The Department of Health and Human Services and Centers for Medicare and Medicaid Services (CMS) published final Stark IV regulations in the Federal Register on August 19, 2008. The web link is ttp://edocket.access.gpo.gov/2008/E8-17914.htm. The final regulations cover issues in addition to physician self-referral. Three issues of particular interest are the per-click compensation arrangements, the Stand-in-shoes regulations, and compliance rules regarding the period of disallowance for non-complying transactions.
I. Per-Click Lease Arrangements: At this time, CMS is adopting its proposal to prohibit per-click payments to physician lessors for services rendered to patients who are referred by the physician lessor. They continue to believe that per-click arrangements are particularly susceptible to abuse. The final rule revises the lease exceptions at Section 411.357(a)(5) and Section 411.357(b)(4), for office leases and equipment, as well as the fair market value exception at 411.357(l) and the exception for indirect compensation arrangements at Section 411.357(p), all of which provide that per unit of service rental charges are not allowed to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. The prohibition on per-click payments for space or equipment used in the treatment of a patient referred to the lessee by a physician applies regardless of whether the physician himself or herself is the lessor, or whether the lessor is an entity in which the referring physician has an ownership or investment interest. Although the general effective date for the Stark IV regulations is October 1st, 2008, CMS is delaying the effective date of the amendments to the lease exceptions until October 1, 2009, in order to afford the party’s adequate time to restructure their arrangements.
The new regulations require a compensation arrangement that is not determined in relation to the value or volume of referrals and does not use a formula based on either percentage of revenue or per unit valuation formula. The regulations do not prohibit percentage based formulas for compensation or leases as long as they do not involve physicians who are referring designated health services to the provider entities.
In an interesting aside, CMS acknowledged that lithotripsy is not DHS, but warned that any non-compliant per-click lease would be a non-protected compensation arrangement, thus prohibiting referrals of other DHS.
II. Stand-in-Shoes: In this final rule, CMS is finalizing the physician Stand-in-Shoes proposals so that a physician owner is deemed to stand in the shoes of a physician organization, and have a direct compensation relationship with that organization, if the physician organization is the only intervening entity between the physician and the provider entity. The regulations exclude titular owners, but allow such owners to elect to be covered in order to be evaluated in accordance with the direct compensation relationships if they so choose.
CMS is not finalizing the Stand-in-Shoes regulations with respect to designated health service entities and is not proposing exceptions for either mission support payments or academic medical center relationship.
III. Period of Disallowance: The Stark Regulations prohibit payment for any improperly referred designated health services during the period of non-compliance. The period of non-compliance begins when the relationship fails to satisfy the exception and continues no later than the following:
1. For non-compensation, non-compliance issues, the period of disallowance ends when the compliance issue is resolved.
2. For excess compensation issues, the period of disallowance ends when the excess compensation has been repaid.
3. For insufficient compensation issues, the period of non-compliance ends when the insufficient compensation has been repaid.
The regulations also clarify that the burden of proof lies upon the entity claiming the exception.