The Centers for Medicare and Medicaid Services have issued the final rules for "Stark II," the Physician Self-Referral Act, Section 1877 of the Social Security Act. The new regulations have important implications for physicians, group practices, hospitals and healthcare organizations. The new rules state that contracts with per-click and hourly units of service will comply with the Stark lease and personal services exceptions, so long as the payment methodology is set in advance, is objectively verifiable, and does not change to reflect the volume or value of referrals between the parties. Important changes to the physician recruitment exception were also promulgated, as well as new exceptions and additional clarifications to existing Stark exceptions. For additional material from the Dorsey health care practice group regarding the new Stark rules, read the full article.
Jury Decision in St. David's Tax-Exemption Case
On March 4, 2004, a federal court jury found that St. David's Hospital in Austin, Texas retained sufficient control over its partnership with a for-profit entity to ensure that the partnership was conducted primarily for charitable purposes. This case was remanded from the Fifth Circuit for a fact determination regarding control over the partnership. Essentially, the jury's decision restored St. David's tax-exempt status by finding that St. David's maintained sufficient control over the partnership, despite a long term management contract with the for-profit partner. This decision does not alter the IRS's position that the determinative factor for acceptable joint ventures between for-profit and tax-exempt entities is the amount of control the tax-exempt entity maintains over the joint venture.
Specialty Hospital Moratorium Guidance
On March 19, 2004, CMS issued guidance for implementation of the moratorium on specialty hospitals contained in the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "MMA") for an 18 month period beginning on December 8, 2003 and ending on June 8, 2005. The guidance describes what qualifies as a specialty hospital, and does not add any additional specialized services to the MMA that would cause an institution to be considered a specialty hospital. Not included in the moratorium are specialty hospitals that were in operation before, or under development as of, November 18, 2003, so long as they comply with certain other restrictions, including a ban on increasing the number of physician investors after that date. Parties may seek a determination as to whether their hospital was under development as of the deadline by requesting an advisory opinion, although specialty hospitals that had Medicare provider numbers by the deadline are considered to be in operation and do not need to request a CMS determination. As a result, a physician may not refer a patient to a specialty hospital in which he or she has an ownership or investment interest, and the hospital may not bill Medicare or any other entity for services provided as a result of a prohibited referral, unless the specialty hospital complies with the grandfathered requirements.
Hospital Discounts to Uninsured
In a letter dated February 19, 2004, Tommy Thompson, Secretary of the Department of Health and Human Services, stated that Medicare rules do not prevent hospitals from providing discounts to uninsured or underinsured individuals or Medicare beneficiaries that cannot pay, so long as certain guidelines are met. The OIG also stated that the anti-kickback statute is not violated when waiving charges for the uninsured or offering discounts to the underinsured, so long as the waiver is not linked to the generation of business payable by a Federal health care program. HHS has provided guidance stating that the discounts must be based on the financial need of the patient in accordance with the hospital's indigent care policy. This policy must be applied uniformly to Medicare and non-Medicare patients. Compliance with the guidelines will allow hospitals to offer discounts to uninsured, underinsured, or Medicare beneficiaries that cannot afford to pay without fear of violating Medicare rules or regulations.
HIPAA National Provider ID Numbers
As part of HIPAA's administrative simplification requirements, final regulations were published by HHS in the January 23, 2004 Federal Register, allowing health care providers to apply for and obtain a National Provider Identifier on or after May 23, 2005. All covered entities are required to obtain and use this number, which replaces the myriad of numbers that are currently in use. By May 23, 2007, most providers must use this identifier exclusively for all standard transactions, although small health plans have an additional year for compliance. No action is required at this time, but covered entities should be aware of this requirement and should be prepared to obtain their National Provider Identifier after May 23, 2005.
Medicare Reassignment Rule Changes
As required by the MMA, CMS released a Program Transmittal on February 27, 2004 providing certain changes to the Medicare Claims Processing Manual, effectively liberalizing Medicare's reassignment rules. This change, implemented on March 12, 2004, allows carriers to make payments to any entity enrolled in the Medicare program for services rendered by a physician or other person under a contractual arrangement with that entity, regardless of where the service is furnished. CMS requires certain safeguards to be contained in these contractual arrangements. Specifically, joint and several liability must be shared between the entity submitting the claim and the person actually furnishing the service for any Medicare overpayment relating to such claim, and the person furnishing the service must have unrestricted access to claims submitted by the entity for the services provided by that person. So long as these contractual requirements are satisfied, the entity may bill for services furnished on or off the premises by the contracted physician.