Stark bill could restrict MDs’ agency choices

By Elizabeth Hogue, JD

Health Care Attorney

Elizabeth Hogue, Chartered

Burtonsville, MD

One of the more nettlesome issues raised by California Democratic Congressman Fortney "Pete" Stark’s proposed legislation, introduced near the end of the last session (104th) of Congress, is that it appears to prevent physicians from designating agencies for their patients.

Home care services are, of course, provided under the direction and supervision of physicians, and many doctors prefer to deal with one or just a few home care providers for the sake of efficiency. However, statute requirements that govern the content of discharge plans may prohibit it.

Although the issue of doctors’ liability for home care services they supervise has not been fully explored, it seems reasonable to permit physicians to designate agencies, as long as their choices are related only to quality of care. After all, physicians (along with agencies and their staffs) may ultimately be responsible.

In addition, H.R. 4100, the "Medicare and Medicaid Hospital Self-Referral Amendment of 1996," will provide regulators with a means to gather information about referrals of patients by hospitals to other provider organizations that they own.

More legal issues

This begs more questions for home health agency directors:

Are hospitals limited to a certain number of patients referred to their own home health agencies? How many referrals to hospital agencies are too many? What can hospital-based agencies do to guard against claims that referral patterns are unlawful?

Agency executives have recognized for quite some time that these questions raise a number of legal issues. So-called self-referrals to hospital-owned agencies may violate the federal statute that prohibits illegal remuneration. Such practices also may violate federal and state antitrust laws. The right to freedom of choice of providers, which is guaranteed to Medicare and Medicaid patients, also may be compromised.

The proposed legislation would affect agencies that are either owned by or closely related to hospitals. Specifically, the bill requires hospitals to:

• inform patients (through hospital discharge planners) of all Medicare-certified home care providers that serve the area in which patients reside and have requested to be listed by the hospitals;

• prohibit discharge plans that specify or otherwise limit the qualified provider that may provide post-hospital care;

• identify providers in which hospitals have a financial interest or vice versa;

• disclose to the Secretary of the U.S. Department of Health and Human Services the nature of such financial interest; the number of individuals discharged from the hospital who required the kinds of post-hospital services provided; and the percentage of such individuals who received those services.

The proposed statute, perhaps best referred to as "Stark III", does not provide hospitals or agencies with any guidance about the appropriateness of referrals.

If hospitals can make too many referrals to their own agencies, is it acceptable to make referrals to only one other agency, or must hospitals see to it that referrals are spread to a number of agencies? If so, what system should be used to accomplish this objective?

Stark III does, however, require hospitals to make fairly detailed reports regarding their referral patterns to post-hospital services. In fact, as hospitals merge, the reporting requirements for such multi-hospital systems may take significant amounts of time and money and may be truly burdensome.

Stark III clearly indicates that hospitals not meeting these requirements will be denied payment for inpatient services. But, as drafted, the statute does not include any specific monitoring or enforcement mechanisms. What can agencies expect in this regard if this legislation is enacted?

If hospitals make the reports by this statute, agencies should realize that regulators will accumulate vast amounts of information regarding referral patterns for home health services. The data may serve as a platform for additional, more restrictive regulation.

Governments are convinced that fraudulent and abusive conduct is rampant within the health care industry, and the climate in health care has changed dramatically in response to this perception. Now is the time for agency directors to respond to initiatives such as Stark III.