House leader introduces bills on self-referral and appeals

By MATTHEW HAY

HHBR Washington Correspondent

Home care providers might see a rollback of a major portion of the self-referral laws passed by Congress in 1993. Last week, House Ways and Means Health Subcommittee Chairman Bill Thomas (R-CA) unveiled legislation that would strip the compensation portion of the so-called Stark II laws. That follows a bill he introduced a week earlier that would revise the Medicare coverage and appeals processes. Notably, Thomas decided to introduce these measures as freestanding bills and not part of a larger Medicare reform package he is known to be working on.

Thomas signaled he would try to rein in the self-referral laws at a May 13 Health Subcommittee hearing where he grilled Health Care Financing Adminis tration (HCFA; Baltimore) Deputy Director Kathy Buto over the agency’s failure to publish regulations for Stark II.

Self-referral is the term used to describe situations in which a healthcare provider refers a patient to a medical facility in which the physician has a financial interest. In the Omnibus Reconciliation Act of 1989 (OBRA 89’), Congress passed what became known as Stark I after the law’s main sponsor, Rep. Pete Stark (D-CA) to restrict such arrangements. OBRA 93’ extended the law to 10 designated health services, including home health, durable medical equipment (DME), parenteral and enteral nutrients, and orthotic and prosthetic devices.

The second physician self-referral law had two parts, ownership and compensation. But Thomas said the compensation portion of Stark II has been "a vexing area" for some years. "We have a statute on the books that is unenforceable," he said at a press conference on Capitol Hill July 29. "The whole intent of (the law) was to draw bright lines to allow people to have guidelines about what was and what was not permissible," he added. "The problem is that since 1993 HCFA has not been able to write the regulations dealing with that compensation portion."

Instead, Thomas said HCFA should use the anti-fraud tools included in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Balanced Budget Act of 1997 (BBA). There were more than five dozen specific provisions to empower Health and Human Services (HHS), the Office of Inspector General and the Department of Justice to go after fraud and abuse included in those two measures, Thomas said. But the portion of the 1993 self-referral legislation dealing with compensation has never been used and has only created mayhem, he added.

Thomas noted that earlier this year the administration announced it had sliced fraud and abuse in Medicare and Medicaid in half — from $24 billion a year to $12 billion a year. While $12 billion a year is still unacceptable, he said, reduction reduction demonstrates the usefulness of the anti-fraud tools provided in both HIPAA and the BBA.

Thomas said the Congressional Budget Office scored his bill at $100 billion to $200 billion over five years, but argued that the increased flexibility would lead to increased services. "Cost is not necessarily an evil," he said, "but rather an indication government is not allowing creativity."

Stark offers alternative

Stark wasted no time blasting Thomas’ bill and introducing his own on the same day.

"The Thomas bill will return us to the days of massive patient abuse by unscrupulous doctors," said Stark. "Total repeal of the compensation provisions is a loophole you can drive an armored division through." He said his bill, the Medicare Physician Self-Referral Improvement Act of 1999, would simplify and streamline the law by creating a fair market value exception or safe harbor for providers who have compensation relationships with entities to which they refer Medicare and Medicaid beneficiaries for health services.

Under the fair market value test, an agreement must be in writing for a definite period of time and not be dependent on the volume or value of referrals and the compensation in the contract must be a reasonable fair market rate.

Stark said his bill also addresses concerns that providers have expressed about the law’s direct supervision requirements by replacing this standard with one that requires providers to "assume full and direct legal, financial, and professional responsibility for the services that are provided." His bill would also remove ambulatory surgical centers or hospices from the list of designated health services that are covered by the self-referral ban and eliminate the current ban that prohibits providers from providing DME and parenteral and enteral nutrients as part of the in-office ancillary exception.

Thomas and Stark join forces on appeals bill

While Thomas and Stark are worlds apart where self-referral is concerned, the two joined forces a week earlier when they introduced the Medicare Patient Appeals Act of 1999. That bill would establish a 60-day deadline for HCFA’s intermediaries and contractors to review appeals and a 90-day deadline for administrative law judge (ALJ) appeal decisions and Departmental Appeals Board reviews. It would also task the HHS Appeals Board with reviewing HCFA’s coverage decisions.

"Patient disputes are often resolved quicker in private health plans than they are in Medicare," said Thomas. "We want to give Medicare patients the right to hold the federal government accountable in the same way that the private health plans are accountable.

The National Association for Home Care (NAHC; Washington) strongly endorsed the bill. "Currently there is no procedure for appealing national and local coverage policy decisions," NAHC said. "Often delays exceed three months for reconsideration decisions by intermediaries and a year or longer for scheduling of ALJ hearings. This bill will go far in improving the rights of Medicare beneficiaries appealing medical decisions."

Because all of these bills were introduced as freestanding bills, they will have to be attached to a larger Medicare reform bill or other legislation that Congress acts on later this year.