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LegalEase: New Phase II Stark rules affect provider payments
By Elizabeth Hogue,
As many providers already know, the Stark law prohibits physicians from making referrals to providers who render "designated health services" (DHS) if the referring physicians have an ownership or investment interest in, or compensation arrangement with, the provider.
DHS generally include home health, home medical equipment, and infusion services. Likewise, providers of DHS generally cannot bill for services provided to patients referred by physicians who have ownership or investment interests in their operations, or compensations arrangements that violate the Stark law.
Exceptions to these general rules were published in the form of final regulations on Jan. 4, 2001, and are known as Phase I Stark rules. On March 26, 2004, Phase II Stark regulations were published as interim final rules in the Federal Register. These Phase II regulations further clarify exceptions to the statute described above.
Here are some of the provisions of the Phase II regulations:
1. Many providers utilize the services of referring physicians as consulting physicians to their organizations.
These consulting physicians perform a wide variety of appropriate services to providers. There is an exception for personal service arrangements that may include payments to referring physicians for consulting services. To meet the requirements of this exception, providers must ensure:
This requirement is met if all separate arrangements between providers and physicians and between providers and any family members of physicians incorporate each other by reference. If they cross-reference a master list of contracts that is maintained and updated centrally, it must be available for review by the secretary of the Department of Health and Human Services upon request.
To meet this requirement, if an arrangement is terminated during the term, with or without cause, the parties may not enter into the same or substantially the same arrangement during the remainder of the first year of the original term of the agreement.
2. Compensation paid to referring physicians who have compensation arrangements with providers must be set in advance, based upon a unit of time, such as per-hour or unit-of-service rates.
The formula providers choose must be included in the written agreement described above, and providers must be able to verify that services actually were rendered. In addition, the formula may not be changed or modified during the term of the agreement in any manner that reflects the volume or value of referrals or other business generated by referring physicians.
Use of a formula for payment that is based upon units of service allows providers to pay a flat fee for actual participation in each of a variety of meetings, such as professional advisory board meetings, team meetings, case conferences, interdisciplinary team meetings, and ethics committee meetings.
3. Providers must pay for services from consulting physicians at fair market value.
Many providers have asked how they should go about determining fair market value. The new Phase II Stark rules make it clear that fees paid to referring physicians for their services will be considered to be at fair market value if an hourly payment is established using either of the following two methodologies:
As a practical matter, that means providers must obtain the rates that at least three local hospitals pay physicians who staff their EDs. This information must be documented in writing and maintained by providers to demonstrate compliance. Providers should update this information periodically, and these updates also should be documented in writing.
4. The Phase II Stark rules include an exception for compliance training, which allows organizations to provide a variety of training and education from providers from whom they receive referrals.
Under the exception, providers may offer such training to physicians, their immediate family members, and office staff who practice in the provider’s local community or service area if the training is held in that area. This exception does not, however, include medical education.
"Compliance training" means
5. Finally, all providers furnishing services for which payment may be made under the Medicare program will be required to submit information about financial relationships covered by the Stark law and regulations to the Centers for Medicare & Medicaid Services or to the Office of the Inspector General.
Providers should promptly review their financial arrangements with referring physicians and make any modifications needed to comply with the Stark laws and regulations.
[A complete list of Elizabeth Hogue’s publications is available by contacting Elizabeth E. Hogue, Esq., 15118 Liberty Grove, Burtonsville, MD 20866. Phone: (301) 421-0143. Fax: 301) 412-1699. E-mail: firstname.lastname@example.org]