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Son of Stark III -Is Son of Stark III -Is it soup yet?it soup yet?

Presentation to CBA Healthcare SectionPresentation to CBA Healthcare Section

““Brown Bag” SeriesBrown Bag” Series

By By

Jody KeplerJody Kepler

Son of Stark III -Is Son of Stark III -Is it soup yet?it soup yet?

Presentation to CBA Healthcare SectionPresentation to CBA Healthcare Section

““Brown Bag” SeriesBrown Bag” Series

By By

Jody KeplerJody Kepler

Denver │ Boulder │ Colorado Springs │ London │ Los Angeles │ Munich │ Phoenix │ Salt Lake City │ San Francisco

Son of Stark III – Is it soup yet?

The Basic Prohibition• A physician cannot

refer patients to an entity

for the furnishing of DHS

if there is a financial relationship between the referring physician (or an immediate family member) and the entity

unless an exception applies


Referral

Exceptions • Pathologist for diagnostic lab tests and

pathological exam services• Radiologist for diagnostic radiology services• Radiation oncologist for radiation therapy• Services performed by the referring physician

– bonuses based on services personally performed

Son of Stark III – Is it soup yet?DHS annual list of codes:• designated health service categories included

in the list of codes are: clinical laboratory services; physical therapy services (including speech-language pathology services); occupational therapy services; radiology and certain other imaging services; and radiation therapy services and supplies

• http://www.cms.hhs.gov/PhysicianSelfReferral/11_List_of_Codes.asp


Phase I

• 66 Fed. Reg. 856

• Definitions

• General Exceptions• In-Office Ancillary Services• Physician Services• Academic Medical Centers• Others


Phase II

• 69 Fed. Reg. 16054 • Exceptions specific to ownership and

investment relationships– publicly traded securities, mutual funds, specific

providers (rural)

• Exceptions specific to compensation relationships– rental of office space, rental of equipment,

employment relationships, personal service arrangements, physician recruitment, others


Phase III

• 72 Fed. Reg. 51012

• Stand in the Shoes

• Clarification to group practice– relationships– bonuses

• Physician recruitment exception relaxed


• 72 Fed. Reg. 48434 • Stand in the shoes (10.1.08)

• Percentage based compensation (10.1.09)

• Per-click arrangements (10.1.09)

• Definition of entity (10.1.09)

• Investments through retirement plans (10.1.08)

• Information reporting


“Stand in the Shoes”• 42 CFR 411.354(c) • A physician who has an ownership or

investment interest in a physician organization stands in the shoes of that physician organization– exception – physicians with no right to receive the

financial benefits of ownership (profits, dividends, proceeds of sale)


“Stand in the Shoes”• CMS permits a physician who is not an owner or

investor in his physician organization to stand in the shows of the physician organization for purposes of applying the compensation exceptions– Allows arrangements that were restructured under

Phase III to continue in compliance– CMS believes that complying with direct

compensation exceptions will curtail abuse

• CMS did not finalize the entity “stand in the shoes”


Percentage-Based Compensation• 42 CFR 411.357(a), (b), (l) and (p) • CMS is taking a targeted approach to its

primary concerns regarding percentage based compensation (stay tuned, CMS may further restrict in future rule making)

• Prohibits the use of percentage-based compensation formula in the determination of rental charges for lease of office space and equipment


Percentage-Based Compensation

• Not affected: – management and billing services– Example - A business that wants to

provide space and equipment to a physician organization and manage that physician organization. How to structure? What incentives can the business provide to the doctors?


• Per-Click Arrangements

• 42 CFR 411.357(a)(5), (b)(4), (l) and (p)• prohibits per-click payments to physician lessors for

services rendered to patients who are referred by the physician lessor

(example - physicians purchase equipment and lease it to a clinic to which the physician refers patients)

• Lithotripsy, not DHS, but can create a compensation relationship


DHS Entity• 42 CFR 411.351

• Includes the entity that performs the DHS, as well as the entity that bills for the DHS

• Affects: under arrangements

• Example: Effectively moving a department outside of a hospital


Retirement Plans

• “Clarification”

• Exclusion from the definition of ownership or investment interest applies only to an interest in the physician’s employer

Son of Stark III – Is it soup yet

Information Reporting

• A physician-owned hospital – shall furnish to patients, upon request, a list

of physicians or immediate family members who own or invest in the hospital

– shall require all physician owners and investors who are also members of the medical staff to make a written disclosure of such interest to patients that they refer to the hospital


Conclusion

Recommend to clients that they:

• Inventory existing arrangements

• Modify where necessary for compliance

Be prepared to discuss “the new reality”

with clients who want to push the

envelope


Thank you for your attention.Questions?

Jody Kepler303.866.0331

[email protected] Roberts & Owen LLP

1700 Lincoln Street, Suite 4100Denver, Colorado 80203-4541

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