Steven Baruch - Health Care Compliance Association

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Stark and academic medical centers: A primer ...continued from page 31 The “stand in the shoes” doctrine The foregoing justification for many financial arrangements in the AMC setting was profoundly complicated by the 2007 Phase III revisions of Stark and the introduction of the so-called “stand in the shoes” doctrine. Simply stated, the “stand in the shoes” doctrine declares that a referring physician will be deemed to have a “direct compensation arrangement” with a DHS provider if the only intervening entity between the physician and the DHS provider is his or her “physician organization.” 14 As a practical matter, this revision could have meant that a “physician organization” (whose physician members referred patients to a DHS provider within an AMC) could not accept reimbursement or compensation of any sort without meeting one of the stipulated direct compensation exceptions—an onerous, impractical, and sometimes impossible task in an AMC setting. Mission support payments from DHS providers to FPPs and medical schools appeared especially vulnerable, because there was no direct compensation exception applicable to mission support payments made for general teaching, research, community service, and indigent care purposes. Other financial arrangements between the FPP/ medical school, too, might be analyzed as direct compensation relationships, because the referring faculty physician might be deemed as having the same direct compensation relationship as the physician organization. 15 Final “stand in the shoes” regulations After multiple delays, extensive commentary, competing proposals, and deliberation, CMS amended the “stand in the shoes” requirements in the 2009 Final Hospital Inpatient Prospective Payment System (IPPS) rules. 16 These most recent revisions clarify the operation of the “stand in the shoes” doctrine for AMC entities that wish to analyze their internal financial relationships with faculty physicians. Simply stated, CMS declared that a physician will be deemed to “stand in the shoes” of his or her physician organization only if the intervening entity between the physician and the DHS provider is a physician organization and the physician has an ownership or investment interest in that physician organization. 17 The revised definition of “ownership and investment interest” is pivotal. The revised rule emphasizes that physicians whose ownership interests are merely nominal, or titular, in nature will not stand in the shoes of their physician organization. These arrangements include ownership or investment interests in which the referring physician does not receive the benefit of such an interest, such as distribution of profits, dividends, proceeds of sale, or other types of returns on investments. 18 The impact of these changes and clarifications is significant, especially for AMCs, Stark Act The Stark Act, 42 U.S.C. § 1395nn, is one of the most complex statutes, including interpretive regulation, that prohibits a physician from referring to a designated health entity if the physician has a financial arrangement with such entity. Designated health services include the following: clinical laboratory, physical and occupational therapy, radiology, radiation therapy and supplies, durable medical equipment, parenteral and enteral nutrition, prosthetics orthotics and prosthetic devices, home health, outpatient prescription drugs, and inpatient and outpatient hospital. Further, financial arrangements include both compensation arrangements and investment or ownership arrangements. If a physician has a compensation arrangement with an entity that bills for designated health services, the physician cannot refer to such entity unless the arrangement meets all components of an exception. There are numerous exceptions that apply to the Stark Act, some of which apply only to investment/ownership arrangements, some that apply only to compensation arrangements, and some that apply to both ownership/investment arrangements and compensation arrangements. Each financial arrangement will need to be carefully analyzed to make sure that either the Stark Act does not apply, or all components of an applicable exception are met. Complicating such arrangements further, physicians, under the Stark Act, include all of the following family members related to the physician: husband or wife; birth or adopted parent, child, siblings; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild. Thus, even if a designated health service entity, like a hospital, is not contracting directly with a physician, the Stark Act may be implicated if the party with whom the hospital is contracting is related to a referring physician. The restrictions imposed by the Stark Act are not eliminated, therefore, merely by contracting with a family member of a . If you would like more information, visit the Captain Integrity website at http://www.captainintegrity.com or contact a representative at 1.866.222.0706. December 2010 32 Health Care Compliance Association • 888-580-8373 • www.hcca-info.org
teaching hospitals, medical schools, and FPPs in which there are no physician owners. Payments from a DHS entity to a physician organization in which the member physicians have no ownership interests may once again be analyzed under the more forgiving indirect compensation relationship rules. As a consequence, payments from a DHS provider (like a teaching hospital) to a non-physician owned physician organization or medical school, in the form of mission support funds, may be permitted under Stark provided that: (1) the relationship does not satisfy the basic definition of indirect compensation relationships; or, (2) if they are considered indirect compensation relationships, the payments, remunerations, compensation or benefits satisfy the exception for indirect compensation relationships. Recall however, that payments between DHS entities and physician-owned physician organizations—inside or outside of AMCs—may still be deemed direct compensation relationships under the “stand in the shoes” doctrine and will be required to meet one of direct compensation exceptions. Despite the latitude the recent changes have given AMCs, CMS has not given a blanket green light to all manner of mission support payments. In response to a commenter in the final regulations who contended that a physician organization’s non-owner physician employees would be highly unlikely to benefit from “infusion of capital” or a mission support payment to the physician organization, CMS cautioned that there might still be scenarios in which excessive reimbursement would undermine the indirect compensation protection: …[W]e are aware of situations where non-owner physician employees and contractors have compensation arrangements that are not based on fair market value and benefit from payments made to their physician organizations from entities to which the physician employees and contractors refer patients for DHS. 19 In addition, CMS has noted in previous commentary that even fixed aggregate compensation may sometimes constitute a prohibited direct or indirect compensation relationship if such compensation exceeds fair market value or has been inflated to reflect the volume or value of referrals the physician makes to the DHS entity. 20 As such, even when there are no physician owners within a physician organization—which is often the case in FPP arrangements—it is still important to ensure that physician salaries are fair market value and are not otherwise inflated in ways that may reflect the volume or value of referrals to the DHS entity. Finally, as noted above, it is vital to understand that although certain mission support payments between a DHS entity and a non-physician owned physician organization may fall outside of Stark, those arrangements will also need to be analyzed under the federal Anti-kickback Statute, an additional reason why FMV analyses continue to play a central role in FPP compliance due diligence. Finally, it is important to note that in addition to the indirect compensation relationship exception, other exceptions may be helpful to AMCs with respect to the various business relationships among the AMC entities. For example, the physician recruitment exception under Stark has been helpful in allowing certain types of physician salary support and incremental overhead expense allowances to FPPs. 21 Additionally, the personal services exception may be used to protect relationships, such as medical director arrangements or other services that faculty physicians may provide to the DHS entity. Again, however, if there are no FPP physician owners, the personal services exception (which is a direct compensation relationship exception) will likely not be necessary to protect the financial arrangement under Stark. Health Care Compliance Association • 888-580-8373 • www.hcca-info.org Conclusion Stark Law requirements pose a special challenge in the AMC setting in which a multiplicity of entities, institutions, practitioners, and missions co-exist and interact. The AMC exception was specially crafted to allow affiliated medical schools, physician faculty, and teaching hospitals to follow together their broad and multifaceted goals of teaching, research, clinical care, and community service. Where the AMC exception is satisfied, the component parts of the AMC will be granted broad latitude to pursue their joint missions. AMCs that do not meet the exception may still work together, but will have to seek protection under other, narrower Stark exceptions. In either instance, every factual scenario and every AMC arrangement is unique, and the highly technical provisions require that each be analyzed on a case-bycase basis by competent legal counsel before determining that the specific relationship is allowable under Stark. n 1 The Stark “self referral” statute appears at: 42 U.S.C. § 1395 et seq. The accompanying regulations issued by the Centers for Medicare and Medicaid Services (CMS) appear at: 42 CFR §411.350 – §411.389 (2010) 2 US Department of Justice, Press Release: Savannah’s Memorial Health University Medical Center to Pay U.S. $5.08 Million to Resolve Fraud Allegations. April 28, 2008. Available at http://www.justice.gov/usao/ gas/pr/2008/45_08MemorialHealthUniv.pdf 3 The AMC exception now appears at 42 C.F.R. §411.355(e) 4 Centers for Medicare and Medicaid Services: Code List for Certain Designated Health Services (DHS). Available at https://www.cms. gov/PhysicianSelfReferral/40_List_of_Codes.asp 5 Charles B. Oppenheim, Jenni Rosenberg: Compliance 101: An introduction to the Federal Anti-Kickback Statute and Stark Law. Compliance Today, November 2008, pp. 54-56 6 See 42 U.S.C. § 1395 (b)-(e) 7 42 C.F.R. § 411.355(e)(1)(i-iv) 8 Federal Anti-Kickback prohibitions may be found at 42 U.S.C § § 1320a–7b (2000) 9 U.S. ex rel. Villanfane v. Solinger at al., 543 F. Supp. 678 (W.D. Ky. 2008); and Anjana D. Patel, Robert J. Senska: Court analyzes first case under Stark’s academic medical center exception. Compliance Today, September 2008, pp. 11-13 10 Gerald M. Griffith: Pros, Cons and Further Questions on the AMC Exception. Health Lawyers Weekly (AHLA), May 2008;6(20), p. 32; and Frances Fernald, ed: A Guide to Complying with Stark Physician Self Referral Rules. Washington, DC: Atlantic Information Services, 2010, 1322.1.5; and Mark R. Fitzgerald: Financial Support Arrangements Between Academic Medical Centers and Faculty Practice Plans. Powers, Pyle, Stutter and Verville, Newsletter, March, 2003. Available at http:// www.ppsv.com/news-publications-29.html. 11 42 C.F.R. § 411.354(a)(2)(i) 12 42 C.F.R. § 411.354(c)(2); and 42 C.F.R. § 411.357(p) 13 42 C.F.R. § 42 C.F.R. 411.357(e) 14 42 C.F.R. § 411.354(c)(1)(ii) 15 73 Fed. Reg. 48434, 48691 (Aug. 19, 2008) 16 73 Red. Reg. 48434 (Aug. 19, 2008) 17 73 Fed. Reg. 48434, 48693 (Aug. 19, 2008) 18 42 C.F.R. § 411.354(c)(3)(ii)(C) 19 73 Fed. Reg. 48694 20 69 Fed. Reg. 16054, 16059 (March 26, 2004) 21 42 C.F.R. § 411.357(e) December 2010 33
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Steven Baruch - Health Care Compliance Association

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