Stark Law Reform

In an effort to transform Medicare from a passive payer to an active purchaser of high-quality, efficient care, the government has instituted three mandates: a readmission reduction program which penalizes hospitals for higher-than-expected readmission rates with a cut in the hospital’s base DRG payment (1% cut in 2013, 2% in 2014, and 3% in 2015); a hospital acquired condition (“HAC”) program beginning in 2015 which will impose a 1% penalty on all discharges at hospitals that are in the top 25%, with regard to HACs; and a value-based purchasing (“VBP”) program which will take away 1% of the MS-DRG rate for all hospitals starting Oct. 1, 2013 (and 2% by FYE 2017), however hospitals can get that money back by performing well on clinical process measures, patients’ experience-of-care measures, and outcome measures.   When all three programs are fully implemented, up to 6% of a hospitals bottom line will be affected by quality of care.

These new quality of care programs are also creating compliance challenges.  Sloppy documentation could subject hospitals to false claims under value based purchasing, which may be intensified by shortcuts in electronic health record (“EHR”) systems, such as copy/paste.  If hospital EHRs prepopulate the administration of drugs, they should document that the drug was in fact administered in the time frame that was in the EHR documentation.  Hospitals must also be aware of physician compensation risks.  If hospitals pay physicians for quality-related activities, they could run afoul of the fraud and abuse laws, as these activities should be performed as an integral part of their professional duties.  However, hospitals may incentivize physicians to adhere to quality improvement programs, as long as the incentive falls within a Stark exception.

Rather than simply responding to these government mandates, hospitals should look overall at how they can reform their health care delivery systems to benefit patients, and how they can deliver optimal care to patients using consistent, reliable methods.  The following identifies examples of how hospitals can begin to implement consistent quality of care:

• Ensure all caregivers are comfortable identifying their concerns regarding inappropriate patient care with their colleagues;
• Use meetings to educate physicians regarding meaningful clinical process issues and to share data with them to garner their support and promote behavior change;
• Rather than comparing hospital statistics to publicly available information, which may be too old to be meaningful, use current results at every level and tie to Joint Commission core measures; and
• To reduce readmissions, ensure clinicians follow-up with patients after discharge from the hospital, whether by phone or an in-person visit. 

If you have any further questions please contact Meghan Linvill McNab at 317-808-5863 or Kristen L. Gentry at 317-238-6288.

On April 7, 2011, CMS issued a joint notice with the OIG (Notice) relative to the waiver of certain fraud and abuse laws as necessary to carry out the Medicare Shared Savings Program set forth in the PPACA reform legislation passed in March of 2010. The Notice describes and solicits public input regarding possible waivers of the application of the federal Anti-Kickback Statute, the Stark Law, and certain civil monetary penalties (CMP) law provisions to specified financial arrangements involving accountable care organizations (ACOs). The Notice states that CMS and the OIG are seeking to address application of these fraud and abuse laws to ACOs so that the laws do not unduly impede the development of beneficial ACOs, while ensuring that ACOs are not misused for fraudulent or abusive purposes that harm patients or Federal health care programs.

Stark Law

As proposed in the Notice, the application of the Stark Law would be waived for distributions of shared savings received by an ACO from CMS: (i) to or among eligible ACO participants; or (ii) for activities necessary for and directly related to the ACO’s participation in and operations under the Shared Savings Program. All other financial relationships involving physicians or entities participating in the Medicare Shared Savings Program that implicate the Stark Law would still need to satisfy a Stark Law exception.

Federal Anti-Kickback Statute

As proposed, the application of the federal Anti-Kickback Statute would be waive with respect to two scenarios: (i) distributions of shared savings received by an ACO from CMS under the Medicare Shared Savings Programs to or among eligible ACO participants; and (ii) any financial relationship between or among the ACO, ACO participants, and ACO providers/suppliers necessary for and directly related to the ACO’s participation in the Medicare Shared Savings Program that implicates the Physician Self-Referral Law and fully complies with a Stark Law exception. Failure to qualify for one of the proposed waivers under the federal Anti-Kickback Statute does not mean that an arrangement is automatically illegal; however, to the extent that the federal Anti-Kickback Statute is implicated by a financial arrangement that is not subject to a waiver, the financial arrangement would need to comply with the law.

Prohibition on Hospital Payments to Physicians to Induce Reduction or Limitation of Services

As proposed in the Notice, application of certain CMPs would be waived in the following scenarios: (i) distributions of shared savings received by an ACO from CMS in circumstances where the distributions are made from a hospital to a physician, provided that the payments are not made knowingly to induce the physician to reduce or limit medically necessary items or services, and the hospital and physician are ACO participants; and (ii) any financial relationship between or among the ACO, its participants, and its providers/suppliers necessary for and directly related to the ACO’s participation and operations under the Medicare Shared Savings Program that implicates the Stark Law and complies with a Stark Law exception.

In order to qualify for any of these proposed waivers, ACOs would be required to enter into an agreement with CMS to participate in the Medicare Shared Savings Program, and be compliant with associated transparency, reporting, and monitoring requirements. Public comments on the Notice are due to CMS no later than June 6, 2011.

For additional information, please contact Leeanne R. Coons.

Physicians who provide certain imaging services in their offices and rely on the Stark Law’s In-Office Ancillary Services Exception to protect their referrals of such services are reminded that imaging disclosure notices under the Stark Law reform are required as of January 1, 2011. Specifically, under the new disclosure requirements, at the time of referral, a referring physician must inform the patient, in writing, that he or she may obtain MRI, CT, or PET imaging services from a person other than the referring physician, a physician in the same group practice as the referring physician, or an individual directly supervised by the physician or by another physician in the group practice. In addition, the referring physician must provide the patient with a written list of at least five suppliers who furnish such services within a 25-mile radius of the physician’s office location at the time of referral.

It is important to note that the imaging disclosure notice must be given to the patient at the time of referral. CMS has clarified that patients should receive the disclosure each time these services are needed, not just for the initial service. For subsequent referrals made via telephone, the written disclosure must still be provided to the patient and adequately documented. Mailing or e-mailing the disclosure is acceptable if verbal notification has also occurred.

For additional information regarding the disclosure requirements, other Stark law reform issues, or other general health care reform changes, please contact Leeanne R. Coons or visit us at Health Reform Connect.

• The Court has jurisdiction to hear the case;
• Section 6001 has retroactive effect, but does not violate Plaintiffs’ due process rights and does not constitute a constitutional taking;
• Section 6001 does not deny Plaintiffs’ equal protection rights; and
• Section 6001 is not void for vagueness.

The Centers for Medicare and Medicaid Services has proposed a rule relating to health care fraud and abuse changes occuring under the health care reform law.  As reported in our July 12, 2010 Health Care Newsletter, CMS published a proposed rule that includes, among other changes, guidance regarding patient notices required for certain in-office imaging services contained in the Patient Protection and Affordable Care Act (PPACA).  Section 6003 of PPACA amended the Stark Law's statutory In-Office Ancillary Services Exception, which protects physicians' referrals for certain designated health services (DHS) furnished in the physicians' offices.  Specifically, PPACA requires that, at the time of referral, a referring physician inform, in writing, the patient that he or she may obtain MRI, CT, or PET imaging services (or other DHS that the Secretary of HHS may identify at a future date), from a person other than the referring physician, a physician in the same group practice as the referring physician, or an individual directly supervised by the physician or by another physician in the group practice.  In addition, PPACA requires the referring physician to provide the patient with a written list of suppliers "who furnish such services in the area in which the patient resides." 

In its proposed regulatory guidance for implementation of Section 6003 of PPACA, CMS has proposed the following:

• CMS indicates that it is "not inclined" to expand the disclosure requirement to services other than MRI, CT, and PET scans, but is soliciting comments regarding whether other imaging services should be included in the list of services for which the disclosure is required.
  
• The list of alternative suppliers need only contain other imaging "suppliers," such as other physicians, and does not have to include "providers" of imaging services, such as hospitals.
  
• CMS acknowledges that patients may travel outside of the area in which they reside to receive medical care.  To ease the administrative burden of creating multiple alternative supplier lists, CMS proposes that suppliers included on the patient notice should be located within a 25-mile radius of the physician's office location at the time of referral, even if the patient lives more than 25 miles away from the physician's office.
  
• CMS proposes that the written notice include no fewer than ten (10) other suppliers (as applicable), and that the list must include the name, address, phone number, and distance from the physician's office location at the time of referral for each alternative supplier.
  
• CMS declines to propose an exception to the disclosure requirement for MRI, CT, or PET scans furnished on an emergency or time-sensitive basis.
  
• CMS also proposes that in order to document that the disclosure requirement has been satisfied, a record of the patient's signature on the disclosure notification must be maintained in the patient's medical record.

It is important to note that the above-referenced requirements are in proposed form, and that CMS is requesting commentary on these changes by August 24, 2010.  Thus, the above-referenced requirements are subject to change in the final rule that is expected to be published in the fall of this year.

Finally, it is important to note that despite the fact that PPACA contains a retroactive effective date of January 1, 2010 for the amendments made by Section 6003, CMS has interpreted PPACA to require compliance on or after the effective date of the regulations implementing Section 6003.  CMS proposes an effective date of January 1, 2011 for the regulations implementing the disclosure requirement.

A copy of the proposed rule can be found here.

If you would like additional information, please contact Leeanne R. Coons at lcoons@kdlegal.com or (317) 238-6269.