Medicare Compliance & Reimbursement

Trick or treat: October debuted Stark IV changes that could come back to haunt providers that haven't revamped what are now illegal leasing deals. As of Oct. 1, CMS no longer allows certain types of variable rent arrangements for property and equipment under the applicable Stark exceptions, according to attorney Wayne J. Miller, with the Compliance Law Group in Los Angeles. The rental deals include "per click" arrangements where a physician or physician group leases space or equipment to a hospital and receives a payment each time the hospital uses the property to care for Medicare patients referred by the physician or group.

"Most commonly, these arrangements involve an MRI, PET scanner or lithotripsy machine, as examples, where a specialty physician group buys the equipment and ... leases it to the hospital for use," says Miller.

Hidden twist: The Stark law applies to physician self-referral involving certain Medicare-payable "designated health services" or DHS. CMS has acknowledged that lithotripsy is not DHS, notes attorney Michael Cassidy on his law blog (www.medlawblog.com). But CMS has "warned that any non-compliant per-click lease would be a non-protected compensation arrangement, thus prohibiting referrals of other DHS," he writes.

The Stark reg changes also affect cardiologists. "The classic per click arrangement" is one where cardiologists lease a cardiac CTA (coronary tomography angiogram) scan to a hospital on a per-click basis, and also uses the equipment for their own practice, observes Nashville, Tenn. attorney Thomas Bartrum. "The lease payment to the cardiologists increases with each patient they refer to the hospital for a cardiac CTA."

The doctor or doctor group could potentially still have a lease arrangement with the hospital that's based on a set amount per month, says Miller. Then the physician(s) could maintain the payment per click for other doctors' referrals, including Medicare and Medicaid patients. "It works the same way if the hospital is leasing equipment to the doctor," he adds.

"Technically Stark just covers Medicare," Bartrum notes." But in 1993, the federal government amended the Stark law "and sort of back-doored Medicaid by [refusing to] match state funds [for Medicaid] if the state doesn't have a similar self-referral prohibition for Medicaid [patient] referrals."

Doable but tricky: "A doctor or doctor's group can do a per click arrangement for non-Medicare/Medicaid referrals only," and have a flat-fee arrangement for Medicare/Medicaid patients, says Chicago attorney Kevin J. Ryan. That set-up is "doable," agrees Miller, but would require "keeping detailed records." If the physician or group inadvertently received a per-click payment for a Medicare or Medicaid patient referred to the hospital, the exception would no longer be met, he cautions. And if  that happens, "all referrals between the parties are [then] tainted." Thus, "there's essentially no room for error."

Don't overlook: The leasing arrangements in all cases have to comply with the federal anti-kickback statute and be fair market value, stress legal experts.

Under the Stark changes, physicians and hospitals also have to watch out for lease arrangements based on a percentage  of revenues. Before Oct. 1, you could lease equipment and base the rental payment on a percentage of revenue generated by the equipment billings, says Miller. But no more. The new restriction differs from the "per click arrangements," however, in that it applies to all percentagebased compensation whether it's "generated from landlordtenant referrals or from other sources," explains Miller.

So-called "block lease arrangements are still viable under the Stark law," adds Bartrum. But "CMS has warned that the block of time has to be sufficiently large that it doesn't equate to a per click  arrangement."

Good news: The new Stark law restriction does not apply to deals other than leases -- at least not as of now, says Miller. For example, a doctor or doctor group might lease office space from a hospital owner for a flat fee or an amount per square foot. Then, "conceivably," as part of that agreement or in a separate agreement, the physician or group could pay for management or consulting services, as examples, based on a percent of gross revenues generated by the practice, Miller relays. "The key there is you have to have a fair-market value compensation for each component of the services," he adds. And that poses a risk under Star and anti-kickback laws -- if the projection turns out to be "wholly inaccurate, resulting in too little or too much compensation compared to the market," Miller cautions.

Editor's note: Stark changes that went into effect Oct. 1 also affect services provided under arrangement. For details, see the article on page 2.