lori k. nomura 206.447.7895 | [email protected] association of washington public hospital districts...

Lori K. Nomura206.447.7895 | [email protected]

Association of WashingtonPublic Hospital Districts

“Leading Wisely, Living Well”The Seventh in a Series of Retreats

April 29 - May 1, 2008

Stark II Phase III Regulations

2Stark II Phase III Regulations

Objectives

1. Review basic framework of the statute

2. Discuss the most significant changes in the Phase III

regulations

3. Identify action items


The Stark Prohibition

If a physician (or a physician’s family member) has a financial

relationship with an entity, the physician may not refer Medicare

patients to the entity for designated health services unless an

exception applies

Stark also prohibits an entity from billing for services provided

as a result of a prohibited referral


Penalties

Payment denial/recovery by Medicare

Refund to the individual

Civil monetary penalties of up to $15,000 per prohibited

service/billing

Civil monetary penalties of up to $100,000 for a circumvention

scheme

Program exclusion


Analytical Approach

Is there a financial relationship between the referring physician

and hospital? If yes,

Does the physician refer Medicare patients to the hospital for

DHS? If yes,

Does the arrangement comply with an exception? If no, any bill

submitted for a DHS resulting from a prohibited referral violates

the statute.


Physicians “Stand in the Shoes” of PC

Physician Org/Group Practice

Hospital

MD

MD

MD

OLD Rule

OLD Rule


Arrangements With Non-Professional Entities Are Still OK

MDs

Hospital

LeasingCompany


Arrangements With Professional Entities Must Be Reevaluated

Hospital SubsidiaryNonprofit

Hospital

MD

MD

MD


Delay and Changes to SITS

CMS delayed the effective date of SITS for certain arrangements of AMCs and exempt, integrated health systems

2009 IPPS Proposed Rule:

1. SITS wouldn’t apply if certain compensation arrangement exceptions are met

2. SITS would apply only to physicians who own the physician organization

3. New exception for “mission payments”


Physician Recruitment

Exclusive exception

Only available for “qualified recruits”

Distinction between direct and indirect recruitment

Greater flexibility for rural providers


Who Qualifies for Recruitment?

Recruit must

1. not be on the medical staff;

2. relocate his/her medical practice;

3. into the hospital’s “geographic service area”


Zip Codes IP % Total

99210 22%

99211 20% 42%

99212 18% 60%

99218 16% 76%

99225 8% 84%

99301 7% 91%

99302 2% 93%

99310 2% 95%

99314 2% 97%

urban

rural

Rural Hospitals Have a Larger Service Area


Physician Recruitment, continued

Direct recruitment requirements:

Written and signed agreement

Not conditioned on referrals

Remuneration not tied to referrals or other business

Recruit can establish privileges and refer elsewhere


Indirect Recruiting

Except for actual recruiting costs incurred by the

physician/group, the remuneration passes directly to the recruit

In an income guarantee, costs allocated to the recruit cannot

exceed the actual additional incremental costs attributable to

the recruit


Actual Additional Incremental Costs

What qualifies?

Recruit’s salary and benefits

Recruit’s malpractice premium and license dues

Cost of space rental? Maybe.

Cost of staff salary and benefits? Maybe.

General overhead? Probably not.


Indirect Recruiting, continued

The physician/practice cannot impose unreasonable practice

restrictions on a recruit

Records of actual costs and amounts paid to a recruit must be

maintained for five years and be made available to CMS


Retention Exception is Expanded

Available to hospitals, FQHCs and RHCs

Practice located in rural area, HPSA or underserved area

Bona fide offer requiring relocation outside of the hospital’s

service area

Written offer from other hospital or physician organization for

recruitment or employment

Certification from physician recruit


Retention Payment Limits Vary

Written Certification (the lower of…) Amount equal to 25% of current annual income (calculated

uniformly)

Reasonable cost to recruit a new physician to replace the physician

Bona Fide Written Offer (the lower of…) Amount = income physician would receive minus current income Reasonable cost to recruit a new physician to replace the

physician


Disclosure of Financial Relationships

CMS proposes data collection about financial relationships Description of all compensation arrangements with physicians

such as: employment personal services leases recruitment

Report must be completed and returned within 60 days CMP of $10,000 per day


Copies Of Contracts Are Required

Include a copy of the written agreement

with the physician

Include a copy of the written agreement

with the physician


CEO or CFO Must Certify

Signed by the CEO or CFO


Non-Monetary Compensation Requires Record-Keeping

Hospitals must track the value of all benefits provided to

physicians

New “cure” period

New holiday party exception


Set In Advance Changes Again

Lease, personal services & FMV exceptions

Cannot amend the financial terms during the

term

After first year, a new agreement is

permissible

Limited holdover permitted


Period of Disallowance

Begins when the relationship failed to comply with the statute

Ends when either

Arrangement brought into compliance

When excess/shortfall is paid


Rural Referrals

Phase II created the exception for referrals from a physician to

his/her family member or DHS entity with a financial

relationship with that family member if:

patient lives in a rural area

no other person or entity to furnish the DHS within 25 miles of

patient’s residence

Phase III alternative test of 45 minute transportation time

Warning to retain documentation such as weather report


Limitation on Incident-To Billing

CMS defined “incident-to” services to exclude services and

supplies that have their own benefit category under the Social

Security Act

diagnostic x-ray

diagnostic lab test

Any credit to physician group practice members is prohibited


Phase III Action Items

Monitor arrangements with physicians to ensure all aspects of

exception are met

Gather certain minimum data set based on DFRR requirements

Track nonmonetary compensation


Contact Information

Lori Nomura

Telephone: 206-447-7895

Email: [email protected]

Foster Pepper PLLC

1111 Third Avenue, Suite 3400

Seattle, WA 98101

www.foster.com

Lori K. Nomura206.447.7895 | [email protected]

Association of WashingtonPublic Hospital Districts

“Leading Wisely, Living Well”The Seventh in a Series of Retreats

April 29 - May 1, 2008

Stark II Phase III Regulations

lori k. nomura 206.447.7895 | [email protected] association of washington public hospital districts...

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