Stark Rules Target Doctor-Hospital Relations

October 29, 2008
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Contracts between doctors and hospitals are in the crosshairs of new government regulations governing self-referrals known as the Stark law.

Local health care lawyers have been pouring over hundreds of pages of new Stark regulations, some of which are effective as of Oct. 1. Others have a year’s reprieve.

The law is intended to keep physicians from overbilling Medicare for services that unfairly pad their pockets. It lists circumstances that are disallowed for government program billings and provides 11 exceptions. The Centers for Medicare & Medicaid Services periodically issues new regulations intended to close loopholes.

Cara Nieboer, a health-law specialist at Warner Norcross & Judd, said one provision in the current round of regulatory changes could result in wide-ranging changes in agreements between doctors and hospitals, such as joint ventures, medical services contracts, and leases for space and equipment. The regulation looks at services furnished “under arrangement” and clarifies the definition of an entity.

The impact is that CMS intends to look at physician ownership, not only of entities that bill Medicare, but those that “perform designated health services that are ultimately billed to Medicare, no matter who does the billing,” Nieboer said. “I think they (joint ventures) are fairly common nationwide; I don’t think it’s specific to Grand Rapids. For a long time they have been considered a way to allow hospitals, who may have limited knowledge in a particular area, to partner with physicians to provide services to its patients, and to allow physicians who may not have the capital to invest in certain types of equipment necessary to provide the technical component to support their professional services.”

When the rule was first proposed, it drew many comments from doctors who argued it could impact the types of services they provide to patients, Nieboer said.

“I think it’s definitely going to require that these arrangements be restructured,” she added.

At the area’s largest physicians’ practice, Michigan Medical PC, it seems that strength may be in its numbers, General Counsel Kathleen Maine said. Numbering more than 200 doctors, the practice can purchase for itself and fully utilize some services that smaller practices may need on only a part-time basis, thus requiring the “under arrangement” mechanism that CMS is targeting, she said. MMPC has numerous agreements with hospitals.

“There is a host of different arrangements done that way, primarily the imaging with the CT scans and sometimes there’s shared lab services — things like that where there may be some impact on physicians’ practices,” Maine said. “A really small practice might not be impacted by this. They might not have any of these relationships. There may be some groups that are a little bigger that are really struggling with trying to figure it out.”

Maine said she thinks that the regulations demand that hospitals and practices detail an inventory of contracts, arrangements and relationships with each other.

“One of the things CMS is going for is a lot more transparency,” she said. “For a long time, CMS has been indicating that they want hospitals to actually file a disclosure of all of the contracts where they have a relationship with physicians. I don’t think it’s going to be fully there yet, but they are a lot closer to implementing a document and a timetable for sending out to hospitals.

“That’s going to cause hospitals and physicians’ practices to inventory all of their relationships.”

Spectrum Health’s Assistant General Counsel Bill Jewell is not waiting for further prompting from CMS to do just that, a tedious and time-consuming task that he expects won’t yield much to concern the Medicare agency.

“Part of it is you have to review and analyze the contract to see if it needs to be amended in some way or restructured to make sure it is indeed in compliance,” Jewell said.

The new regulations also attempt to replace “per-click” leases, under which a physician pays a rental fee based on each time one of his patients uses, for example, a piece of imaging equipment.

“We don’t do a lot of per-click in equipment rental,” noted General Counsel David Leonard. But Spectrum often leases space for doctors to see patients for short time periods, for example, if they regularly visit an outlying site once a week, he added, which may fall under the provision.

Among topics included in the new regulations are “stand in the shoes,” known by the acronym SITS, which now states that an agreement between a single doctor and a hospital will be viewed as covering all the doctors in the practice; and whether doctors’ retirement plans can own entities to which they refer patients.

Leonard said Stark regulations are like a “sledgehammer when tweezers are what’s needed” to root out abuse of the system.

“The latest changes are really compounding what we have felt is a regulation that in many ways gets in the way of effective hospital-physician collaboration,” Leonard said. “It really significantly increases the cost of doing business for hospitals, physicians and other health care providers.” HQ

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