is the physician organization 42 C.F.R. §411.354 (c)(1) 42 C.F.R. §411.354 (c)(1)

13. 13 Stand in the Shoes – cont. Stand in the Shoes concept does not apply to physician whose ownership or investment interest is titular only. Stand in the Shoes concept does not apply to physician whose ownership or investment interest is titular only. Titular ownership or investment interest is an ownership or investment interest that excludes the ability or right to receive financial benefits of ownership or investment such as distribution of profits, dividends, proceeds of sale, or similar returns on investment. Titular ownership or investment interest is an ownership or investment interest that excludes the ability or right to receive financial benefits of ownership or investment such as distribution of profits, dividends, proceeds of sale, or similar returns on investment.

14. 14 Referral Request/ordering or certifying medical necessity (including tests ordered pursuant to consult) Request/ordering or certifying medical necessity (including tests ordered pursuant to consult) Does not include personally performed services Does not include personally performed services Does not include incident to services Does not include incident to services Imputed to physician who directs or controls person making referral (ex. NPs & PAs) Imputed to physician who directs or controls person making referral (ex. NPs & PAs)

15. 15 Referral - cont. Special rules for pathologists, radiologists and radiation oncologists Special rules for pathologists, radiologists and radiation oncologists Ordering additional services is not referral if: Ordering additional services is not referral if: Pursuant to request for consultation Pursuant to request for consultation Physicians opinion sought Physicians opinion sought Request documented on chart Request documented on chart Written report delivered Written report delivered Under supervision of consulting physician Under supervision of consulting physician

16. 16 Other Key Definitions physician organization physician organization A physician, a physician practice, or a group practice that complies with the requirements of §411.352 A physician, a physician practice, or a group practice that complies with the requirements of §411.352 Term used in applying Stand in the Shoes concept Term used in applying Stand in the Shoes concept

17. 17 Types of Exceptions General - Related to both ownership/investment interests and compensation arrangements (§411.355) General - Related to both ownership/investment interests and compensation arrangements (§411.355) Related only to ownership or investment interests (§411.356) Related only to ownership or investment interests (§411.356) Related only to compensation arrangements (§411.357) Related only to compensation arrangements (§411.357)

18. 18 General Exceptions Related to Ownership and Compensation (§411.355) Physician Services Physician Services In-office Ancillary Services In-office Ancillary Services Services Furnished by an Organization to Enrollees Services Furnished by an Organization to Enrollees Academic Medical Centers Academic Medical Centers Implants Furnished by ASC Implants Furnished by ASC EPO and Other Dialysis-related Drugs Furnished in ESRD Facility EPO and Other Dialysis-related Drugs Furnished in ESRD Facility Preventive Screening, Immunizations & Vaccines Preventive Screening, Immunizations & Vaccines Eyeglasses & Contact Lenses following Cataract Surgery Eyeglasses & Contact Lenses following Cataract Surgery Intra-family Rural Referrals Intra-family Rural Referrals

19. 19 Exceptions Related only to Ownership or Investment Interests (§411.356) Publicly-traded Securities and Mutual Funds Publicly-traded Securities and Mutual Funds Hospitals Located in Puerto Rico Hospitals Located in Puerto Rico Rural Providers Rural Providers Ownership Interest in a Whole Hospital Ownership Interest in a Whole Hospital

20. 20 Exceptions Related only to Compensation Arrangements (§411.357) Rental of Office Space Rental of Office Space Rental of Equipment Rental of Equipment Bona Fide Employment Bona Fide Employment Personal Service Arrangements Personal Service Arrangements Physician Recruitment Physician Recruitment Isolated Transactions Isolated Transactions Remuneration Unrelated to DHS Remuneration Unrelated to DHS Group Practice Arrangements with a Hospital Group Practice Arrangements with a Hospital

21. 21 Exceptions Related only to Compensation Arrangements (§411.357) cont. Payments by a Physician Payments by a Physician Charitable Donations by a Physician Charitable Donations by a Physician Nonmonetary Compensation Nonmonetary Compensation Fair Market Value Compensation Fair Market Value Compensation Medical Staff Incidental Benefits Medical Staff Incidental Benefits Risk-sharing Arrangements Risk-sharing Arrangements Compliance Training Compliance Training Indirect Compensation Arrangements Indirect Compensation Arrangements

22. 22 Exceptions Related only to Compensation Arrangements (§411.357) cont. Referral Services Referral Services Obstetrical Malpractice Insurance Subsidies Obstetrical Malpractice Insurance Subsidies Professional Courtesy Professional Courtesy Retention Payments in Underserved Areas Retention Payments in Underserved Areas Community-Wide Health Information Community-Wide Health Information

23. 23 Statutory Framework and Regulatory History Section 1877 of Social Security Act, in effect since January 1, 1995 Section 1877 of Social Security Act, in effect since January 1, 1995 January 9, 1998 – Proposed rule (63 FR 1659) January 9, 1998 – Proposed rule (63 FR 1659) January 4, 2001 – Phase I final rule, effective January 4, 2002 (66 FR 856) January 4, 2001 – Phase I final rule, effective January 4, 2002 (66 FR 856) March 26, 2004 – Phase II interim final rule, effective July 26, 2004 (69 FR 16054) March 26, 2004 – Phase II interim final rule, effective July 26, 2004 (69 FR 16054)

24. 24 Regulatory History – cont. July 12, 2007 – Proposed rule (72 FR 38122,38179 July 12, 2007 – Proposed rule (72 FR 38122,38179 September 5, 2007 – Phase III final rule, effective December 4, 2007 (72 FR 51012) September 5, 2007 – Phase III final rule, effective December 4, 2007 (72 FR 51012) November 15, 2007 – Final rule delaying effective date of stand in the shoes provisions of certain compensation arrangements (72 FR 64161) November 15, 2007 – Final rule delaying effective date of stand in the shoes provisions of certain compensation arrangements (72 FR 64161) April 30, 2008 – Proposed rule (73 FR 23683) April 30, 2008 – Proposed rule (73 FR 23683) August 19, 2008 – Final rule (73 FR 48434) August 19, 2008 – Final rule (73 FR 48434)

25. 25 Significant Issues in Final Rule Effective October 1, 2008 Effective October 1, 2008 Burden of Proof Burden of Proof Period of Disallowance Period of Disallowance Physician Stand in the Shoes provisions Physician Stand in the Shoes provisions Alternative method of compliance for missing signatures Alternative method of compliance for missing signatures Revisions to obstetrical malpractice insurance subsidies Revisions to obstetrical malpractice insurance subsidies Ownership/investment interest in retirement plans Ownership/investment interest in retirement plans

26. 26 Significant Issues in Final Rule - cont. Effective October 1, 2009 Effective October 1, 2009 Percentage-based compensation formulae prohibitions addressing exceptions applicable to office space and equipment lease arrangements Percentage-based compensation formulae prohibitions addressing exceptions applicable to office space and equipment lease arrangements Prohibition of certain unit-of-service (per- click) payments in lease arrangements Prohibition of certain unit-of-service (per- click) payments in lease arrangements Revisions to definition of Entity) (referred to as services provided under arrangements proposal) Revisions to definition of Entity) (referred to as services provided under arrangements proposal)

27. 27 Burden of Proof Burden of proof at each level of appeal is on provider submitting claim for payment Burden of proof at each level of appeal is on provider submitting claim for payment Must establish that service was not furnished pursuant to prohibited referral Must establish that service was not furnished pursuant to prohibited referral Burden of production is initially on claimant; but may shift to CMS or its contractors Burden of production is initially on claimant; but may shift to CMS or its contractors

28. 28 Period of Disallowance Begins when financial relationship fails to satisfy applicable exception Begins when financial relationship fails to satisfy applicable exception Ends no later than: Ends no later than: Date financial relationship satisfies exception (where not related to compensation); or Date financial relationship satisfies exception (where not related to compensation); or Date excess compensation is returned by party that received it, or if additional compensation is owed, on the date additional compensation is paid by party owing it, and all other requirements of exception are met Date excess compensation is returned by party that received it, or if additional compensation is owed, on the date additional compensation is paid by party owing it, and all other requirements of exception are met

29. 29 Stand in the Shoes Physician deemed to Stand in the Shoes of his or her Physician Organization if the physician has an ownership or investment interest in the Physician Organization Physician deemed to Stand in the Shoes of his or her Physician Organization if the physician has an ownership or investment interest in the Physician Organization Exception: Physician with Titular only ownership or investment interest Exception: Physician with Titular only ownership or investment interest

30. 30 Alternative Method of Compliance: Missing Signatures Grace period to obtain signatures on written agreement of Grace period to obtain signatures on written agreement of 90 consecutive calendar days for inadvertent noncompliance with signature requirement 90 consecutive calendar days for inadvertent noncompliance with signature requirement 30 consecutive calendar days for knowing noncompliance with signature requirement 30 consecutive calendar days for knowing noncompliance with signature requirement

31. 31 Obstetrical Malpractice Insurance Subsidy Retains existing exception that incorporates Anti-kickback Safe Harbor Retains existing exception that incorporates Anti-kickback Safe Harbor Applies to subsidies provided by any entity Applies to subsidies provided by any entity Provides alternative criteria - §411.357(r)(2) Provides alternative criteria - §411.357(r)(2) Applies to subsidies provided by hospitals, FQHCs and rural health clinics Applies to subsidies provided by hospitals, FQHCs and rural health clinics

32. 32 OB Malpractice Insurance Subsidy - cont. §411.357(r)(2) Physicians practice is Physicians practice is Located in rural area, primary care HPSA, or area with demonstrated need for OB services (determined by CMS Adv. Op.), or Located in rural area, primary care HPSA, or area with demonstrated need for OB services (determined by CMS Adv. Op.), or At least 75 % of OB patients of practice reside in MUA or are a medically underserved population At least 75 % of OB patients of practice reside in MUA or are a medically underserved population Arrangement is Arrangement is In writing, signed by parties, specifies payments and terms In writing, signed by parties, specifies payments and terms Not conditioned on referrals Not conditioned on referrals Payment amount not determined based on volume or value of referrals or other business Payment amount not determined based on volume or value of referrals or other business

33. 33 OB Malpractice Insurance Subsidy - cont. §411.357(r)(2) Physician allowed to establish staff privileges at any hospital, FQHC or rural health clinic Physician allowed to establish staff privileges at any hospital, FQHC or rural health clinic Payment made to organization providing insurance Payment made to organization providing insurance Physician treats Federal program OB patients in nondiscriminatory manner Physician treats Federal program OB patients in nondiscriminatory manner Bona Fide insurance Bona Fide insurance Not violate Anti-kickback Law or other laws governing billing or claims submissions Not violate Anti-kickback Law or other laws governing billing or claims submissions

34. 34 Ownership/Investment Interest in Retirement Plan Clarifies exception from definition of ownership Clarifies exception from definition of ownership Excepts: Interest in entity that arises from retirement plan offered by entity to physician (or immediate family member) through physicians (or family members) employment with that entity Excepts: Interest in entity that arises from retirement plan offered by entity to physician (or immediate family member) through physicians (or family members) employment with that entity Does not protect MD referrals to DHS Entity owned by Group Practices retirement plan Does not protect MD referrals to DHS Entity owned by Group Practices retirement plan

35. 35 Percentage-based Compensation: Office Space and Equipment Leases Rental charges can not be determined using formula based on – Rental charges can not be determined using formula based on – Percentage of revenue raised, earned, billed, collected, or otherwise attributable to services performed on or business generated Percentage of revenue raised, earned, billed, collected, or otherwise attributable to services performed on or business generated in the office space or in the office space or by the use of the equipment by the use of the equipment

36. 36 Percentage-based Compensation: Office Space and Equipment Leases Amends four compensation exceptions Amends four compensation exceptions Office space lease arrangements Office space lease arrangements Equipment lease arrangements Equipment lease arrangements Fair market value compensation arrangements Fair market value compensation arrangements Indirect compensation arrangements Indirect compensation arrangements

37. 37 Percentage-based Compensation Applies only to office space and equipment leases Applies only to office space and equipment leases Still allowed for Still allowed for personal services arrangements, personal services arrangements, management contracts management contracts physician compensation physician compensation

38. 38 Per Click Payments: Office Space and Equipment Leases Rental charges for rental of office space or equipment can not be determined using a formula based on – Rental charges for rental of office space or equipment can not be determined using a formula based on – Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred between the parties Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred between the parties

39. 39 Per Click Payments: Office Space and Equipment Leases Includes both physician as lessor and DHS entity as lessor Includes both physician as lessor and DHS entity as lessor Amends four compensation exceptions Amends four compensation exceptions Office space lease arrangements Office space lease arrangements Equipment lease arrangements Equipment lease arrangements Fair market value compensation arrangements Fair market value compensation arrangements Indirect compensation arrangements Indirect compensation arrangements

40. 40 Per Click Payments: Office Space and Equipment Leases CMS intends to monitor block leases CMS intends to monitor block leases Caution: Block lease could be considered a per click payment depending on length of time for block use and number of procedures which can be done during block time Caution: Block lease could be considered a per click payment depending on length of time for block use and number of procedures which can be done during block time

41. 41 Services Provided Under Arrangements Under revised definition of Entity, a person or entity is considered to be furnishing DHS if it – Under revised definition of Entity, a person or entity is considered to be furnishing DHS if it – Is the person or entity that has performed services, that are billed as DHS to which CMS makes payment for the DHS, directly or upon assignment on patients behalf; or Is the person or entity that has performed services, that are billed as DHS to which CMS makes payment for the DHS, directly or upon assignment on patients behalf; or Is the person or entity that has presented a claim to Medicare for the DHS... Is the person or entity that has presented a claim to Medicare for the DHS...

42. 42 Hypothetical Discussions Stand in the Shoes Stand in the Shoes Definition of Entity – Services Under Arrangement Definition of Entity – Services Under Arrangement Per Click and Percentage-based Leases Per Click and Percentage-based Leases Period of Disallowance Period of Disallowance

43. 43 Stand in the Shoes (SITS) Dr. ODr. EDr. IC Physician Organization DHS Entity O – OwnerStand in the Shoes is Mandatory E – EmployeePermissive SITS or analyze using indirect compensation rules IC – IndependentSame as Employee Contractor

44. 44 Services Under Arrangement Dr. O Billed Claims Physician Organization (PO) Hospital Items/Services Payment (Per Procedure) Dr. E Office Equipment Personnel PO Becomes DHS Entity No exception for Physician Ownership

45. 45 Per Click or Percentage Based Leases: Direct Compensation Dr. O Physician Organization Dr. E DHS Entity Lease Equipment or Space Analyze Physician ownership as Direct Compensation Arrangement under SITS Direct lease exceptions do not allow per click or percentage compensation

46. 46 Per Click or Percentage Based Leases: Indirect Rules Dr. O Realty Company or Equipment Leasing Company Hospital Lease $ Analyze under Indirect Rules; SITS does not apply Indirect Rules do not allow leases to have per click or percentage compensation

47. 47 Examples of Periods of Disallowance Date Stark Compliant Contract Expires End 6 month holdover for lease and personal services New Contract Signed Period of Disallowance Doctor begins Call Coverage Contract Signed 6 months later Period of Disallowance

48. 48 Examples of Periods of Disallowance cont. Doctor receives Excess Comp New Contract Signed Doctor returns Excess Comp Period of Disallowance

49. 49 Disclosure of Financial Relationships Report Collection Instrument used to Collection Instrument used to Identify arrangements that potentially may not be in compliance with Stark Law and regulations Identify arrangements that potentially may not be in compliance with Stark Law and regulations Identify practices to assist CMS in future rulemaking Identify practices to assist CMS in future rulemaking Status of Distribution to Hospitals Status of Distribution to Hospitals

50. 50 Reporting Requirements - §411.361 All entities furnishing services for which payment may be made under Medicare must submit information to CMS or to OIG concerning reportable financial relationships in form, manner and at times that CMS or OIG specifies All entities furnishing services for which payment may be made under Medicare must submit information to CMS or to OIG concerning reportable financial relationships in form, manner and at times that CMS or OIG specifies Exception: Reporting requirements do not apply to entities that furnish 20 or fewer Part A and Part B services during calendar year, or to any Medicare covered services furnished outside US Exception: Reporting requirements do not apply to entities that furnish 20 or fewer Part A and Part B services during calendar year, or to any Medicare covered services furnished outside US

51. 51 Reporting Requirements - §411.361 – cont. Required information Required information Name and UPIN or NPI of each physician who has a reportable financial relationship with entity Name and UPIN or NPI of each physician who has a reportable financial relationship with entity Name and UPIN or NPI of each physician who has an immediate family member who has a reportable financial relationship with entity Name and UPIN or NPI of each physician who has an immediate family member who has a reportable financial relationship with entity Nature of financial relationship Nature of financial relationship

52. 52 Reporting Requirements - §411.361 – cont. Reportable financial relationships Reportable financial relationships Any ownership or investment interest, as defined at §411.354(b) Any ownership or investment interest, as defined at §411.354(b) Except ownership or investment interests that satisfy exceptions in 411.356(a) or 411.356(b) regarding publicly-traded securities and mutual funds Except ownership or investment interests that satisfy exceptions in 411.356(a) or 411.356(b) regarding publicly-traded securities and mutual funds Any compensation arrangement, as defined at § 411.354 (c) Any compensation arrangement, as defined at § 411.354 (c)

53. 53 Additional CMS Guidance/Resources CMS Advisory Opinions CMS Advisory Opinions CMS-AO-2008-01 (hospital license of custom software interface for use by medical staff MDs in private offices to order or communicate results of tests and procedures) CMS-AO-2008-01 (hospital license of custom software interface for use by medical staff MDs in private offices to order or communicate results of tests and procedures) CMS-AO-2008-02 (whether physician investment in diagnostic center meets rural provider exception) CMS-AO-2008-02 (whether physician investment in diagnostic center meets rural provider exception) Frequently Asked Questions Frequently Asked Questions Preamble Commentary Preamble Commentary

54. 54 Amending Agreements Amendments are allowed if Amendments are allowed if All requirements of applicable exception are met All requirements of applicable exception are met Determine amended rental charges or other compensation (or formula) before amendment is implemented Determine amended rental charges or other compensation (or formula) before amendment is implemented Formula for amended rental charges or compensation does not take into account volume or value of referrals or other business generated between the parties Formula for amended rental charges or compensation does not take into account volume or value of referrals or other business generated between the parties Amended rental charges or compensation (or formula) remains in place for at least 1 year from date of amendment Amended rental charges or compensation (or formula) remains in place for at least 1 year from date of amendment Applies to exceptions that have 1-year term requirement Applies to exceptions that have 1-year term requirement

55. 55 New Developments November 19, 2008 Federal Register Publication of Medicare 2009 Physician Fee Schedule: November 19, 2008 Federal Register Publication of Medicare 2009 Physician Fee Schedule: CMS solicits comments on Gainsharing Incentive Payments and Shared Savings Programs CMS solicits comments on Gainsharing Incentive Payments and Shared Savings Programs 90 Day Comment Period 90 Day Comment Period CMS publishes revised Anti-Markup Final Rules CMS publishes revised Anti-Markup Final Rules Effective January 1, 2009 Effective January 1, 2009