Public comments on the concepts and particulars of the proposed rule must be submitted by June 13, 2008.
The recently released annual proposed rule updating the Medicare Inpatient Prospective Payment System (IPPS), like the 2008 Medicare Physician Fee Schedule regulation (see McDermott White Paper "Proposed Medicare Rule Would Restrict Permitted Business Arrangements") includes proposals and discussion regarding the Stark Law, in addition to traditional reimbursement topics (e.g., payment rate update; additions to the hospital acquired conditions list; and adjustments to the MS-DRGs, outlier threshold, wage index and capital PPS). This On the Subject summarizes the areas in which the Centers for Medicare and Medicare Services (CMS) has proposed changes and those in which it has requested comments. The proposed rule was released April 14, 2008, and public comments on the proposed rule must be submitted by June 13, 2008.
Proposed Revisions Of The Phase III "Stand In The Shoes" (SITS) Provisions For Physician Organizations And Expansion Of SITS To DHS Entities
The most far reaching change in the Phase III rule was indisputably the so-called "stand in the shoes" provision (SITS). For more information, see McDermott White Paper "CMS Publishes Phase III Stark Law Rule," and McDermott On the Subject "CMS Delays Stark Law Stand in the Shoes' Rule for AMCs." In the IPPS proposed rule, CMS proposes certain significant changes and expansion of the SITS concept, and requests comments on other important aspects of these provisions. The SITS proposals are discussed in detail in McDermott On the Subject "CMS Proposes Revisions and Expansion of the Stark Stand in the Shoes' Concept."
Period Of Disallowance For Non-Compliant Arrangements
Having noted in the Phase III rule (see "CMS Publishes Phase III Stark Law Rule") that the Stark Law does not explicitly address the period of disallowance for non-compliant arrangements, CMS now proposes to define the "period of disallowance" during which referrals are prohibited based on failure to satisfy a Stark Law exception and no Medicare reimbursement may be paid for such referrals. Under the proposed rule, when non-compliance is not related to compensation, the period of disallowance would extend until "the date the financial relationship satisfies all of the requirements" of an applicable exception. As an example, CMS explains that if a signature were missing from a written agreement required by an exception, the period of disallowance would end on the date that the signature is secured.
With respect to non-compliance resulting from compensation-related issues, however, CMS proposes to impose an additional standard. In those instances, such as those involving payment of excess compensation or failure to collect sufficient compensation, the period of disallowance would extend until the excess compensation is returned, or fair market value compensation is paid, and the arrangement otherwise complies with a Stark Law exception. Under the proposed rule, simply fixing the payment relationship on a going-forward basis would not be sufficient to end the period of disallowance. Furthermore, this proposal would firmly establish that one cannot eliminate or reverse a Stark law violation by recovering the past excess compensation, and that such action would merely enable the parties to end the period of disallowance, assuming the arrangements were fully compliant going forward.
CMS has declined to address how long the period of disallowance would last if a non-compliant arrangement simply terminates, but is not brought into compliance. For example, CMS explained in the preamble that if a below-market lease arrangement simply expires, "the inference may be raised that the below-market rent was in exchange for future referrals, including referrals made beyond the expiration of the lease agreement." As a result, CMS explained that the period of disallowance "could extend" for some period beyond the expiration of the written lease agreement, but declined to issue a proposal to define the period.
CMS also discussed several other comments from the Phase III rulemaking that it has declined to accept and invited comments on several aspects of this policy. CMS's position that, in several situations, the period of disallowance would have to be determined on a case-by-case basis, but without identifying the criteria for such determinations, is problematic for compliance analysis and undermines the ability of providers to implement effective corrective action to assure compliance going forward in cases of identified non-compliance.
Gainsharing Exception Proposal
Gainsharing is the term used to describe arrangements where a hospital shares with physicians a percentage of the cost-savings that the physicians help the hospital realize by complying with certain cost-saving strategies, such as surgical supply substitution and standardization. In the proposed 2008 Physician Fee Schedule Update, CMS proposed a rule change that would effectively prohibit percentage-based payments to a physician or physician organization unless the percentage was based solely on revenues from physician services personally performed by the physician or physician organization (see "Proposed Medicare Rule Would Restrict Permitted Business Arrangements") CMS acknowledges in the proposed rule that this change "might prevent typical gainsharing arrangements . . ." Although CMS maintains that it has a continuing concern about percentage-based compensation to referring physicians, it recognizes the potential value of gainsharing arrangements. Thus, CMS requests comments on whether it should issue an exception specific to gainsharing arrangements (under its authority to create new Stark exceptions), and, if so, what requirements, limitations and safeguards should be included in the exception.
Physician-Owned Implant And Medical Device Companies
CMS has reiterated its concern that referring physician ownership of implant and other medical device companies (referred to as "POCs" in the proposed rule) presents a significant risk of federal health care program and patient abuse, but does not propose any specific Stark or other regulatory change in the proposed rule. CMS solicits public comments as to whether the Stark regulations should address POCs more specifically, or whether the concerns surrounding POCs, are better addressed through enforcement of the False Claims Act, the anti-kickback statute and other state and federal laws and regulations. CMS has requested comments as to whether, and to what degree, physician investment in POCs presents risks of overutilization, substandard care and increased costs to the Medicare program and its beneficiaries, and creates an anti-competitive climate for affected medical products.
Financial Relationships Between Hospitals And Physicians
CMS also proposes to implement its authority to collect information regarding financial relationships with referring physicians by requiring 500 hospitals (representing 8 to 10 percent of general acute care and specialty hospitals in the United States) to complete and submit a Disclosure of Financial Relationships Report (DFRR), which includes eight detailed worksheets seeking a variety of information, to be submitted under a certification signed by an officer of the hospital. CMS plans to use the information to analyze: (1) the types of financial relationships involving hospitals and physicians, (2) the structure of compensation arrangements and trends, and (3) hospital compliance with the Stark Law and regulations, and to use the information and analysis in future rulemaking concerning the reporting requirements and physician self-referral provisions.
CMS proposes to establish a 60-day deadline for completion and submission of the DFRR and believes that it will take only about 31 hours per hospital to complete the DFRR, since CMS assumes that hospitals already maintain the requested information in the normal course of business
CMS is soliciting comments regarding: (1) whether DFRR submission should be recurring, and if so, whether it should be collected on an annual or other periodic basis; (2) whether the amount and type of information being collected in the DFRR is appropriate; (3) the amount of time hospitals will need to complete the DFRR and the amount of time CMS should permit for responses; (4) the costs associated with completion of the DFRR; (5) whether all hospitals should be required to submit a DFRR, and if so, whether collection should be staggered so that only a certain number of hospitals must submit a DFRR per year; and (6) whether hospitals that have submitted a DFRR should be required to submit annual updates, reporting only information that has changed within that year.
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