Medicare Compliance & Reimbursement

Expert tips help providers navigate part III of the Stark saga

If anything in the health care industry keeps providers and their referring physicians on their toes, it’s the Stark Law. This set of strict regulations that prohibit physician self-referrals just saw its third major set of revisions and interpretations go into effect Dec. 4, 2007, and even then, not all the loose ends have been tied up.

For Medicare cases (and potentially other payers on the state level), Stark prohibits physicians from making a referral to a "designated health service" (DHS) in which the physician or a direct family member of the physician has a financial relationship -- unless the DHS falls under one of Stark’s many exceptions.

A DHS can be anything from rehabilitation therapy services to imaging services or DME.

So there’s already a lot of information to take in. But to keep providers up to date, here are the key points from Stark III that have the potential to affect rehab provider-physician relationships.

One thing that hasn’t changed is that "fair market value" and Stark still go together like bread and butter. For example, providers in lease situations that involve Stark implications must ensure that the lease payments are of fair market value.

To help providers determine fair market value, Stark II added a safe harbor that set a standard for fair market value based on a set of surveys, explained Wayne J. Miller, Esq, with Compliance Law Group in Los Angeles, in an audioconference entitled "The Latest Stark Law Essentials From The Expert: Nail ‘Phase 3’ Of The Final Rules."

But Stark III nixed the requirement that providers must meet the median of these particular surveys to prove fair market value.

The good news is that providers don’t have to worry about comparing themselves to these set surveys anymore -- especially if the surveys weren’t very applicable to their settings.

"But the bad news is that this takes away from providers an industry-wide basis to know that they valued something correctly," Miller said.

If providers thought they were safe being one step away from a Stark-sticky situation, they thought wrong. Stark III declared a new "stand in the shoes" concept, which forces physicians in groups to be accountable for their group’s financial arrangements.

"CMS has now collapsed the doctor and his group into one layer" as far as business arrangements go, explains Linda A. Baumann, Esq, with Arent Fox in Washington, DC. "So, for example, if a physician in a group practice contracts with a hospital and it implicates Stark, he now has to meet a direct compensation arrangement exception."

Before, the physician would likely have been safe under the indirect compensation arrangement analysis; i.e., she was safe as long as she wasn’t getting paid based on the volume or value of her referrals.

So the loud and clear Stark concept for physicians and therapists is that physicians should not be paid based on the volume or value of their referrals. But one of CMS’ recent interpretations in Stark III almost appears to say the opposite.

CMS now says that physicians can receive credit in their bonus compensation for referrals within their group -- to the extent that the therapy services are billed incident-to and there is not a separate benefit paid, Miller clarified.

So incident-to physical therapy services, for example, fits neatly into this interpretation.

"How you give credit is something you should look at separately, but the idea is that the doctor is [technically] involved in incident-to services," Miller said.

Such "incident-to" physician compensation can only be in the form of a productivity bonus -- not profit sharing, Baumann points out.

Plus, the 2008 Medicare Physician Fee Schedule Final Rule tackled some additional Stark issues. Although this rule did not include much that affected rehab providers, it left a lot of comments and room for further interpretation, so watch the headlines for updates in 2008.

Resource: To view the official text of Stark III law released in September, see http://www.cms.hhs.gov/PhysicianSelfReferral.