Printer-friendly format

After Dec . 4, the new Stark II, Phase III final rules — all 516 pages of them — take effect.

These new rules -— and how the Centers for Medicare and Medicaid Services (CMS) interprets a number of the provisions — will influence going forward the financial relationships between physicians and healthcare entities to which they refer patients, and parties with existing financial relationships may have to restructure or even unwind those arrangements.

“This is nothing that has ever existed before,” said Jay Hardcastle, an attorney specializing in healthcare at Boult, Cummings, Conners & Berry in Nashville. “These Stark rules get super technical and start to look like IRS tax rules when you try to figure out how you need to treat a relationship between a referring physician and something to which the physician sends business.”

The rule creates a new “stand-in-the-shoes” doctrine that requires relationships between providers and physician groups to be analyzed, in some situations, as if the relationships were directly between the provider and the individual physicians, Hardcastle said. He provided this example: “Before, the radiology group would have a contract to read for the orthopedic surgery group and that would be it. Now, each individual human being whose eyeballs are going to be on those films is going to have to have some special contract.”

Hardcastle said “the practical solution” he is suggesting to clients is that each physician in a group sign at the bottom of a master professional agreement. “So each physician would join in that would be reading, but you wouldn’t have 40 different contracts,” he said.

Cindy Reisz, a healthcare attorney with Nashville-based Bass, Berry & Sims, explained, “I think CMS felt like they weren’t adequately addressing situations where physicians could indirectly benefit from financial relationships with hospitals, and they feel like physicians could be shielded by the group.”

She said her clients are “going back through every agreement and making sure there’s something called a physician joinder attached to it that each physician actually signs. That way you’re creating a direct relationship.”

Reisz noted that, in November, CMS decided to put on hold for another year the implementation of the stand-in-the-shoes provision only for academic medical centers and nonprofit organizations. “It was just impossible to figure out a way for academic medical centers to try to address every financial relationship as a direct relationship with, for example, a faculty practice plan. They were going to have to collapse that – and really eliminate the ability for an academic medical center to have financial relationships with physicians.”

Stark II, Phase III also changes some recruitment procedures, especially when it comes to noncompete agreements. In the past, Medicare frowned on hospital recruitment dollars going to doctors who signed a noncompete. For example, a hospital may agree to subsidize a physician’s income for a year until the practice is established. But what if the arrangement doesn’t work out and the physician leaves? Those hospital dollars were squandered, since the physician must leave the community to practice.

“The hospital has paid out all this money, and yet the doctor is gone. So it didn’t benefit the community; it only benefited the doctor,” Hardcastle explained. With the recent Stark changes, CMS will allow a non-compete, he said, “as long as it is reasonable and certain other technical requirements are met. That doesn’t sound like a big deal, but believe me, being in the trenches doing a lot of physician recruiting, it is a huge deal.”

CMS also proposed an anti-markup rule when it introduced the 2008 physician fee schedule last summer. This “Stark-like” change takes effect Jan. 1 and is “fairly revolutionary,” Hardcastle said, “and is going to have the broadest effect of any of these changes.”

In essence, the change affects professional advice purchased by one practice from another. “The buying practice is not going to be able to markup that professional fee when they then turn around and bill it to Medicare,” Hardcastle said. For example, an orthopedic surgery group has its own imaging equipment in the office, yet buys an interpretation from a radiologist. Normally, the surgery group would send the bill to Medicare, collecting the professional fee for the radiologist and the technical fee for the use of the machine. The group would then compensate the radiologist a standard fee or a percentage of the collection. “Under the new rule, I’ve got to make sure that I don’t make a profit on that professional interpretive fee,” Hardcastle said. That requires breaking down costs minutely.

“That to me is more of an administrative burden,” he said. “The really tough part of the anti-markup rule is that in some cases, physicians who have their own in-office ancillary services such as diagnostic radiological equipment, won’t be able to make a profit off the technical part of it either, which is a huge, huge change.”

While attorneys and trade associations are still working to interpret these new regulations, physicians with, for example, expensive imaging equipment not physically in their office may only be able to figure their cost and charge no more.

“CMS has basically announced that they’re trying to make it very, very hard for physicians to make money on in-office ancillary services,” Hardcastle said.

Reisz added, “In the final physician fee schedule, CMS is using this new term that the service has to be provided in the office of the physician. That’s being interpreted to mean right in the office suite where the physician is seeing patients, which then eliminates your ability to use a suite on the floor downstairs and rent that out.”

In essence, said Reisz, here’s what CMS thinks: “We think these arrangements where physicians own their own equipment is just a recipe for over-utilization. We want to destroy the link between your ordering the test and your making money on the test. You can have (the equipment) if you want it, but you can’t make a profit on it. The exception is if it’s physically in your office.”




December 2007

Tags:

None

Login and voice your opinion!