CMS Seeks to Clarify Aspects of the Stark Law’s Physician "Stand in the Shoes" Rule – In the Proposed CY 2010 Physician Fee Schedule published in the Federal Register on July 13, 2009, the Centers for Medicare and Medicaid Services (CMS) proposed to amend one aspect of the physician “stand in the shoes” rule. Since the CY 2009 Final IPPS Rule, the physician stand in the shoes rule has required physicians with an ownership or investment interest in a physician organization (other than a “titular” ownership interest) to stand in the shoes of that physician organization, so that the physician owner is deemed to have the same compensation arrangements with the same “parties” and on the same terms as the physician organization. Physician employees and independent contractors of physician organizations are not deemed to stand in the shoes of their physician organizations. The second sentence of the stand in the shoes rule states that the “parties” to the arrangements are considered to be “the entity furnishing designated health services [DHS entity] and the physician organization (including all members, employees, or independent contractor physicians).”
CMS is concerned that some industry members are erroneously interpreting two aspects of the second sentence to the stand in the shoes rule. First, CMS is concerned that some industry members are interpreting the above explanation of “parties” as a definition that is applicable in all other cases where the term “parties’ is used, including all compensation exception requirements in which the agreements must be signed by all parties. According to CMS, these individuals believe that all members, employees and independent contractor physicians of physician organization need to sign all written agreements to satisfy the compensation exception requirements. Second, CMS is concerned that the second sentence is being interpreted as only requiring the referrals between the DHS entity and the physician who stands in the shoes of the physician organization to be considered when analyzing whether the compensation takes into account the referrals or other business generated between the DHS entity and the physician organization.
CMS states in the proposed rule that these interpretations were not its intent, so it is proposing to clarify the second sentence of the stand in the shoes rule to make clear that it is not defining the term “parties” and that all physicians in a physician organization do not need to sign the written agreements between the physician organization and the DHS entity. It is also proposing to clarify that when analyzing whether the compensation takes into account the referrals or other business generated between the DHS entity and the physician organization, the referrals between the DHS entity and all physicians in the physician organization, including all members, employees and independent contractors, should be considered—not just the referrals made by physicians who stand in the shoes of the physician organization.
CMS also updated 14 FAQs on its Web site with respect to the Stark Law, some of which seek to clarify the physician stand in the shoes rule. In line with CMS’s proposed amendments to the physician stand in the shoes rule, CMS clarifies that the physician who is standing in the shoes of his or her physician organization does not need to sign the written agreement when the written agreement was signed by an authorized signatory of the physician organization. Furthermore, CMS clarifies that physician ownership is not determinative as to whether an entity is a physician organization; thus physician organizations are not required to have at least one physician owner.
CMS also clarifies that the following are not considered to be included in the definition of physician organization: federally qualified health centers; staffing companies that do not directly provide and bill for patient care services but merely facilitate the provision of physicians to providers; hospitals and other Part A providers of services, even if a hospital has employment or contractual arrangements with physicians for the provision of patient care services; single entities that do not satisfy the requirements of a group practice that encompass a faculty practice plan (FPP) and either a medical school, hospital or both; and medical schools that do not operate a FPP but do employ physicians to provide clinical and academic services. CMS also defines a “physician practice,” which is used within the definition of “physician organization” in the regulations, in one of the FAQs. It defines “physician practice” as “a medical practice comprised of two or more physicians organized to provide patient care services (regardless of its legal form or ownership).” It provides as an example of what would be a “physician practice” a group of physicians that practice together but do not meet all of the requirements for “group practices” set forth at 42 C.F.R. § 411.352.
Click here for the CY 2010 Physician Fee Schedule and here to view CMS’s FAQs with respect to the Stark Law.
Reporter, Kate Stern, Atlanta, (404) 572-4661, kstern@kslaw.com.
Federal District Court Finds that CMS Properly Denied Hospital’s Request for a Permanent Increase to its Resident FTE Count – On July 17, 2009, the U.S. District Court of New Jersey issued an opinion (Civ. Action No. 08-0625 (SDW)) denying Hackensack University Medical Center’s (Hackensack) and granting the Department of Health and Human Services Secretary’s (Secretary) motions for summary judgment concerning the Centers for Medicare and Medicaid Services’ (CMS) decision to deny Hackensack’s request for a permanent increase of its 1996 resident cap by 12 resident full-time equivalents (FTEs).
Prior to 1997, United Hospital (United) had 49.5 FTE residents rotating through its facilities as part of the University of Medicine and Dentistry of New Jersey’s (UMDNJ) resident training programs. However, in February 1997, United declared bankruptcy and closed its facilities. Subsequently, the residents that were displaced by United’s closure were reallocated to several New Jersey hospitals, including Hackensack, through an Agreement for an Aggregated Count of Residency Positions (Agreement). During the 1997 and 1998 academic year, the Agreement allocated 12 of the 49.5 resident FTEs to Hackensack. While the Agreement was signed by UMDNJ and the affiliated hospitals, it was not signed by United. Following Hackensack’s entry into the Agreement, Hackensack sought a permanent 12 resident FTE increase to its 1996 resident cap. However, that request was denied by CMS on grounds that the Agreement did not comply with the “aggregate group cap” requirements set forth 42 C.F.R. § 413.86(b)(1) (1998). CMS concluded that, since the Agreement was not signed by United, the affiliated group could not include United’s residents in the aggregate cap.
The U.S. District Court of New Jersey agreed with CMS’s determination. The court found that the Balanced Budget Act of 1997 (BBA) “does not allow the Secretary to permanently increase a facility’s FTE residents; in fact, he is specifically prohibited from doing so.” In addition, the court concluded that, while the BBA granted a cap exception for affiliated groups that share residents on an aggregate basis, the Secretary had broad authority to define by rule what constituted an aggregation agreement. According to the court, the aggregate group definition promulgated by CMS did not contemplate a situation in which the residents were not shared by one or more of the affiliated group members (e.g., United). The court stated that the Agreement resulted in “the same effect as trading or selling residency positions from United to Hackensack, which is expressly forbidden by the BBA.”
Reporter, Adam Robison, Houston, (713) 276-7306, arobison@kslaw.com.
George Washington University Study Finds House Health Reform Bill Could More than Double Capacity of Community Health Centers – In a July 23, 2009 report entitled “Estimating the Effects of Health Reform on Health Centers’ Capacity to Expand to New Medically Underserved Communities and Populations,” George Washington University found that the draft House Tri-Committee health reform bill, as issued on July 24, 2009 would at least double the capacity of community health centers to provide care to the newly and already insured. The report focuses on Federally Qualified Health Centers (FQHCs)—non-profit organizations providing comprehensive primary care services to millions of low-income people, irrespective of their ability to pay.
Currently, community health centers’ costs significantly exceed reimbursement received from every category of payer. Medicaid provides the highest level of reimbursement to the centers and leaves an average payment gap of 14.9%. For uninsured (self-pay) individuals, community health centers are left with an average reimbursement gap of 77.6%. Community health centers currently make up these shortfalls in reimbursement with revenue from federal, state, local and private grants and other contributions to support their services. By reducing the number of uninsured Americans, (the preliminary CBO analysis estimates a drop in uninsureds from 19 to 6% by 2015) and increasing funding for FQHCs, the report finds that the House bill will allow the centers to serve 35.6 million patients in 2015. This figure is more than double the 16.1 million patients served by the centers in 2007.
The report also examines the financial consequences for community health centers if insurers participating in the proposed Health Insurance Exchange were required to enhance payments made to the centers to meet the prospective payment (PPS) rates currently paid to the centers by Medicare and Medicaid. Although the current draft House bill does not include such a provision, the report notes that such a requirement would be in line with the government’s current policy of requiring Medicare and Medicaid to pay enhanced reimbursement rates in order to minimize the use of Section 330 grant funds intended to help fill gaps left by inadequate insurance payments. Because plans providing services under the proposed Health Insurance Exchange would be largely subsidized by federal funds, the report finds that the same logic could be used to justify enhanced reimbursement requirements for such plans. Such a requirement would enable community health centers to serve an additional two million patients each year.
To access the George Washington University study, click here.
Reporter, Martha S. Henley, Atlanta, (404) 572-2775, mhenley@kslaw.com.
Health IT Standards Committee Adopts Recommendations on Standards and Quality Measures for Use of Electronic Health Records – The Health IT Standards Committee, a Department of Health and Human Services advisory panel, recommended quality measures and standards to enable meaningful use of EHR, with the goal of meeting the statutory mandates of the HITECH Act. The measures and standards adopted by the Standards Committee will be reviewed by the Office of the National Coordinator of Health IT, which will make final recommendations to CMS before its interim final rule on the EHR incentive program is issued in December. In order to receive the first round of incentive funding in 2011, providers must demonstrate meaningful use of EHR to CMS. The Standards Committee believes these measures and standards will enable providers to do so.
The Standards Committee approved specific data providers must collect and submit to meet the 27 meaningful use measures approved by the Health IT Policy Committee on July 16. Providers and eligible professionals already submit the bulk of the quality measures to CMS under programs like the Physician Quality Reporting Initiative, such as the percent of patients with blood pressure under control. The Standards Committee also recommended that providers have implemented 12 standard capabilities to demonstrate meaningful use, including being able to transmit in-hospital and outpatient prescriptions and lab test results. These standards have been approved by the Health IT Standards Panel (HITSP), a standards advisory organization formed by the Office of the National Coordinator in 2005.
The HITECH Act requires that HHS develop more robust reporting requirements in 2013 and 2015. The Standards Committee recommended measures for those benchmarks, but the specific methods of collecting data for those measures remain undefined.
The full list of quality measures and HITSP standards, as well as the full agenda of the July 21 meeting, are available here. The next meeting of the Standards Committee will be on August 21.
Reporter, Christopher Kenny, Washington, D.C., (202) 626-9253, ckenny@kslaw.com.
This bulletin provides a general summary of recent legal developments. It is not intended to be and should not be relied upon as legal advice.
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