Medicare Compliance & Reimbursement

If you run afoul of Stark, here's a potentially easier way out.

The Affordable Care Act has two more Stark provisions up its sleeve that provide a give-and-take proposition for providers.

One provision, which the law refers to as the Medicare self-referral disclosure protocol (SDRP), provides a way for providers with actual or potential Stark (self-referral) violations to come clean. Providers can "confess their sins to the OIG and get special consideration," says attorney Michael Cassidy, in Pittsburgh, Pa. "It's almost like where you can self-disclose to the Internal Revenue Service and therefore don't get the severe penalties," he adds.

The reform law directs HHS to establish the disclosure protocol in conjunction with the OIG "not later than six months" after the date of the healthcare reform legislation enactment, which was March 23, 2010. (CMS is supposed to post the protocol on its Web site, according to the law.) The SDRP, says the reform law, is "separate from the advisory opinion process."

The Affordable Care Act also restricts expansion of specialty hospitals, like heart hospitals, so there can be no new ones with physician ownership that weren't in place as of Dec. 31, 2010, says Cassidy.

That provision proved to be bad news for physician-owned hospital projects in progress when the law was signed, according to attorney Daniel Melvin, with McDermott Will & Emery LLP in Chicago, Ill. Investors in the projects had hoped they would have until the end of 2010 to build their hospitals and obtain a Medicare provider agreement in order to be "grandfathered" under the Act, he reports. Instead, "the Act appeared to freeze development on March 23, 2010," which the regulations subsequently confirmed, leaving the investors and their projects "out in the cold."

Not only that: The Act didn't afford the grandfathered physician-owned specialty hospitals the "flexibility to grow and expand that they'd been hoping for," adds Melvin.

The bottom line: "Right or wrong, at the end of the day Congress and HHS accepted the view of the broader hospital industry," Melvin observes. And that view holds "that physician-owned hospitals, most of which are higher-margin specialty hospitals with limited or no emergency departments, divert needed funding and resources from the local community hospitals that have high uncompensated care and emergency room costs."