Medicare Compliance & Reimbursement

Hospitals can require doctors to refer to their HHAs, rule says.

The long-running grudge match between hospital-based and freestanding home health agencies is likely to get even more acrimonious, thanks to the new Stark II regulations.
 
The Centers for Medicare & Medicaid Services published the interim final rule on physicians' referrals to health care entities with which they have financial relationships in the March 26 Federal Register. It is the second phase of the rulemaking on the law named after Rep. Pete Stark (D-CA), which regulates physician referrals to providers of "designated health services." The first phase was published in April 2001. DHS includes HHA services and durable medical equipment, but not hospice services.
 
In the new Stark II regs, CMS drops a bomb in its comments on the regulations. A "hospital can require its employees to refer to its home health agency without running afoul of the restriction on compensation that reflects referrals" as long as certain requirements are met, the agency says.
 
"This could arguably fan the flames of the grudge match" between freestanding and hospital-based HHAs, notes attorney Mark Langdon with Arent Fox Kintner Plotkin & Kahn in Washington. "Hospitals affiliated with home health agencies could require employed physicians to refer to the hospital's home health agency, as opposed to another freestanding agency," without violating Stark II requirements.
 
Caveat: That ability comes with a lot of restrictions, Langdon cautions. A hospital-employed physician has an indirect financial relationship with an HHA owned by the same hospital. So the hospital can require referrals only if it sets the docs' compensation in advance at fair market value without regard to referrals; doesn't vary that compensation based on the volume of the physicians' referrals; and gives patients a choice of HHAs, he points out.
 
And Stark II isn't the only word on the matter. "There are all sorts of other regulatory and compliance issues at stake with regard to referrals in addition to the Stark II rules," ranging from state statutes to fraud and abuse to patient choice, asserts Burtonsville, MD-based health care attorney Elizabeth Hogue.
 
Many other laws and regulations govern the matter, including the Balanced Budget Act of 1997 provision requiring hospitals to give patients lists of other agencies available in their community, says Kay Cox of the American Association for Homecare.
 
"It is very difficult to even imagine the circumstances under which hospitals can instruct employees to refer to their home health agencies without problems in one or more of these areas, even if they managed to meet Stark requirements," Hogue insists.
 
And the fact that CMS makes the statement in its comments on the regulation rather than in the reg itself is telling, Hogue argues.
 
Still, the fact that the statement is out there is bound to cause more problems in the notoriously contested area of referrals to hospital-based agencies. "Although we don't think it should, this latest notice could be misinterpreted and could further hinder patient choices for home health agencies," Cox warns.

Rural Exception Unfair, Commenters Say

One other HHA-related Stark II issue is the rural exception. CMS sets out an exception for the referral prohibition "if the patient resides in a rural area and there is no DHS entity available to furnish the referred DHS to the patient in a timely manner in light of the patient's condition."
 
Commenters on the Stark I regs complained the exception would unfairly benefit physician-owned HHAs, and CMS agreed. "The statute may benefit physician-owned entities to the detriment of competing DHS entities that are not owned by physicians," the agency admits in its comments. "However, the statutory directive is clear."

 Editor's Note: The Stark II reg is at www.access.gpo.gov/su_docs/fedreg/a040326c.html.