Medicare Compliance & Reimbursement

MGMA says Stark should be friendlier to physician recruitment.

With Phase II of the Centers of Medicare and Medicaid Services' Stark II self-referral regulation poised to make landfall July 26, small group practices are worried about the impact on their business.

In June 21 comments to CMS Administrator Mark McClellan, the Medical Group Management Association points to what it calls "unduly restrictive" language in the rule's physician recruitment exception.

As it reads now, the physician recruitment exception allows hospitals to pay only the "actual additional incremental costs" physicians incur when recruiting. MGMA, which represents more than 11,500 organizations and 237,000 physicians, claims that in cases where a physician must be recruited because of a death, relocation or retirement, hospitals would not be allowed to help out with any overhead expenses. That could spell a crippling financial hardship for small practices -- and MGMA says it's outright discrimination against group practices.

"Under the interim final rule, a hospital could pay - for any costs, including overhead costs, to recruit a new physician into a solo practice setting," writes William Jesse, MGMA president and CEO. Also, group practices can only impose restrictions such as non-compete clauses when they recruit without financial assistance from hospitals.

"There appears to be no reasonable explanation for these inequities," he adds.

A rule in the June 25 Federal Register moves the effective date for new language addressing percentage compensation relationships from July 7, 2004 to July 26, 2004, aligning it with the arrival of the Stark II physician self-referral rule.

Stark I disallowed the "set in advance" exception for percentage compensation arrangements when reimbursement "is based on fluctuating or indeterminate measures or in which the arrangement results in the seller receiving different payment amounts for the same service from the same purchaser," according to the rule.

CMS delayed the effective date of this sentence after numerous comments from physicians and entities complained that thousands of contracts would have to be renegotiated to comply.

New language in the Stark II, Phase II rule revises "set in advance" to permit some percentage compensation "if the methodology for calculating the compensation is set in advance and does not change over the course of the arrangement in any manner that reflects the volume or value of referrals or other business generated by the referring physician."

To see the rule go to http://www.access.gpo.gov/su_docs/fedreg/a040625c.html.

Lesson Learned: CMS gives the final word on the effective date for new language in the physician self-referral rule.