June 16, 2005 - The Renal Physicians Association (RPA) has posted a message stating it has received support from the AMA, ACP, and IDSA relating to its lawsuit against CMS and HHS regarding safe harbor payment methodologies to determine dialysis facility medical director remibursement.
1-page pdf file.
February 7, 2005 - Renal physicians say a provision in the Stark II interim final rule that applies to medical directors will make it difficult for dialysis facilities to ensure that end-stage renal disease patients receive quality health care, and they've gone to court to try to change it.
Story from American Medical News.
On January 14, 2005 the Renal Physicians Association (RPA) announced that it had filed suit in U.S. District Court in Washington D.C., charging that a provision in the recent Stark II Interim Final rule will negatively impact the ability of dialysis facilities to provide quality health care to patients with end-stage renal disease. The suit was filed against the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS).
Press release (3-page pdf file) from the RPA web site.
April 2, 2004 - The Centers for Medicare and Medicaid Services (CMS) has issued
a document (pdf) that corrects a technical error in the interim final rule with comment period published in the Federal Register on March 26, 2004, entitled "Physicians� Referrals to Health Care Entities With Which They Have Financial Relationships (Phase II)."
March 30, 2004 - The Centers for Medicare and Medicaid Services (CMS) has issued the second phase of its final regulations addressing physician referrals to entities with which they have a financial relationship.
Notice from CMS.
The
rule was published in Friday's Federal Register. The excerpts below pertain to dialysis and ESRD:
C. Personal Service Arrangements (Section 1877(e)(3) of the Act; Phase II; Sec. 411.357(d))
Proposed Rule: The January 1998 proposed rule contained several technical changes and some additional proposed interpretations. The technical changes would conform the physician incentive plan (PIP) requirements to the regulations governing PIPs issued on March 27, 1996 (61 FR 13430) established in Sec. 417.479; delete Sec. 411.357(d)(3), a time-sensitive provision that is now obsolete; and reorder certain paragraphs for clarity.
We proposed interpreting the exception as covering services furnished by a physician or his or her immediate family member (63 FR 1701). We proposed interpreting the equirement that the proposed arrangement cover all services to be provided by the physician (or immediate family member) to permit multiple agreements between the physician and the entity if each individual agreement fits in an exception and all of the agreements incorporate one another by reference (63 FR 1701). With respect to covered ``services'' under the exception, we concluded that the exception is limited to ``personal services'', that is, services of any kind performed personally by an individual for an entity, but not including any items or equipment. Thus, ``personal services'' would not be limited to generic Medicare services (defined in Sec. 400.202). We further interpreted the exception to permit the contracting physician (or immediate family member) to perform the services personally or to provide the services through technicians or others whom they employ (63 FR 1701). We interpreted the exception to apply to situations in which an entity has an arrangement with either an individual physician (or immediate family member) or a group practice to provide personal services. Thus, a hospital could use the exception if it contracted with a group practice for purposes of having group members serve as the hospital's staff (63 FR 1702).
With respect to PIPs, we concluded that the exception applies only when the entity paying the physician or physician group is the kind of entity that enrolls its patients, such as a health maintenance organization (63 FR 1701).
Final Rule: As described in more detail in the responses to comments, we are adopting the January 1998 proposed rule, with some modifications. These modifications include clarifying the treatment of the termination provisions, clarifying that payments from downstream subcontractors are included in the physician incentive plan exception, and easing the incorporation by reference rule. These changes are discussed in greater detail in the following comments and responses. In addition, we are making a technical change to Sec. 411.357(d)(2)(iii) (the physician incentive plan (PIP) exception) by updating the citations to reflect that, since January 1, 1999, the PIP requirements that apply to Medicare risk contracts have been set forth at Sec. 422.208 and Sec. 422.210.
As indicated in the Phase I preamble (66 FR 897) and above in this preamble, we believe that the personal service arrangements exception is the applicable exception for most foundation-model physician practices. The fair market value exception may also be available, depending on the circumstances. Changes we have made to the regulations, particularly in the definitions of ``referral'' and ``set in advance,'' should enable foundation-model practices to use the personal service arrangements exception to engage freely in common foundation-model structures and compensation arrangements. In particular, the regulations make clear that independent contractor physicians--including most, if not all, foundation-model physicians-- can receive compensation that takes into account the volume or value of personally performed services (that is, services that are not referrals for purposes of section 1877 of the Act) and can be compensated using a percentage-based compensation methodology as long as the methodology is set in advance. We also discuss, in the following responses to comments, new ``safe harbors'' for determining fair market value for physician services.
Comment: Two commenters representing independent dialysis laboratories urged us to issue additional regulations prohibiting referrals between dialysis centers and laboratories owned by a common parent company. These commenters believed that the two major corporations that own dialysis facilities should be subject to the same referral prohibition as physicians. In addition, these commenters raised concerns about medical director contracts or other employment or services contracts entered into in connection with a physician's sale of his or her dialysis facility to a corporate owner. The commenters believe that these contracts--which often are long-term and include non-compete clauses--are part of the overall purchase price of the facility and should be considered when determining whether the sale is at fair market value. They also believe that these contracts serve to lock the physician into referring to the corporation's laboratories, thus competitively disadvantaging independent laboratories.
Response: Section 1877 of the Act is limited to referrals by physicians and does not cover referrals among commonly held entities, absent involvement of a referring physician. With respect to medical director contracts or other contracts between corporate dialysis facilities and physicians, these arrangements may create indirect compensation arrangements between the medical director and the corporate laboratory that would need to fit in the indirect compensation exception. In other words, the medical director contract creates a link between the physician and the dialysis facility, which is linked through ownership to the parent corporation, which is linked by ownership to the corporation's laboratory (the DHS entity). If the physician's compensation takes laboratory referrals into account, the arrangement would not fit in the exception. (See discussion of indirect arrangements in section II.B)
Comment: One commenter recommended that we establish a benchmark for evaluating whether end-stage renal disease (ESRD) facility medical director compensation is fair market value by establishing a presumed appropriate fair market value hourly rate.
Response: With respect to the commenters' suggestion that we fix a fair market value benchmark for medical directors, we are not in a position--nor would it be appropriate--to set a fixed, industry-wide fair market value rate for ESRD medical directors. However, we are creating a ``safe harbor'' provision under the definition of ``fair market value'' in Sec. 411.351 for hourly payments to physicians for their personal services. The ``safe harbor'' provision applies to payments for services provided personally by the physician, but not to services provided by the physician's employees or other persons or entities. The safe harbor is not limited to medical director services for ESRD facilities, but may be used for other hourly physician compensation paid by any DHS entity.
The safe harbor consists of two methodologies for calculating hourly rates that will be deemed to be ``fair market value'' for purposes of section 1877 of the Act. The first methodology requires that the hourly payment be less than or equal to the average hourly rate for emergency room physician services in the relevant physician market, provided there are at least three hospitals providing emergency room services in the market. The second methodology requires averaging the fiftieth percentile salary for the physician's specialty of four national salary surveys and dividing the resulting figure by 2000 hours to establish an hourly rate. The ``safe harbor'' provides a choice of six recognized, readily-available surveys. If the relevant specialty does not appear on the survey, the safe harbor looks to the salary for general practice.
Compliance with these safe harbor methodologies is entirely voluntary; DHS entities may continue to establish fair market value through other methods. DHS entities that choose to use either of the two ``safe harbor'' methodologies will be assured that their compensation rates will be deemed fair market value for purposes of section 1877 of the Act. (Their arrangements will still need to meet all other conditions of an applicable exception.) For example, we believe that nephrology salary data from four surveys could be used to calculate an hourly payment for medical directors of ESRD facilities (that is, the average fiftieth percentile nephrologist salary from four surveys divided by 2000 hours). DHS entities using other methodologies to determine fair market value will continue to bear the risk that their rates may not be considered fair market value.
For purposes of section 1877 of the Act, we would treat a sale of a dialysis facility and an accompanying employment contract as separate arrangements to be evaluated under the isolated transactions exception and the employment exception, respectively. Both exceptions require fair market value compensation.
Finally, we note that the arrangements described by the commenters may be problematic under the anti-kickback statute.
Comment: Commenters representing independent dialysis laboratories stated that dialysis corporations sell dialysis supplies at a discount to physicians who agree to refer to the corporation laboratories and enter into management contracts with independent dialysis facilities that steer the facility business to the corporation laboratories.
Response: If the dialysis corporations sell items or services to physicians at a price below fair market value (including any discount), the arrangement will not fit in the exception for payments by a physician for items or services at Sec. 411.357(i). Similarly, cut-rate management contracts in exchange for the ability to steer business will not fit in an exception. Again, these arrangement may raise concerns under the anti-kickback statute.
December 14, 2001 - The Centers for Medicare and Medicaid Services has announced a partial delay of the effective date in the final rule entitled "Medicare and Medicaid Programs; Physicians' Referrals to Health Care Entities With Which They Have Financial Relationships."
June 25, 2001 - Here is a
follow-up column from the American Medical News web site about questions that physicians have about the Stark II regulations.
June 11, 2001 - Here is an article from the American Medical News web site about some of the remaining concerns about the
Stark II regulations revisions. The latest comment period closed on June 4.
February 5, 2001 -
Bush Delays Stark II Regulationby Gwen Gampel,
NRAA Government Relations Consultant
The effective date of the final rule on physician self-referrals (known as Stark II) has been delayed by 60 days. President George Bush issued a memorandum to delay regulations that had been published, but not implemented in order to allow the new Administration officials the opportunity for further review and consideration of the new regulations. The Department of Health and Human Services (HHS) announced a new effective date for the physician self-referral final rule of April 6, 2001. However, health care providers will have until April 6, 2002 to be in compliance with the rule's requirements.
HHS has not yet made a determination as to whether the presidential order will apply to the final rule on medical records privacy. The privacy rule may be exempt from the delay as the memorandum excludes "regulations promulgated pursuant to statutory deadlines." HHS was directed by legislation to create the rule after Congress failed to enact legislation.
January 9, 2001 - Modern Healthcare has an article about the Stark II regulations entitled:
Less Stark, more clarity: Long-awaited federal regulations may relax strict limits on physician self-referrals (link is no longer available)
January 8, 2001 Stark II Self Referral Final Rule
by Gwen Gampel, NRAA Government Relations Consultant
(What follows is a portion of the Legislation Report that first appeared in last week's National Renal Administrators Association (NRAA) Weekly E-mail Newsletter. For information on joining the NRAA and receiving complete print and electronic versions of up-to-the-minute and in-depth reports on all ESRD issues, visit the NRAA web site.)
SELF REFERRAL FINAL RULE EXEMPTS PHYSICIAN OWNED DIALYSIS FACILITIES
The Clinton Administration is continuing to issue final rules in the waning days of its administration. On January 4, HCFA published in the Federal Register the first part, called Phase I, of the long awaited final rule on Physician Self-Referrals, known as Stark II, which includes several noteworthy changes from the proposed rule but maintains the exemption for dialysis related services for physician owned dialysis facilities. ESRD related drugs and EPO can be provided in physician owned dialysis facilities under the final rule as well as all services covered under the composite rate.
Phase I and II of Final Rule
The final rule for the Stark II self-referral law will be divided into two parts with Phase I, focusing on paragraph (a) which concerns the general prohibition, paragraph (b) which includes exceptions that pertain to both ownership and compensation relations, including an in-office ancillary services exception, and paragraph (h) which includes definitions that are used throughout Section 1877 of the law. There is a ninety day comment period on the Phase I rules which will end on April 4, 2001 at 5:00 pm. In general the Phase I rules will become effective January 4, 2002, one year after the date of publication, while the home health provisions will become effective February 5, 2001.
HCFA indicated that Phase II will be published after the comment period ends for Phase I and will include those comments and any changes HCFA makes based on the comments. Phase II of the rule will address comments concerning the ownership and investment exception in paragraphs (c) and (d) and the compensation exceptions in paragraph (e) of Section 1877 of the Act. In addition, Phase II will address comments concerning the reporting requirements and sanctions provided by paragraphs (f) and (g) of the Act, respectively. Most importantly, Phase II will include further consideration of the general exception to the referral prohibition related to ownership/investment and compensation for services furnished in an ambulatory surgical center, dialysis facility, or by a hospice. Phase II will also address the referral prohibitions in the Medicaid program.
Background on Stark II
Under Section 1877 of the Social Security Act (i.e. Stark I and II), if a physician or a member of a physician's immediate family has a financial relationship with a health care entity, the physician may not make referrals to that entity for the furnishing of designated health services under the Medicare program, unless an exception applies. The following services are designated health services: clinical laboratory services; physical therapy services; occupational therapy services; radiology services, including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services, radiation therapy service and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics, prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services.
In addition, Section 1877 of the Act provides that an entity may not present or cause to be presented a Medicare claim or bill to any individual, third party payer, or other entity for designated health services furnished under a prohibited referral, nor for the payment for a designated health service furnished under a prohibited referral.
Major Changes From The Proposed Rule
Clarification of the definitions of designated health services.
Clarification of the concept of "indirect financial relationship" and creation of a new exception for indirect compensation arrangements.
(More information available in the NRAA Weekly E-mail Newsletter).
EPO And ESRD Related Outpatient Prescription Drugs Furnished In Dialysis Facility Exempted In Final Rule Other Permissible Exception - The final rule exempts from the reach of the statute under the "other permissible exceptions" in section 1877(b)(4), "EPO or other drugs required for dialysis when furnished in or by an ESRD facility owned by physicians." The list of these drugs is set forth in the attachment to this final rule on page 965 and they include: Calcitriol injection, Deferoxamine meslyate inj, Iron Dextran, NA Ferric Gluconate Complex, Alteplase recombinant,and EPO.
However, the final rule "does not protect any physician investment in a home dialysis supply company or other entity that supplies EPO to ESRD facilities or that supplies EPO to patients pursuant to a contract with an ESRD facility" HCFA points out that, "in such situations, the physician's investment in the dialysis supply company is no different from any other investment in a designated health services entity and there is no indication in the legislative history that home dialysis supply companies were not meant to be covered by the statute."
(More information available in the NRAA Weekly E-mail Newsletter)
.
Composite Rate Services Exempted HCFA in the final rule states that, " As the Congress did not list dialysis facility services under Section 1877(h)(6) of the Act," while it did list home health services and hospitals, they "do not regard services furnished under a composite rate by an ESRD facility as DHS" (i.e. designated health services). See page 937.
Exception For Phlebotomist Provided By Laboratory to Dialysis Facilities According to the final rule, "The provision of a phlebotomist to an ESRD facility would not implicate Section 1877 of the Act, unless the arrangement conferred a direct or indirect benefit on a physician or physician group; such laboratory-ESRD facility arrangements may implicate the anti-kickback statute." See page 948-949.
Comment Only specific references to dialysis facilities in the final rule are discussed in this article There are likely other provisions in the final rule which may affect dialysis facilities.
This article is not a legal opinion. Individuals are advised to consult an attorney for a legal opinion on the meaning of the Stark II final rule.
For a copy of the Phase I final rule log onto
www.access.gov/su_docs/fedreg/a010104c.html.
January 4, 2001 - The US Department of Health and Human Services yesterday
released new regulations that will go into effect in January 2002 concerning the referral of Medicare patients by physicians to labs, suppliers, home health agencies and other companies with whom the physicians have a financial relationship.
Studies have shown that when physicians have a financial stake in companies to which they refer patients, "excessive use" of services sometimes occurs. "We've taken a commonsense approach to the law to prevent potentially abusive referrals while recognizing many legitimate business practices and financial arrangements," said HHS Secretary Donna Shalala.
Here is a summary of the new regulations (link is no longer available) from
WebMD.
The new regulations are huge - over 670 pages. Here is the index of the new regulations from the HCFA web site. (link is no longer available)
Dialysis facilities and drugs administered during dialysis are generally classified as regulatory exceptions.
The exact regulations concerning dialysis can be found in the following sections (pdf format):
Background (page 3) (link is no longer available)
New Regulatory Exceptions (page 364) (link is no longer available)
Definitions of the Designated Health Services (pages 498-500, 505, 507-508, 512-515) (link is no longer available)
Regulations Text (pages 598 and 646-647) (link is no longer available)
Attachment (page 666) (link is no longer available)
